For most of us, buying real estate is a rare occurrence. With most people staying in their homes for an average of at least 7 years, it is obvious that shopping for real estate is not frequently undertaken. Additionally, the process of purchasing real estate has evolved considerably over the years (and continues to evolve) making our infrequent participation even more of a challenge. How can we be assured that we are following the correct steps and avoiding any possible pitfalls when we finally need to embark on a real estate purchase? Introducing the buyer’s agent. A buyer’s agent is someone who performs a variety of tasks to help you navigate the process of purchasing real estate. They are typically well versed on legislation, financing, market dynamics, neighbourhood features (schools, amenities, etc.) and can act as a connector to a variety of other service providers that you may need along your purchase journey. Ultimately, a Buyer’s Agent is someone who represents and protects your legal interests.

All licensed real estate agents in British Columbia can act as a Buyer’s Agent. The requirements are quite simple and usually involves the consumer contacting a brokerage or finding an agent online and “interviewing” them to insure there is a good fit. At the end of the day, the most important characteristics of a good Buyer’s agent is simply someone who you can relate to and who listens to your needs. In B.C. we have an established marketing system called the MLS (Multiple Listing Service) which is used by sellers’ agents to market their clients’ properties. In addition to important information about a property, this system also indicates to Buyer’s agents what “fee” a seller is offering as compensation for their (i.e., the Buyer’s Agents) services. This fee is negotiable and in B.C. a typical fee is 3.5% on the first $100,000 and 1.5% on the balance. This fee is the only compensation that prospective Buyer’s Agents earn on a given real estate transaction and is used to cover all expenses such as licensing fees, brokerage fees, office fees, and business expenses (i.e., marketing, car, gas, cell phone, client lunches, training, taxes, etc.). What is left over is the Agent’s income.

Unique to B.C. is what is called Single Agency. This is a legal requirement that means no single agent can represent both a buyer and a seller on the same transaction. This is because it is impossible for an Agent to avoid conflicting interests and to represent both parties with what is called undivided loyalty. This is relatively new legislation that was introduced in B.C. in 2018. It is slowly being adopted in other jurisdictions in Canada with Ontario set to adopt similar legislation. Buyers and Sellers can still choose to be “unrepresented”, but this is a very low (i.e., < 1% of all transactions) percentage as most individuals prefer to have a professional represent their interests in one of the largest (financially) transactions of their lives.

A very recent development out of the United States is a class action lawsuit that was brought against the National Association of Realtors and several large brokerages that sued for uncompetitive practices when it came to Buyer’s Brokerage (Agency) fees. Remember from above that the MLS system is used to advertise not only the property, but the “fee” offered to Buyer’s Agents for their services. In simple terms, the lawsuit claimed that by having the seller agree to a fee that would ultimately compensate the Buyer’s Agent it was considered uncompetitive. The claimants were successful, and the U.S. Department of Justice has ordered brokerages to “decouple” commissions and stop this practice. As a result of this outcome, a similar lawsuit (class action) has been filed in Canada naming the Canadian Real Estate Association and various brokerages. The claim is almost a carbon copy of the U.S. suit. The snafu is that in Canada, we have been evolving the industry towards Single Agency, which is the requirement for Buyers and Sellers to have their own representation (or remain unrepresented). If the lawsuit is successful, this will mean that Buyer’s Agents will need to negotiate a fee for their services directly with their clients to have them represent their (the Buyers’) interests. This will undoubtedly be a big shift in thinking for many people (remember the opening paragraph about major changes in the industry?) and it remains to be seen if the goal of the lawsuit will be achieved.