What to Expect of your Realtor
When choosing a realtor, it is important to understand what is reasonable to expect of your real estate professional and what questions to ask in order to make an educated decision.
The Real Estate Due Diligence & Professionalism
Courts treat real estate professionals as professionals and expect them to follow the applicable standards of practice and perform the due diligent activities expected of them when representing clients. That would include a level of judgment, care, responsibility, and any other activity that would be expected and exercised by a reasonable person under the circumstances.
They are a critical aspect of any real estate transaction as they are necessary for providing competent services to clients and maintaining professionalism.
Furthermore, a real estate professional should carry out systematic research and analysis of acquiring factual and objective information about aspects of a property that is, or maybe, the subject of a transaction. All these activities are required to be performed prior to or in the course of a real estate transaction.
The general activities that real estate professionals are expected to perform on behalf of clients include the following:
- A real estate profession is required to gather and verify all the relevant information and facts regarding the property.
- While dealing with clients, all of their concerns should be identified and addressed. Also, they should be explained the advantages and disadvantages of accepting or rejecting a given course of action, and should also be given the advice to seek legal counsel or expert advice.
- The real estate professionals should, at no point, predict what they think might or might not happen.
- They should document, in writing, the information they receive from others and convey to the client details such as where and when the conversations occurred.
- Retaining and providing all documentation and trade records about the transaction to the brokerage should also be taken care of.
In addition, real estate professionals must understand that the due diligence activities they perform on behalf of the client should involve the following considerations:
- Physical Considerations – This includes items related to the physical aspects of the property such as its features, measurements, and general condition.
- Legal considerations – This includes items related to the legal matters of the property such as ownership rights, title registrations, Real Property Reports, condominium bylaws, and material-latent defects.
Due diligence activities carried out by all real estate professionals will vary depending on the client’s role in the transaction (seller, buyer, landlord, tenant). While the activities may be different in terms of scope and degree, the areas in which real estate professionals are expected to carry out their due diligence activities include the following:
- Property rights, ownership, and limitations
- Registered interest on the property title (e.g., mortgage, rights-of-way)
- Property boundaries (e.g., encroachments, easements) and measurements
- Restrictions imposed by covenants and/or condominium bylaws
- Compliance with municipal bylaws, regulations, and relaxation permits
- Property defects (e.g., material-latent defects)
- Property location, (it relates to flood hazard areas)
- Property taxes
- All other client concerns (e.g., noise considerations, criminal activity)
RECA sets and enforces standards of practice to which all real estate professionals must adhere in order to protect consumers and improve the industry of real estate. Self-regulation requires that the real estate professionals, both individually and collectively, govern themselves in a manner that is in the public interest. This means that their conduct must be at the highest levels of professionalism, integrity, and ethical behavior regardless of whether it is in the business of an industry professional or other non-industry related activity.
Choosing a Realtor to Represent You & The Different Types of Representation Relationships
Professionalism is linked to due diligence which is required of real estate professionals in a representation relationship with a client. By contrast, real estate professionals have a non-representation relationship when they are working with customers. The difference between a realtor working with you as a client or a customer is important to understand as it directly relates to due diligence. Any services real estate professionals provide to customers are provided in order to advance the client’s interests to help them sell or purchase a property.
Different Types of Representation Relationships
Representation relationships come with a combination of general obligations towards the client and fiduciary duties of the real estate professional.
General obligations that a real estate professional must fulfill are as follows:
- They must exercise care and skill
- They must act in all honesty
- They must only negotiate favourable terms
- Special care to maintain confidentiality must be taken
- They should make sure to disclose all information to clients
- They should act in person
- They should, by all means, obey lawful instructions
- They must be sure to perform the mandate
While dealing with clients, the principles underlying fiduciary duties must not be overlooked. The three fundamental principles that constitute the fiduciary duties are as follows:
- Trust and confidence should be maintained at all times.
- Best interests of the client should be looked after
- Loyalty towards the client should be assured.
A real estate professional is, furthermore, responsible to not only provide you with utmost loyalty but also not to make any secret profits and to disclose and avoid conflicts of interest. A real estate professional is also responsible for accounting and handling all confidential and other information adequately.
A real estate professional, in a representation relationship should demonstrate competence by the course of being supervised and doing referrals.
In a non-representation relationship, the real estate professionals are not entitled to the aforementioned obligations and duties towards the customer.
Standard of Care
The standard of care expected of real estate professionals when fulfilling their general obligations and fiduciary duties to clients is the standard of care that would be expected of a reasonable and prudent real estate professional in similar circumstances. This standard of care is a legal concept, that applies to all real estate professionals in all their actives involving clients, to establish attention and caution.
A real estate professional meets the standard of care by observing the following things:
- Professional standards
- Professional norms and practices
- Expert testimony
In order to decide if your real estate professional has met the standard of care, there are a few things that should be judged.
First and foremost, they should identify and address the type of consumer relationship, and act consistently with the relationship chosen
Moreover, they should know the brokerage services along with knowing the brokerage policies and procedures.
It’s also important to know the market as well as various practical issues and exercise due care while preparing all sorts of documents.
A real estate professional should not only make reasonable efforts to confirm information but also, know when to seek advice and on what matters. It is important to admit one’s own self to being a life-long learner.
Role of Real Estate Professionals
A real estate professional must confirm that consumers understand the varying responsibilities and services associated with each type of real estate relationship. With knowledgeable consumers, they would be able to safeguard their interests, make informed decisions, and choose the best real estate relationship for their needs.
While making relationship disclosures, real estate professionals need to discuss all the types of relationships and how their own responsibilities would vary from one relationship to another.
Upon receiving confidential information from an individual concerning his or her real estate needs, motivation, financial qualifications or before entering into a service agreement, an industry member must disclose in writing to that person about the nature of the services he or she will provide. The industry member also needs to state whether he is acting in the anticipated/ongoing trade in behalf of any other member as well as any conflict of interest that may exist. Any other facts that may be likely to influence a person’s decision should also be mentioned.
A consumer attending an open house held by a real estate professional or in a preliminary conversation with a real estate professional discussing price range, location, and or property styles does not require written disclosure. A consumer asking general questions to which factual answers can be provided can be omitted in written disclosures too.
The written disclosure provided by real estate professionals must further include whether the REP has already entered into a representation relationship with another party to the real estate transaction. The services the real estate professional will provide to the consumer along with any conflicts of interests that may exist between the consumer and the real estate professional, and any additional facts or information that may influence the consumer’s decision should also be included.
Clarifying Your Realtor’s Role with the 5 Ds of Clarity and Consistency
When dealing with a real estate professional, use the “5 Ds of Clarity and Consistency” in order to correctly clarify your realtor’s role:
Determining the role of your realtor, while in a relationship with a real estate professional is important as it imposes the following benefits of role clarity and consistency:
- Ensures meeting the regulatory requirements
- Enhances professionalism
- Prevents unintended or misunderstood relationships
- Clarifies responsibilities and services to consumers
- Reduces disputes that may arise between the two parties