Transaction Brokerage (formerly known as Dual Agency in Alberta) is a common practice in common law real estate. Two examples where transaction brokerage might occur would be:
- You are working with a REALTOR® as your Buyer's Agent (ideally, under an Exclusive Buyer Brokerage Agreement). They introduce you to a property that they have listed for sale and you decide you would like to write an offer on it (and in Alberta, this would also apply to the properties listed by any other agent in your REALTORS® brokerage)
- As a Seller, you list your property with a REALTOR® (using an Exclusive Seller Brokerage Agreement) and then they introduce a Buyer to the property who would like to write an offer on it.
Before we proceed, there are a couple of things that you as either a Buyer or Seller should be aware of:
- Before entering into Transaction Brokerage, both parties must fully understand the role of the REALTOR® and must sign a written Common Law Transaction Brokerage Agreement form before continuing in the transaction.
- The role of a REALTOR® working under Transaction Brokerage changes. No longer can they "go to bat" for just one party. They must represent both parties in a fair, impartial and even-handed manner. They in a sense become a "facilitator" to the transaction.
So what are some of the challenges involved with Transaction Brokerage?
The REALTOR® representing both parties must show extra dilligence in making sure that they are impartial. Any information that is shared must be shared to BOTH parties (other than the information that a is not allowed to be disclosed with regards to price and motivation).
If one party does not agree (either Buyer or Seller) to Transaction Brokerage, the REALTOR'S® loyalty must remain with the party with whom they first signed an agreement with. Many Buyer's choose to work without a signed agreement (Exclusive Buyer Brokerage Agreement) so even if they had been the first to work with the REALTOR®, without that signed agreement, the REALTOR'S® loyalty would have to transfer to the seller (assuming that they had signed an Exclusive Seller Brokerage Agreement, also know as a Listing Contract).
The facilitating REALTOR® loses their ability to give advice or voice an opinion UNLESS either the Buyer or the Seller specifically asks for information (and the information they give can not give an advantage to either party). A good REALTOR® will guide both the Buyer and the Seller through the questions they should be asking and will present any information needed in order to make good decisions.
So what are some questions that you need to be asking throughout the process?
Can you show me what properties similar to this one have sold for in the recent past? What would be an acceptable offer amount in this situation?
Do you reccomment that we have a property inspection done?
In this situation, what is a good amount of time to leave for conditions to be removed? What is a good amount of time to leave before possession?
What is the normally accepted amount in this area for the deposit that accompanies the offer?
Is the deposit accompanying the offer a dollar amount that is typical for this area?
What would be an acceptable counter offer in this circumstance?
Is this term / condition of the offer a reasonable request in this situation?
Each situation will be different, but a good rule of thumb is: If in doubt, ask questions, lots of them. Make sure you are satisfied with the answers, and if you aren't, seek guidance from other professionals outside of the transaction (lawyers, property inspectors, appraisers, etc...)
Transaction brokerage does have it's advantages as well. With one person representing both parties, there should be excellent knowledge of the property and the flow of information should be very smooth between both parties.
I work with a partner and we have our own way of dealing with transactions where we represent both parties. My partner and I co-list every property that we put up for sale with one of us chosen as the primary agent for that listing. If we get a call on the property, the secondary agent on the listing is the one who will show the home (unless it is not at all possible). If the buyers then wish to write an offer, they will continue to work with the agent that introduce them to the property and the other agent will continue to work with the sellers. We are still in a "dual agency" situation, but it allows for a bit of separation between the two parties and has worked very well for us in the past.
Transaction Brokerage can be done successfully by a professional REALTOR® who is careful to explain the process to both parties and who makes sure that each party understands the process at each step of the way.
Visit my website for more information on Lethbridge Real Estate.