Choosing the Model That’s Right for Your Brokerage
| March 27, 2014
Designated agency isn’t the right choice for all real estate brokerages. There, we said it. The Real Estate Council of Alberta (RECA) doesn’t believe designated agency is the right choice for all real estate brokerages.
RECA wholeheartedly believes designated agency makes sense for many brokerages – and we have support services available for those that want to make the transition from common law to designated. But, we also recognize and in fact, tell some brokerages it really isn’t the right choice for them.
Designated agency can work very well for mid-size to larger brokerages:
- It eliminates the conflict of interest and transaction brokerage in situations where one associate is working with a seller client and another is working with a buyer client in the same transaction within the brokerage.
- It eliminates attributed knowledge. When brokerages have higher numbers of associates the associates are seldom aware of the business other associates are doing and what information they are aware of.
- The current practice within these brokerages better reflects designated agency.
- In small brokerages, designated agency may not be appropriate, because it’s difficult to separate the practice and knowledge of the associates within the brokerage. There may be too much sharing or overlap of knowledge to clearly separate agency relationships.
A majority of real estate associates in Alberta will be practicing designated agency by the end of this year, but this does not mean the majority of brokerages will be practicing designated agency.
There are 750 brokerages with five or fewer real estate industry members, 510 of those have one or two industry members and 340 of those brokerages have a single practitioner. Most of these small brokerages will not adopt designated agency. However, we expect the majority of larger brokerages will transition and these brokerages employ the majority of practitioners. Currently there are more than 3,300 associates practicing designated agency and that will surpass 4,000 by May 1st and 5,000 by July 1st. This number is expected to be more than 67% of practitioners by the end of 2014.
There has been a substantial increase in discussion about and education on designated agency, and that has cleared up much of the misinformation. It’s also helped make it clear that what most brokerage s are actually practicing is designated agency rather than common law agency.