Friday, September 22, 2023
It’s interesting watching Ken come home after meetings as the President of the Ottawa Real Estate Board (OREB). While Ken faces frequent, exhausting, long days, he has a light in him when he describes the updates and changes taking place. Ken sits on task forces this year at the federal and provincial levels, so he is at the forefront, getting the information as it comes out. It’s an exciting role this year in particular, since the real estate industry has not undergone such immense changes since 1994!
That’s right! There are BIG changes for Ontario real estate ahead. While the Ontario government has provided phase one of the new Trust in Real Estate Act (TRESA, 2002) to RECO (Real Estate Council of Ontario) that enforces the provincial real estate acts; phase two of TRESA, 2002 will replace the Real Estate Business Brokers Act (REBBA), 2002. These acts are laws created by the government to regulate sales and purchases of real estate in Ontario.
While our relationships are ever-changing, your relationship with your REALTOR® will also change! Let’s outline some main differences that will impact you starting December 1, 2023, with phase two of TRESA, 2002.
There is an incredible amount of confusion surrounding these changes, so if you feel confused, don’t worry! You’re in good company! REALTORS® themselves are adapting as information and training become available. I’ll do my best to spell out the changes that affect you as clearly as possible.
Currently, a buyer can do one of two things. First, buyers can decide to work with a REALTOR® and be their client. This means your real estate agent has a fiduciary responsibility to you to represent your best interests. Their advice and guidance must all be geared to benefit you, their client. Not someone else. For example, your agent can’t help you buy a house and at the same time secretly put in an offer for himself on the same property. Or tweak his advice so that his cousin Bob, who is also interested in the property, can get insider info.
We call this fiduciary relationship buyer representation. The agent represents his buyer’s best interests. And trust us, when you are trusting someone with your largest asset, this is a critical relationship. You want to know your agent is advising, coaching, counseling you, providing you with the knowledge and understanding you need, and proactively getting you the information you need, even if you haven’t explicitly asked for it. You don’t always know what you don’t know, right?
The other approach a buyer can take, which we don’t recommend, is not to sign a contract and to act as a customer. This means you can talk to an agent and have them show you properties, and get advice. Agents must give you ethical, honest, proper answers, but without a contract, they don’t have to have your best interests at heart. As a customer, they have no loyalty to you because you haven’t shown commitment to them by signing up to work solely with them.
It’s important to know that the client relationship isn’t going anywhere. That stays the same. What is going to change is the shape of the customer relationship. Now, they officially call it “self-represented.” This is more than a simple name change. It’s now official, much like if you go into a court of law. If you are self-represented, you acknowledge that you consciously choose not to have a lawyer represent you.
So, as of December 1, 2023, you can be self-represented or represented by a real estate agent.
What will this look like as it plays out? Well, it’s fascinatingly practical. If you approached me as a buyer in the past, I could say, “Oh, you’d like to see this house? Well, actually, there are four more in the area, just like it. Would you like me to show them to you?” And I could take you on a tour. Under REBBA, 2002, I could do that. Under TRESA, 2002, I can only show a self-represented person my brokerage’s own listings. I can’t show you any other listings unless you decide you want to become my client and work only with me. Then I have the fiduciary responsibility to look after you and can show you any property and help you however you need.
This change primarily impacts buyers. The next goes into more detail about how TRESA changes things for sellers.
Currently, under REBBA, if you sign with me as your agent, you are not technically my client, per say. You’re actually signing as a client of my brokerage, Solid Rock Realty. According to the law, your real estate agent is treated like an independent contractor connected to a brokerage. This is really important because the brokerage represents the seller.
So, let’s say you sign up with Ken to buy a house, and the home you love is listed with Solid Rock Realty. That house could be listed with Ken or another office agent. Since the brokerage is representing two parties with conflicting interests, your REALTOR® could really only act like a mediator. It takes away a lot of our power. We can’t negotiate for you or give you counsel. We could say, “Here’s what the seller countered with. What would you like to do? Would you like to accept it or reject it?” We can’t say, “I’d recommend you counter 2K higher.” It means that in these situations, currently we can’t fully represent you in multiple representation cases.
Your legal relationship with your REALTOR® is about to change with TRESA. Brokerages now have the option of choosing a designated agency. This means that if you were in the same situation outlined above, you could sign with Ken to be your designated agent. And the seller could be represented by their REALTOR® from Solid Rock Realty to be his or her designated agent. Now, both REALTORS® can advise their clients fully, giving all the guidance and counsel they wouldn’t have been able to previously in a case of multiple representations. The Brokerage has a duty to still ensure the two REALTORS® are supervised and provide the brokerage proper paperwork for the transaction.
This might not seem like a big deal, and it probably isn’t for you at the moment. That’s because you won’t care until it affects you. And trust me, when you are looking at an offer and are unsure what to do, having that guidance from your seasoned, wise agent is a lifesaver! If you are excited about this, trust me, so is your REALTOR®. It kills us having to sit on our hands when we want to help our clients in every way we can.
So, to clarify, multiple representation still exists, but an option for buyers and sellers to choose designated agency is being added under TRESA.
In the past, multiple representations were a small margin of cases. Maybe about 5% of the time did both the seller and buyer work with agents from the same brokerage. So this change will not affect the majority of times you buy and sell. Further, it’s the situations are minimal when people lack clarity and can feel taken advantage of.
This is the reason why the new act is called Trust in Real Estate. These changes are designed to build more trust in the industry for buyers and sellers. More transparency means more trust.
This third change is pretty interesting, if you ask me. Here is how things normally work: You find a home you love, and you find out there are other people putting in offers on the house. You’re worried now! This is the perfect house for you! Then the quandary really begins. How much should you offer?
Almost every person in this situation fears the idea of putting in an offer just under another buyer and losing their dream home by a few dollars. For this reason, we often advise our clients to offer the highest amount they are willing to pay, such that if they went one dollar higher, it wouldn’t be worth it to them. They’d be okay if they lost the house by a dollar.
With TRESA, 2002, this may no longer be relevant! According to the new act, sellers get to choose what information they want open or closed in cases of multiple offers. Currently, the seller only has to disclose how many other offers they receive. That’s the only piece of information that has to be provided. Starting December 1 2023, a seller can now choose to have a closed offer or an open offer to disclose the offer amounts, the irrevocable timeline, the conditions, the closing dates, the terms, etc. They can disclose just the conditions or just the closing dates, or any, or all of it.
The only thing they can’t disclose is the identity of the people putting in the offer. The Privacy Act ensures that this information is still kept confidential like it is now.
Another interesting thing is the seller can also change their mind partway through, which is really fascinating. So they can start off closed with sealed bids, and then, depending on what they receive, they can change it to an open bid. Buyers’ will need to determine how they structure their offers in such a case.
There are many implications to these changes that are going to benefit you whether you are a buyer, seller, or an agent. And while change is good, it can also be confusing. If you’d like more clarity on these changes and how they can impact you, reach out. Send us an email to firstname.lastname@example.org.
We can make sure you get a copy of the TRESA, 2002 guide when it comes out and can walk you through how these changes will impact your situation. Or, if you just want clarity on a few things, reach out. We have most of the information and whatever we don’t have, we’ll get back to you once it’s available. Why? Because together we’ve got this.