New Real Estate Consumer Protection Rules
On June 15, 2018 there will be sweeping changes to how real estate is bought and sold in British Columbia. These new rules, which were set out by the newly created Superintendent of Real Estate, change the way real estate professionals in BC provide service to the general public.
There is an incredible amount of misinformation out there about these rule changes, and the purpose of this article is to provide a straightforward explanation on how these new rules affect you, the real estate consumer. It is not the intention of this article to cast judgement on the rule changes, but to remain impartial while explaining them. As a disclaimer, the deadline to implement the changes has already been pushed back, as the rules and associated forms are being changed on what seems like a daily basis. With changing information, and little in the way of education for real estate professionals, this is an honest attempt to explain the new rules in a very fluid situation. If you would like a legal opinion about real estate agency, it is advisable to speak with a Lawyer, which I am not.
For the most part these rule changes revolve around the banning of a concept called Limited Dual Agency. Limited Dual Agency is a practice implemented by the provincial government of British Columbia, which has been in place for my entire 15 year real estate career. Basically, it goes like this. Imagine I have a client who has signed a Multiple Listing Contract with me to sell their home for the most money possible. I have a second client who wants to buy the home, and of course their intention is to pay the least amount of money possible. This scenario puts me in an impossible situation: I am legally, and ethically, bound to serve two masters with opposing interests. In an attempt to level the playing field for all parties, Limited Dual Agency, had us limit our agency responsibility to both parties. In essence, we were not to disclose to either party three key pieces of information about the other party: (1) the price they were willing to take/pay; (2) the motivation for selling/buying; or (3) any personal information about the parties aside from what was written on the Contract of Purchase and Sale.
On June 15, 2018 Limited Dual Agency will be banned in British Columbia (except in rare situations). The same scenario will now play out differently. I will still have a client who has signed a Multiple Listing Contract with me to sell their home for the most money possible. However, when my buying client informs be that they would like to buy the house; I will not be able to represent them as a client. The Buyer in this case will have the choice to: (1) as an “Unrepresented Party”, have me facilitate the Contract of Purchase and Sale; or (2) begin working with another real estate professional in an agency relationship. The choice for you as the buyer will be between working with me, presumably as the real estate agent you trust, or work with another real estate professional you may not know or trust. As you can imagine, the choice is not necessarily a straightforward one.
Let’s assume for a moment, that because of our relationship and the trust we share, you decide to have me facilitate the sale with you being an “Unrepresented Party”. You will have to sign a new form called ‘Unrepresented in a Real Estate Transaction? Know the Risks.’ Interestingly, the risks outlined are that I will not be able to disclose to you: (1) the price the Seller is willing to take; (2) the motivation for selling; or (3) any personal information about the Seller aside from what was written on the Contract of Purchase and Sale. Does that sound familiar? That’s because it’s the exact same information we limited already under Limited Dual Agency. The difference now is that limitation only applies to one party and not the other, so you will want to be careful in this case not tell the real estate professional what your top dollar is (in my experience clients very rarely share that information anyway), because that professional will now have a legal obligation to share the information with the Seller.
From my perspective, it is impossible to say that deciding to enter into an “Unrepresented Party” agreement is in your best interest 100% of the time, or not in your best interest 100% of the time. Again I’m not a Lawyer, but from a practical perspective it seems that it really depends on the scenario. Do you know, like and trust the real estate professional? Do you feel like the listing agent might be able to have better success facilitating a deal?
In my experience in life in general there is often a disconnect between the rules and the reality. I’m confident that my clients know in their hearts that I am honest and fair. At the end of the day honest and fair is all that matters to me in life. I know with certainty that there are many other agents out there who are also honest and fair. In 2016 and 2017 my team facilitated dozens of sales to “Unrepresented Parties” (which was at the time called “No Agency”). The reason we did this was that the Seller of those properties was a real estate professional on our team. I’m am 100% confident that each of those transactions was done in a fair and honest way. I know this because I have the Buyer testimonials to prove it.
At the beginning I promised not to cast judgement on the new rules. I’m going to amend that promise now for reasons that will become obvious. We set out to build a team of true real estate professionals at the beginning of 2016. We began the business plan, by addressing what we thought were the most pressing issues in the real estate industry. The list of issues is beyond the scope of this article, however I will point out that at the top of the list was the conflict between representing Buyer and Seller on the same transaction. I have to commend the Superintendent of Real Estate in this regard, I agree with his wish to address the issue. What our team decided to do was dedicated Listing Agents and Buyer’s Agents on our team. Our Listing Agents do not from practical perspective deal directly with Buyers, and our Buyer’s Agent’s do not directly interact with our selling clients. This was our attempt to create a more honest real estate environment and be proactive about the problem of Limited Dual Agency. Unfortunately, the Superintendent of Real Estate has decided that legally speaking this practical separation does not count, and our Buyer’s Agents are deemed agent of our Seller’s even though they have more often than not, never even met them. It is my hope that the real estate law in British Columbia will catch up with this team model in the future, as in my opinion it provides the best real world solution to the challenge of agency.
Chris Fenton, Personal Real Estate Corporation
Team Leader, BCom
The Fenton Team
Royal LePage Port Alberni Pacific Rim Realty