Multiple Representation In Real Estate - Advantages, Drawbacks And Caveats

In many contexts, service providers often bow out of simultaneously representing clients who have diametrically opposed objectives - there's an obvious conflict of interest. But in the real estate world, these kinds of relationships are called multiple representation and they're not uncommon. But navigating them requires proper disclosure form the brokerage and informed decision making by clients.

How Multiple Representation Arises

Multiple representation - or dual agency as it used to be known - can happen when an unrepresented buyer spots a "for sale" sign on a lawn, calls up the agent to inquire and ends up accepting the rep's pitch to also provide representation on the purchase. Or it can happen when there are multiple buyers attracted to the same property, but are each represented by different agents working under a single brokerage.

The Potential Benefits And Drawbacks

Although it may seem counter-intuitive, multiple representation can sometimes come with pluses. Both buyer and seller often benefit from the convenience of streamlined processes, and the brokerage may offer a discount on commissions. Access to certain information about the other party may also prove strategically advantageous.

But the general principle that information is shared within a brokerage may be reason enough for some clients to walk away. The brokerage would have information about the home itself, the seller's strategy or knowledge that the buyer is willing to pay more than what's offered. In such cases, parties could end up with a deal that's less optimal than might otherwise have been achieved under single representation.

That's why there are strict rules surrounding multiple representation in Ontario.

Disclosure And Consent Required

In multiple representations, clients must be informed up front on a number of disclosures. At the most basic level, the brokerage must make known the existence of the situation when it arises. Then, it must detail how its services and obligations to the client would be different from a single representation, including the important issue of information confidentiality.

Before proceeding, all parties must agree in writing to the arrangement. If one side refuses consent, the brokerage must then decide which of the involved clients it will discontinue representing.

In all cases, if a legal dispute arises during a multiple representation, parties should immediately consult with their own lawyers, as real estate agents should not provide advice in situations of conflicted interests.

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