TRESA: The RECO Information Guide

Dec 5

A significant transformation has unfolded with the implementation of the Trust in Real Estate Services Act (TRESA) on December 1st. Among the notable changes introduced, a key addition is the emergence of the Real Estate Council of Ontario's (RECO) new information guide. This guide, developed in response to the evolving industry landscape, now holds a central role in shaping interactions between realtors and potential clients.

We spoke with Charlene Weber about the new changes to real estate in Ottawa, and how the RECO Guide you sign at the beginning of any interaction with a real estate agent sets you up for success.

Under TRESA's mandate, there is now a requirement to provide this information guide to individuals actively seeking the services of a realtor. The purpose of the RECO guide is to ensure consumers understand what it entails to work with a realtor, provide consumers with more information before signing any type of agreement as well as highlighting the risks of choosing to be a self-represented party. This obligation extends to situations where a realtor is representing a client in a transaction, and there is potential for the provision of services or assistance. An example of this is when a realtor is representing a buyer interested in making an offer on a property listed privately by the owner what we call For Sale by Owner or “FSBO.” As we delve into the details of this newly mandated guide, it is crucial to uncover the span of its coverage. We’ll dive into the rights, responsibilities, and expectations that define the relationship between realtors and their clients. Join us in this comprehensive exploration as we break down the contents of the RECO information guide, providing clarity and empowering both realtors and clients with the knowledge needed to navigate this transformed landscape of real estate services.

Section 1: Collaboration with a Real Estate Professional

Understanding the fundamental responsibilities of an agent is essential. Realtors in Ontario are required to hold a valid license, and complete education requirements including continued education throughout their career to ensure compliance and staying up-to-date with crucial changes in real estate, as well as maintaining valid consumer deposit insurance and professional liability coverage.

Realtors stand as invaluable partners, offering their professional advice and guidance to both buyers and sellers. From the RECO guidebook, here are some of the various ways realtors can assist:

Sellers:

Providing counsel on market conditions and formulating effective strategies to attract buyers and secure the best price for your home.
Guiding you through the intricacies of handling competing offers, including the sharing of offer details and navigating other transactional aspects.
Skillfully negotiating with buyers to achieve optimal results in terms of price and overall transaction terms.

Buyers:

Compiling and sharing pertinent information about neighbourhoods and homes that align with your criteria.
Coordinating property viewings based on your preferences.
Offering advice on navigating competing offer scenarios and safeguarding your offer information.
Facilitating referrals to other professionals essential to the process, such as home inspectors, lawyers, or contractors.

This section further explains the advantages of collaborating with a realtor and outlines the duties that both the brokerage and realtor owe to you as a client. These include commitments to undivided loyalty, full disclosure, confidentiality, and the avoidance of conflicts of interest.

As a valued client, you also bear certain responsibilities outlined in the guidelines. These encompass being transparent about your expectations, sharing all relevant information, promptly responding to your realtor's inquiries, comprehending the terms of your agreement with the brokerage, and fulfilling agreed-upon fees. This comprehensive understanding forms the bedrock of a successful partnership in the dynamic realm of real estate.

Section 2: Understanding the Risks of Self-Representation

While some individuals opt for this route, it is imperative to comprehend the inherent risks associated with self-representation.

A self-represented party, by choosing this path, foregoes the services, opinions, and advice that a realtor can provide. Realtors are bound by a set of limitations in their interactions with self-represented individuals. They cannot offer any service, opinion, or advice, nor can they take actions that might encourage reliance on their knowledge, skills, or judgment. Furthermore, they are restricted from either promoting self-representation or dissuading individuals from working with another realtor and brokerage.

If as a self-represented party, you engage with a buyer or seller who benefits from the expertise and guidance of a realtor obligated to act in the best interest of their client. Any information shared with the realtor does not enjoy legal confidentiality protection, and the realtor is bound to share information that aligns with the best interest of their client. This includes details such as your motivation for buying or selling, as well as your minimum or maximum acceptable price.

To safeguard your best interests as a self-represented party, seeking independent professional advice becomes paramount. Additionally, you bear the responsibility of due diligence, some examples of this include inquiries into zoning regulations, permitted property use, property valuation, navigating offer situations (including potential multiple offers), and determining the terms you desire in an offer.

As part of this process, you will be presented with RECO's Information and Disclosure to Self-Represented Party form. The realtor is obligated to guide you through this form before providing any assistance, ensuring that you comprehend its contents. Importantly, you retain the right to change your mind at any point during the transaction if you decide to transition from a self-represented party to a client.

Section 3: Entering into a Contract with a Real Estate Brokerage

In Ontario, there exist two primary types of representation agreements: Brokerage Representation and Designated Representation.

When you decide to become a client, a critical step involves signing a representation agreement with the brokerage. This agreement takes the form of either a Buyer Representation Agreement or a Listing Agreement, also known as the Seller Representation Agreement. It is of utmost importance to initiate and finalize this representation agreement promptly, ensuring that you are formally represented in your real estate transactions. Equally crucial is a clear understanding of the agreement's intricacies, and your realtor should provide a comprehensive explanation, addressing any queries you may have before you sign.

There are key elements that you as a client should ensure you understand, including the duties owed to you, the array of services you are set to receive, your rights and responsibilities, the financial aspects such as what you will pay (for example, as a seller, what commission amount have you and your realtor agreed to), and specific terms governing the agreement. This encompasses critical details such as the duration of the agreement and the provisions for potential cancellation. It is necessary for both parties—the client and the realtor—to have a mutual comprehension of these terms, fostering transparency and clarity throughout the real estate engagement. This section aims to guide you through this pivotal phase, empowering you with the knowledge necessary to make informed decisions as you embark on this contractual relationship with your chosen real estate brokerage and realtor.

Section 4: Key Considerations in a Real Estate Contract

When reviewing a real estate contract, several essential elements warrant your attention. Here's a comprehensive list of key items to look for, ensuring a clear understanding of the terms and conditions:

Designated Representative:

Identify the name of your designated representative, the realtor with whom you are working. Note that more than one realtor at the brokerage can be identified as your designated representative.

Scope of the Agreement:

For sellers, the scope should define the property intended for sale. For buyers, it should specify the areas or types of properties under consideration. Multiple buyer representation agreements are permissible, provided each scope is clearly defined. An example of this is working with a realtor who specializes in downtown condo properties and working with a realtor who specializes in rural properties - ensure your representation agreements clearly define the scope and location that each will assist you in.

Services:

Understand the services outlined in the contract, as brokerages offer a range of options. Tailor the services to meet your specific needs, an example of this can be opting for a mere posting to enhance online exposure while retaining control over handling offers.

Payment Amount and Terms:

Determine the payment amount and terms, decided collaboratively between you and the brokerage. Options include a fixed dollar amount, a percentage of the sale price, or a combination thereof. The payment structure cannot be based on the difference between a property's list price and its final selling price. These are set in place by you and your realtor there are no requirements set in place by RECO or other governing bodies, this amount is set by the client and their realtor.

Seller Agreement Details:

If you're a seller, ensure the agreement specifies the amount you agree to pay the brokerage for services and representation. Clarify compensation to the buyer's brokerage and understand how these amounts might change in the case of multiple representation.

Buyer Agreement Details:

If you're a buyer, the agreement should indicate the amount you agree to pay your brokerage, how this amount may change if the seller covers some or all of your brokerage fees. There are times when a seller may not offer any commission to the buyer agent, ensure you understand the financial implications if you offer on a property where your realtor does not get compensated through the seller.

Termination Provisions:

Understand the circumstances under which the agreement can be terminated and any associated penalties or costs.

Contract Expiry:

Be aware of when your contract expires and have a say in determining the length of the agreed-upon term.

Holdover Clause:

Understand the holdover clause, which may obligate you to pay brokerage fees for transactions occurring after the agreement's expiration. This period, typically 30-60 days, merits careful consideration to avoid unexpected financial implications.

By examining these components, you empower yourself with the knowledge needed to navigate the intricacies of a real estate contract effectively.

Section 5: Understanding Multiple Representation in Real Estate Transactions

The concept of multiple representation demands careful consideration and explicit agreement from the client before its occurrence. Multiple representation can manifest in various ways, including situations where the brokerage represents both the buyer and the seller in a transaction. This scenario may unfold when the buyer and seller have separately signed agreements with the same brokerage, even if different realtors within that brokerage are involved. Furthermore, multiple representation can arise when a designated representative, the client's realtor, represents both the seller and the buyer in a transaction.

Before consenting to multiple representation, it is imperative to fully grasp the associated risks. In such situations, the designated representative must adhere to the following constraints:

Objective and Impartial Treatment:

The realtor must treat each client involved in the transaction with objectivity and impartiality.

Undivided Loyalty Limitation:

Undivided loyalty cannot be maintained exclusively to you, and the realtor is prohibited from promoting or protecting your interests over those of the other client.

Restrictions on Advice:

The realtor is constrained from offering advice on critical matters such as the appropriate price to offer or accept, or the terms that should be included in an agreement of purchase and sale.

If you agree to multiple representation, the brokerage is obligated to furnish you with a written disclosure outlining significant changes. This disclosure should explain how the brokerage's or the designated representative's duties to you will be altered, detail differences in the services you will receive, and specify any adjustments to the fees you pay the brokerage.

Importantly, the choice to accept or refuse multiple representation rests with you as the client. This section seeks to empower you with the knowledge needed to make informed decisions regarding multiple representation, ensuring transparency and clarity throughout the real estate transaction process.

Section 6: Addressing Concerns: How to Make a Complaint

Ensuring accountability and transparency, brokerages and realtors in Ontario are mandated to be registered with the Real Estate Council of Ontario (RECO), establishing a framework for ethical conduct. If you find yourself with concerns about the conduct of a realtor or brokerage, there are specific avenues available to address and resolve such issues:

Contact the Brokerage:

Initiate the resolution process by reaching out to the realtor's brokerage directly. Brokerages often possess mechanisms to mediate and address complaints about the conduct of a realtor affiliated with their firm. Engaging with the brokerage is a first step toward finding an amicable resolution.

File a Complaint through RECO:

You retain the right to file a formal complaint through RECO. Upon receipt of your complaint, RECO will undertake a thorough review, determining if they have the authority to address the issue. Should your complaint fall within their purview, RECO will guide you through the subsequent steps in the resolution process. For detailed information on how to file a complaint, consult the dedicated complaints section on the RECO website.

Empowering consumers with the means to address concerns, these avenues facilitate the resolution of issues related to real estate transactions. Recognizing the importance of transparent and ethical conduct, both brokerages and realtors are held accountable through established processes overseen by RECO. This final section serves as a resource, providing you with the knowledge and tools necessary to navigate the complaint resolution process and uphold the integrity of real estate services in Ontario.

The recent enactment of the Trust in Real Estate Services Act (TRESA) has ushered in transformative changes, reshaping the dynamics between clients, realtors, and brokerages.

From the fundamental considerations of working with a realtor and signing contracts with a real estate brokerage, to the intricacies of multiple representation and avenues for complaint resolution, each section aims to empower you with knowledge. Whether you are a buyer, a seller, or considering the complexities of self-representation, navigating this dynamic field necessitates a thorough comprehension of rights, responsibilities, and potential challenges.

Knowledge is not just power; it is the bedrock of informed decision-making. We encourage you to utilize this guide as a reference, a source of clarity, and a roadmap as you embark on your real estate journey. Whether you are seeking professional guidance, signing contractual agreements, or addressing concerns, your ability to make well-informed decisions ensures a smoother and more rewarding experience.

Remember, the Real Estate Council of Ontario (RECO) strives to uphold ethical conduct, providing avenues for complaint resolution and upholding the integrity of the real estate profession. Your rights as a consumer are central to the regulatory framework, offering you the confidence to actively participate in the real estate market.