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Home Consumers Buyer journey Your contract with the real estate brokerage

Once you’ve selected a real estate agent, you will be asked to sign a contract (known as a representation agreement) with the brokerage. 

Without an agreement in place, you should not expect a real estate agent to provide you with any services, such as taking you to visit properties. 

Before signing, take the time to read the terms and the agreement carefully. This is a legal document, and you need to understand what you are signing. Ask your agent to answer any questions you may have and contact a real estate lawyer if you require further clarification.

It is your agent’s responsibility to ensure that any agreements they are providing comply with the Trust in Real Estate Services Act, 2002 (TRESA).

Your representation agreement is a contract with the brokerage for the services that will be provided to you.

For this reason, it is very important that, before you sign your representation agreement, you are comfortable that it clearly sets out the services you will receive.

Note: There is no standard set of services: brokerages offer a variety of different options depending on their business model and your specific needs.

You might enter into an agreement for a specific purpose, such as having an agent prepare an offer on a home you’ve already chosen or simply to arrange for a viewing for a particular property. You might also want to limit the agreement to a particular area (a specific city, town, or neighbourhood).

All of these things should be clear to you in the agreement you sign.

The expiry date will appear on the first page of the agreement, and you will be asked to initial next to it.

There is no set term for agreements. It might be for a few days, a month, or several months. Make sure you are comfortable with how long the agreement will remain in place.

Your agreement should also include information about when and how the agreement might terminate prior to the expiry date.  It is important to understand these terms, as well as any penalties or costs that might apply if the agreement is terminated early.

Most representation agreements also include a “holdover clause”. 

This is a period of time after the termination or expiry of the agreement where you might still be required to pay the brokerage fees or commissions.

For example: If you buy a home that the real estate agent showed you while the agreement was in effect, make sure you understand the potential costs and how long the holdover period is.

Real estate fees or commissions are negotiable. Fees or commissions are not fixed by government, RECO, or any real estate association or board. 

Keep in mind that: 

  • The fees or commissions you pay should be based on the services and representation the real estate agent and brokerage provide under the representation agreement you sign. While it is most common for the brokerage to charge a percentage of the purchase price, a flat fee (fixed dollar amount) is also permitted.
  • You are responsible for the fees or commissions you agree to pay to your brokerage. A seller might offer to pay some or all of your brokerage fees.
If a seller agrees to pay some or all of your brokerage fees, this will be built into the purchase price. The services and representation you receive are not “free” or provided at “no cost to you”.

Important: Commissions and fees paid to an agent or brokerage are subject to HST.

Brokerage fees or commissions are due when the transaction completes or on the date the transaction is scheduled to complete. If the seller has not agreed to cover the fees or commissions you owe, including the applicable taxes, you will be responsible for paying the entire amount or any balance owing.

Your agent has a duty to avoid conflicts of interest, including representing more than one client in the same transaction.

One of the most important duties your real estate agent has is promoting and protecting your best interests. 

Your agent can’t fulfill this duty if they represent more than one person in the same transaction -- for example, if you are interested in the home of one of their seller clients.

This is known as multiple representation and is prohibited unless all three of the following conditions are fulfilled:

  • The brokerage immediately provides the disclosure required by law regarding the proposed change in representation.
  • The brokerage advises you to seek independent professional advice with respect to the disclosure.
  • You and the other party agree to the change in representation after receiving the disclosure.

You have a choice. You do not have to agree to allow the agent to proceed. Even if you do, there is a chance the other client will not agree.

Here’s a quick summary of the difference between exclusive representation by your real estate agent and multiple representation, where your agent is also representing one or more additional clients in the same real estate transaction.

If you are the client and your agent is only representing you, the agent: If you agree to allow the agent to represent you and another client in the transaction, the agent:
Must promote and protect your best interests in the transaction. Cannot promote and protect your best interests and must treat the interests of each client in an objective and impartial manner. 
Can provide advice on the price and terms to offer or accept.  Cannot provide advice on the price and terms to offer or accept. 
Can provide advice and opinions that promote and protect your best interests.  Cannot provide any advice or opinions that are not in the best interests of both parties. 
Can disclose the other client’s motivation to buy or sell and other confidential information if known.  Cannot disclose the other client’s motivation to buy or sell or other confidential information unless that client provides written consent. 

 

When buying a property, you might be asked to provide identification and financial details. This helps prevent fraud, money laundering, and terrorist financing in the real estate sector.

Your agent will ask for a piece of government-issued photo identification, such as a driver’s license or passport. They will document this information confidentially and it will remain secure unless requested by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). We The agent might also verify your identity through a credit file check to verify that your name, birthdate, and address match official records.

Keep in mind, your agent has an obligation to protect your personal and confidential information.

Be vigilant when it comes to real estate fraud. If at any point you are asked to falsify your information, inflate your income, or submit an offer without seeing a property, you could be at risk and you should contact your real estate lawyer immediately.

Learn more:
The Proceeds of Crime (Money Laundering) and Terrorist Activity Financing Act and client identity verification