When a Real Estate Professional Represents the Buyer and the Seller (Transaction Brokerage)
What is transaction brokerage?
Transaction brokerage is when the buyer and the seller are represented by the same real estate brokerage (in common law agency) or the same real estate professional (in designated agency). If a real estate professional represents both parties in the same transaction, there is a conflict of interest. Transaction brokerage is a way to deal with this conflict. It allows the same real estate professional to work with the buyer and the seller in the same transaction.
When does transaction brokerage happen?
Transaction brokerage happens when a buyer is interested in a property listed by their representative’s brokerage (in common law) or by their representative (in designated agency).
A buyer simply viewing a property listed with the same brokerage or with the same real estate professional does not create transaction brokerage. However, if the buyer expresses an interest in the property after the showing, this triggers the need to discuss the client’s options, one of which is transaction brokerage.
What are the differences between transaction brokerage and other types of representation?
Typically, when you’re the client of and represented by a real estate professional in sole agency, your professional owes you:
- Undivided loyalty – your representative must act only in your best interests and put them above their own and those of other people
- Confidentiality – your representative must keep information confidential, even after your relationship ends
- Full disclosure – your representative must tell you, in writing, the services they will provide and they must tell you everything they know that might affect your relationship or influence your decision in a transaction.
- Obedience – your representative must obey all your lawful, reasonable and ordinary instructions.
- Reasonable care and skill – your representative must exercise reasonable care and skill in all their duties
- Full accounting – your representative must account for all money and property they receive while acting on your behalf
In transaction brokerage, your representative becomes a transaction facilitator and treats you and the other party (the buyer and seller) in an even handed, objective and impartial manner. The real estate professional no longer owes you undivided loyalty.
If the buyer and seller agree to proceed in transaction brokerage, both will have to sign an Agreement to Represent Both Buyer and Seller form, which will effectively end the sole agency representation for both and set out the terms of the new relationship between the brokerage and the buyer and seller.
What are the responsibilities of my real estate professional in transaction brokerage?
Your real estate professional must:
- present all offers and counter-offers to and from you and the other party, even when you have accepted another purchase contract.
- pass on all information to you that the other side wants you to know.
- keep you informed of progress.
- tell you what information they’ve given to the other side.
- tell you all information they receive while this agreement is in effect, especially:
- to the buyer, all material latent defects affecting the property.
- to the seller, all material facts about the buyer’s ability to buy the property.
They must not tell either of you without the informed written consent of the other:
- the other side may be prepared to move on the price or to offer more favourable terms.
- the other side’s reasons for buying or selling the property.
- personal and confidential information about the other.
Pros and cons of working in transaction brokerage
What if I don’t want transaction brokerage?
When you or the other party do not agree to transaction brokerage, you still need to resolve the conflict.
If one or both parties want the benefit of sole agency representation, the brokerage needs to determine which party became its client first. The party who became a client first will remain the brokerage’s client; the date on the written service agreement for each party is the determining factor. The other party then needs to decide what to do.
Option 1: Customer status (self-representation)
The party that becomes a customer, and represents themselves in the transaction, will need to sign a Customer Acknowledgement form to confirm the change in representation with the brokerage. Although the brokerage or designated agent will not represent that party or advocate on that party’s behalf, they may provide certain services to the customer. For more information on customer status, review Customer – Real Estate.
Option 2: Representation by another brokerage or by another designated agent within the same brokerage
The party who is not remaining a client of the original brokerage/designated agent may want to have another brokerage or a different designated agent represent them. If you go this route, it is up to you to find a new brokerage or request a different designated agent from within the same brokerage.
Choosing a new brokerage or a different designated agent within the same brokerage will provide you with sole agency representation as a client.
Is transaction brokerage always appropriate?
There are some situations where sole agency representation would be in the client’s best interests; in those cases, transaction brokerage isn’t appropriate.
A buyer or seller may need sole agency representation if:
• they have mental or physical limitations
• they are of advanced age
• they are a new immigrant unfamiliar with Alberta’s real estate industry
• they are unfamiliar with the English language
Transaction brokerage is also inappropriate if the real estate professional is a party to the transaction (as the buyer or seller) or is a family member or business associate of one of the parties in the transaction. It would make it very difficult and unrealistic to expect the industry professional to treat both parties in an even handed, objective and impartial manner.