The Faithful Servant

Man Signing Contract

When you enter into a listing agreement or buyer representation agreement with a real estate registrant you become a CLIENT of the brokerage that that registrant is licenced with. That means that every registrant within that brokerage, including the owner, the broker of record, all brokers and sales representatives are held by LAW to owe specific duties to ALL clients. Your agent is a Fiduciary. The true meaning of Fiduciary is “faithful servant”.

What are Fiduciary Duties?

(For the purposes of this article,

  • The Terms registrant, agent, broker, sales rep, real estate professional, are all interchangeable
  • Registrant shall mean all registrants of a brokerage
  • Obligated shall mean within the bounds of the real estate transaction)

Fiduciary duties are generally broken down as follows:

LOYALTY

This is the most important duty a real estate registrant owes to a client. A registrant is obligated, to act at all times, solely in the best interests of the client, excluding all other interests, including those of the registrant. A registrant must be aware of all situations that could cause a conflict of interest, such as buying their clients property, or selling their property to a client.

An example of breach of loyalty is when a registrant buys a property listed with his/her firm, and immediately resells it at a profit. Such conduct is usually considered appropriate and lawful by persons who act at “arms length”, but a registrant would be considered to have stolen an opportunity for profit that rightfully belongs to the client.

OBEDIENCE

A registrant is obligated to obey a client’s lawful and reasonable instructions, even if the registrant doesn’t agree with them. The key word here is “lawful”, the duty does not include an obligation to obey unlawful instructions, such as instructions to not market a property to minorities or to misrepresent the condition of a property or to misrepresent a buyer’s potential to buy. However, if a seller tells a registrant to list a house at a given price, the registrant must obey the sellers wishes (if the registrant choses to work for that seller).

REASONABLE CARE (COMPETENCE)

A registrant is obligated to use reasonable care and diligence when pursuing the client’s affairs. The standard of care expected of a buyer’s or seller’s real estate broker is that of a competent real estate professional. By reason of his/her license, a broker is considered to have skill and expertise in “real estate matters” superior to that of the average person, and they must use that skill and knowledge in pursuit of a client’s affairs.

However, no registrant is expected to perform tasks or know information outside the scope of his/her real estate license. Real estate licensees are not expected to perform services normally provided by engineers, home inspectors, lawyers, accountants, or other professionals. If concerns arise outside the scope of a registrant’s responsibility, the registrant must acknowledge that and suggest that the client seek assistance from a reliable outside source.

DISCLOSURE

A registrant must disclose to his/her client any information relevant to the transaction in which the registrant has been engaged to assist. This includes any facts affecting the value or desirability of the property and all known relevant and material information. For instance, if a registrant notices a crumbling chimney on a house he/she is showing and fails to mention it, he/she would be in violation of his/her fiduciary duty to his/her buyer client. On the other hand, a registrant is not expected to know of problems that can not be seen or that should be uncovered by another professional.

A registrant’s duty of disclosure to his/her client must not be confused with a registrant’s duty to disclose any know material facts about the property value to non-clients (customers, general public, etc). The duty to disclose known material facts is based on a real estate registrant’s duty to treat all persons honestly. The duty of honesty does not depend on the existence of a client relationship.

A registrant must also disclose to all clients, at the earliest practicable opportunity, and in writing, any actual or potential conflicts of interest.

CONFIDENTIALITY

A registrant must not use information acquired for any purpose that is likely to cause the client harm or to interfere with the client’s business, now or in the future. In other words, a real estate registrant must keep confidential any information that may weaken a client’s bargaining position. For example, a registrant representing a seller can not disclose to a buyer what the seller is willing to accept. Conversely, a registrant who is representing a buyer is prohibited from disclosing to a seller how much that buyer is willing to pay.

The duty of confidentiality should not be confused with a real estate registrant’s responsibility to disclose known material facts about a property to potential buyers. The obligation to disclose such facts, including defects, is based on the registrant’s duty to treat all persons fairly and honestly.

ACCOUNTING

A registrant must account for and safeguard money, documents and property entrusted to their care. For example, registrants must ensure that a listed house is secure; that they know and keep track of the comings and goings; that they keep control of keys; and that a licensed registrant attends all showings. A registrant must ensure the deposit is safeguarded by the brokerage or lawyer until closing.

 

For further information on this topic you can go to:

http://www.crea.ca/sites/default/files/files/realtor%20code.pdf

or Google “Fiduciary Duties Real Estate”

 
Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc.  The comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.

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Buyer Representation–To Sign or Not to Sign, that is the question

Signing3This is just a general discussion on the Buyer Representation Agreement…I’ll delve into the specifics in future Blogs.

Buyers, you just spent 3-5 hours driving to your scheduled appointment with a real estate agent who has the listing on the property you want to see.  When you arrive, the agent says “sign this or I won’t show you any properties”.  How do you feel?

Sellers, your agent has just refused to show your listing.  How do you feel?  Frankly, chances are you will never know this transpired.

So Buyers, what do you do?  Turn around and go home?  Nope, likely you will sign that paper and likely without fully reading or understanding it.

ShotgunWeddingYou’ve just had a “Shotgun” wedding and you don’t even know your bride (or groom)!  You’ve just entered into a legal and binding contract for a determined set of time with someone you don’t know and you are starting off your search for one of the most important purchases of your life in an enforced relationship!  How do you think the rest of your decisions are going to go with your new “bride” (or groom)?

There is no requirement, no law or rule that says you must sign a Buyer Representation Agreement before an agent shows you a property.  The purpose of the Buyer Representation Agreement is for you to hire an agent to work on your behalf to help procure an acceptable offer on a property of your choice.   Would you hire someone to work for you at your workplace without an interview, or a series of interviews, or without seeing their resume?  Would you buy a pair of pants without trying them on?  No?  So, why “get married” to someone you don’t know and may not like? 

The difference between signing the agreement or not is that without a contractual agreement the agent can not give you advice.  When you are just beginning your search you are gathering information–are you really at the stage where you need advice?

If you are looking at property with an agent without a signed Buyer Representation Agreement they must answer all of your questions to the best of their ability.  Would this be adequate for your initial search?  Would this give you an opportunity to get to know the agent?  Would this help you determine his/her skill level, give you some insight into his/her personality, and allow you to make an educated decision regarding whether or not you want to continue to work with this person?

So, before you “get married” or sign that document determine what stage you are at in your relationship.  Do you have enough information on this agent to make that kind of commitment? Are you comfortable with this person? Have you established a good and comfortable working relationship?  If not and you are still being asked to sign, “try on another pair of pants”.  Seek out a more suitable agent…there are others who will accomodate you (and on short notice if need be)!

Once you have had a chance to “try out” an agent, ask yourself these questions:  Am I ready to buy and need advice?  Does this person listen to my needs and wants?  Does this person understand what I am looking for?  Is this person answering my questions in a skilful and knowledgeable manner?  Will this person look after my best interests and not pressure me into making an ill advised decision?  Is this person genuine?  Is this person successful?

If the answer is yes, then sign…and live happily ever after!  You will have a much more comfortable mutually respectful relationship and you will ultimately have a happy purchasing experience.  After all, this is a major purchase in your life…you want to enter into it wisely.

Respect and loyalty are earned…they’re not gained through pressure tactics or contractual obligations.

ALWAYS READ AND UNDERSTAND WHAT YOU ARE SIGNING.  If in doubt…ask for clarification and/or seek legal advise.

Watch for my next Blog on….

Northern Bruce Peninsula Trailer By-law

Don’t forget to send your comments, stories, or ideas, in the comment section below or via email at dimaline@amtelecom.net.

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Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc.  T
he comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.

© Copyright Kathy Dimaline, All Rights Reserved

Demystifying the Agreement of Purchase and Sale–Title Search Clause #8

ContractMy last Blog was about Title Search Clause #10 in the Agreement of Purchase and Sale, which is a conditional clause allowing for the Buyer’s lawyer to search for any valid objection to Title and other Title issues.  Clause #8 sets out the actual date for this conditional clause.

What most people don’t notice and it is often overlooked, is that there are actually two dates in this clause.

The first date is a date that is entered by your real estate agent.  This date refers only to any valid objection to title.

Usually this first date is set for approx 5 to 10 days prior to closing.  Not all lawyers will wait until the last minute of your condition date to begin their search, but many do.  And when that happens your closing can be put in jeopardy…

Buyers, you firmed up all of your other conditions weeks ago and now you are approaching closing…you may have already sold your house and started packing…and 7 days before closing your lawyer tells you about a major issue with title on the place you plan to move into in 7 days.  How do you feel?

Sellers, you’re confident your property has sold, you’ve purchased a new place and have started packing and now you find out about a major issue with title on your property, just before it’s due to close.  How do you feel?

A little pressured?  A little stressed?  And, what happens when you are pressured or stressed?  You make poor decisions!

You can renegotiate the deal, delay closing or walk away.  Any of these can have serious consequences and costs to either party.

So, Buyers and Sellers, how do you protect yourselves?

Set the Title Search Date for a week to 10 days after the date of all of the other conditions in the Agreement (don’t wait until the last 5 to 10 days before closing).  Then, set the closing date for 30 days after the Title Search Date.  This will ensure that you know of any problems well in advance and will give you lots of time to deal through all of the issues.

The second date in this clause actually allows more time for the Buyer’s lawyer to check work orders, deficiency notices, use of the property and if fire insurance on the principal building (if there is one) can be obtained.  The Buyer’s lawyer has up to 5 days prior to closing to satisfy these four points.  If this is all left until the last 5 days…in my opinion this puts you back into the pressure cooker.  Now you are srambling to fix things and it may mean delays or worse.

Here’s a solution… remove all reference to this other date and have all of the search requirements completed by the first dateThis, again, will ensure you have plenty of notice and can make timely and effective decisions. If you don’t remove this portion of the clause, then, at the very least keep after your lawyers to make sure you have plenty of notice of any issues.   Don’t leave yourself short.

Present use must also be filled in, in this clause.  What does that mean?  It means, the buyer is purchasing the property based on current permitted uses as per Municipal and County zoning.

Sellers, it’s important that you disclose current zoning of your property, both on the listing and here in this clause on the Agreement.

Buyers, if you plan to use the property for something other than the “Present use” declared, you should do your due diligence in advance of firming up on the deal. Include a conditional clause in the Agreement on satisfying yourself on any potential zoning change or required building permits you may want to explore in future.

There are significant implications if there are issues on Title.  You need to know the importance of these two clauses (#8 and #10) and how they affect you, whether you are the Buyer or the Seller.  Be sure you understand  them and what the consequences can be if there is a problem.

Here’s the clause in its entirety:

Title Search Date

A last minute discovery of a Title problem can be devastating!

ALWAYS READ AND UNDERSTAND WHAT YOU ARE SIGNING.  If in doubt…ask for clarification and/or seek legal advise.

Watch for my next Blog on….

Buyer Representation–To Sign or Not to Sign, that is the question!

Don’t forget to send your comments, stories, or ideas, in the comment section below or via email at dimaline@amtelecom.net.

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Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc.  T
he comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.

© Copyright Kathy Dimaline, All Rights Reserved

Demystifying the Agreement of Purchase and Sale–Title Search Clause #10 Part 2

Today’s topic is on the Title Search Clause in the Agreement of Purchase and Sale.  This is one of the most important “standard” clauses in the agreement.  What most don’t understand, or over look, is that this is a conditional clause.

Real estate professionals are not lawyers.  Our title search tools are limited, we rely on information provided by the sellers and support from Municipal and County resources, however, these resources are not infallible.  Only a lawyer can confirm absolute title to a property.  The Title Search Clause provides a safety net for both Buyer and Seller by allowing a search of a property to ensure title can indeed be exchanged as described in the Agreement.

The Title Search Clause allows for the Buyer’s lawyer, at the Buyer’s expense, to undertake this task prior to the date set out in clause #8 (more on clause #8 in another Blog).  This is an added cost to the Buyer and is usually incorporated in closing costs from the lawyer.  However, it is important to point out, that just like any other condition, at the Buyer’s expense, whether the deal closes or notthe Buyer will be absorbing this cost.  (I will have more details on “Conditional Clauses” in future Blogs.)

There are a whole host of things that a Buyer’s lawyer is looking for to satisfy this condition, I’m rewording them, here, in layman’s terms.

1.  The title to the property must be good and free of any registered restrictions, charges, liens and encumbrances (there are a number of exceptions to this which I have listed below)

2.  There must be no valid objection to title,

3.  There must be no outstanding work order(s)

4.  There must be no deficiency notice(s)

5.  The buyer must be able to lawfully continue the  present use

6. The principal building must be insurable against risk of fire

Each one of these unto themselves can be a full topic of discussion…in any case, for any doubt you should always seek legal advise.

If any of these issues are uncovered, it then becomes the responsibility of the Seller to remedy (fix) the problem(s), at the Seller’s expense.  One of the remedies is that the Seller may obtain Tittle insurance in favour of the Buyer (or any mortgagee).  It is important to note that any and all issues uncovered can re-open negotiations if both Seller and Buyer are willing.

If the Seller is unable or unwilling to remove, remedy or satisfy (the Buyer/Buyer’s lawyer) and the Buyer is unwilling to Waive this condition, the deal dies.  Any deposit money will be returned to the buyer without deduction.

By virtue of this clause, the Seller, Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or damagesBuyer’s you must be made aware of this!

The clause finally concludes that if there is no valid objection to title the Buyer accepts possession of the property as outlined in the Agreement…there is no further document required to fulfill this clause (except for what a lawyer may request to complete the transaction).

Here is the actual clause:

Here are all the exceptions to the restrictions, charges, liens and encumbrances as per point #1 above…both Seller and Buyer need to be aware of these:

1.  Unless it is otherwise agreed upon in the Agreement by both parties

2.  Any registered restrictions or covenants that run with the land and are complied with

3.  Any registered Municipal agreements and registered agreements with public utilities, and are complied with

4.  Any minor easements for supply of domestic utility or telephone service to the property or adjacent properties.

5.  Any easements for drainage, storm or sanitary sewers public utility lines, telephone lines, cable tv lines or other services which do not materially affect the property.

Again, if in doubt about these exceptions always check with your lawyer.

There’s a lot to this clause and it is often just glanced over in the signing process.  ALWAYS READ AND UNDERSTAND WHAT YOU ARE SIGNING.  If in doubt…ask for clarification and/or seek legal advise.

Don’t forget to send your comments, stories, or ideas, in the comment section below or via email at dimaline@amtelecom.net.

Watch for my next Blog on….

Demystifying the Agreement of Purchase and Sale-Title Search Clause #8

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Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc.  The comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.

© Copyright Kathy Dimaline, All Rights Reserved