When buying or selling real estate, you’ll need to decide whether you prefer to have a client relationship or a customer relationship with your brokerage.

If you’re planning to enter into a representation agreement with a brokerage you should understand your options. Whether you’re buying your first home or selling a property, this element is equally important.

Did you know you can miss out on significant benefits, depending on the type of agreement you choose?

In a representation agreement, you become a client of the brokerage. With a customer service agreement, on the other hand, you become the brokerage’s customer.

As a customer, the brokerage’s duty to you is limited to providing information and performing functions, if there are any to be performed. Of course, the brokerage’s dealings with you must be honest and fair and reflect integrity, and confidentiality must be maintained.

If you sign a representation agreement, the brokerage has a fiduciary duty to you, the client. This means that the brokerage has to promote and protect your interests in the real estate transaction. 

The brokerage must not misuse confidential information and must avoid conflicts of interest and disclose any that might arise. The profit cannot be made secret and the brokerage must maintain complete loyalty. 

If you are a client who is in the market to buy a property, the salesperson is duty-bound, under the legislated Code of Ethics, to take reasonable steps to find out all material facts about the property that is for sale. You may be wondering what the term “material facts” means. These are facts that, if known ahead of time, may have led the buyer to make a different decision with regard to the contract or to the price paid. 

On the other hand, if you have signed an agreement that makes you a customer, the salesperson is only obligated to disclose to you the material facts he or she already knows or should know, and no further steps are required. 

If you’re the one selling a home or another type of property and your agreement with a brokerage places you in a client capacity, then the salesperson representing you must share with you all written offers. The only exception is in an instance where you have specified otherwise in writing.

In contrast, if the salesperson is transacting business with you under a customer service agreement, the salesperson does not have to disclose offers to you. In this scenario, the buyer’s representative will need to reach out to you directly. An exception is made, however, if your agreement with the brokerage includes a provision for the brokerage to receive written offers on your behalf. 

To decide whether a client relationship or a customer relationship with a brokerage suits you better, you need to assess how much knowledge you have of the world of real estate. Like most people, you may only have limited knowledge of the inner workings of the industry and you don’t want to single-handedly deal with all the challenges you may face along the way. In that case, a client relationship is the option for you.

Whichever option you choose, remember you’ll be entering into an agreement and you need to be clear on all the conditions. The agreement should explicitly state the services you will receive. If you’re a seller, services may include advertising and promotion, staging and open houses. If you’re a buyer, possible considerations for the agreement include geographic requirements, amenities, features you can’t live without, things you would consider unacceptable.  

At least now you can make an informed decision and you know your rights. Buying or selling a home can be an emotional experience. You don’t need unpleasant surprises to be added to the mix. Let’s hope this information will make your buying or selling journey smoother.