— We take our content seriously. This article was written by a real person at BREL.
After a long 20 years, the Real Estate Business and Brokers Act – the legislation that protects consumers in real estate transactions – has been updated. Now known as the Trust in Real Estate Services Act (TRESA), the new legislation came into effect on December 1, 2023. While some of the changes are only directly relevant to REALTORS, there are some important changes with TRESA that Ontario buyers and sellers need to know about.
In short, TRESA:
- Provides better consumer education – there’s a new RECO Information Guide that must be given to all buyers and sellers
- Sets out new rules around representation – As a buyer or seller, you can now be:
- Represented by a REALTOR as a Client; or
- Choose to represent yourself as a Self-Represented Party (SRP)
- Sets out new rules around brokerage representation – There are now two types of brokerage representation to help navigate situations where an agent or brokerage represents more than one party with competing interests in a transaction (multiple representation):
- Brokerage Representation – when the brokerage and all its agents represent you
- Designated Representation – when one or more of a brokerage’s agents is your designated representative
- Creates greater disclosure requirements – Sellers and their agents must now disclose everything they know about a property
- Allows for open bidding wars – While the blind binding wars of the past are still permissible, there are new rules guiding what a Seller and their agent can share during a multiple offer or bidding war – and open auctions are now legal in Ontario
- Forms, forms, forms – There are a whole bunch of new forms
- Makes changes to the Code of Ethics and creates greater penalties for misbehaving REALTORS
Read on for all the fun….
The New RECO Information Guide
As part of TRESA, prospective buyers and sellers must now be furnished with a copy of the Real Estate Council of Ontario’s new Information Guide, which details the ways that consumers and Ontario REALTORS can work together. Your agent must provide the guide to you before you enter into any agreements and should take you through it, answering any questions you may have. While it isn’t a legal requirement, your agent will likely ask you to acknowledge in writing that you have received and reviewed the guide.
The RECO Information Guide provides detailed information about:
- The different ways you can work with a real estate agent if you’re buying or selling a home in Ontario
- A REALTOR’s ethical obligations and duties
- The option (and risks) of representing yourself
- Representation agreements
- Holdover clauses
- Multiple representation
- Multiple offer rules
- How to make a complaint
Changes to How Consumers and REALTORS Work Together
Under TRESA, you can either:
- Be represented by a REALTOR, in which case you’re considered a ‘Client’; or
- You can represent yourself, in which case you’re considered a “Self Represented Party,” or SRP.
If You’re a ‘Client’
When you’re a ‘Client’, your REALTOR represents your interests and provides you with all the services, advice and opinions you’d expect.
For buyers, that might include:
- Helping you assess your needs and options and educating you about the home buying process
- Introducing you to mortgage brokers, home inspectors and home service professionals
- Showing you homes and touring neighbourhoods
- Educating you about the pros and pitfalls of different condo buildings
- Sharing comparable price information and providing an opinion of value
- Asking all the important questions and performing due diligence
- Preparing the legal documents and negotiating
For Sellers, that might include:
- Determining the market value of your home and developing a pricing strategy
- Help with home preparation and staging
- Photography and marketing
- Coordinating showings with potential buyers
- Navigating offers and negotiating
The RECO Info Guide lays out the ethical duties and obligations owed to you if you are a ‘Client’:
- Undivided loyalty Your best interests are promoted and protected by the brokerage or agent representing you. As a client, your interests take priority over the interests of the brokerage, its agents, and any other party.
- Disclosure They must tell you everything they know about the transaction or your client relationship that could have an impact on any decisions you make.
- Confidentiality Your confidential information cannot be shared with anyone outside of the brokerage without your written consent, except where required by law, even after your client relationship ends. This includes, for example, your motivation for buying or selling, and the amount you would be willing to pay or accept.
- Avoid conflicts of interest They must avoid any situation that would affect their duty to act in your best interests. If a conflict arises, they must disclose it to you and cannot provide any additional services to you unless you agree in writing to continue receiving services.
If you’re working with a REALTOR, you are considered a Client and will have to sign a representation agreement. The agreement will describe the duties owed to you, the services you will receive, your rights and responsibilities, what you will pay, and specific terms of the agreement, including how long the agreement will last and whether you can cancel it. Both buyers and sellers have to sign representation agreements.
The ‘Self-Represented Party’ (SRP)
Self-represented parties are not clients of a real estate brokerage and are (by definition) representing themselves.
If you’re a Self Represented Buyer: Remember that the Seller’s agent works for the Seller and is legally required to act solely in the best interests of their client. If you’re an SRP Buyer, that means that a listing agent who shows you a property is obligated to share any information you reveal to them to their Seller, as they aren’t working for you. They can share your motivation, how much you can afford, etc. They also cannot:
- Provide you with any services, opinions or advice
- Do anything that would encourage you to rely on their knowledge, skill or judgement
- Encourage you to represent yourself or discourage you from working with another REALTOR
The only services that the Seller’s agent can provide to a self-represented party are those that are in the best interest of their Seller client – for example, showing you the property.
If you’re a Self Represented Seller: You’re fully responsible for all the activities involved in the sale, from determining a listing price and strategy to staging, marketing, coordinating showings, making required disclosures and negotiating offers. If you’re listed on the MLS and are allowing agents who represent buyers to show your property, note that they are not allowed to give you any advice or opinions and must solely act in the best interests of their buyer.
Risks of Representing Yourself
If you don’t have deep real estate knowledge and expertise, you may be putting yourself at great risk, as Self Represented Parties are solely responsible for looking after their own interests and protecting themselves; meanwhile, the other party is likely benefiting from the services of an expert. While you can get help from a lawyer with the paperwork, there is so much more that goes into buying or selling a home than paperwork.
Our Best Advice
Of course, we’re biased, but we know the benefits our clients gain when they have us representing their interests. If you decide to be an SRP, make sure to seek independent legal advice and proceed cautiously.
Brokerage Representation vs. Designated Representation
In Ontario, all REALTORS work for a brokerage. There are two ways a brokerage can represent a Client:
- Brokerage Representation – The brokerage – and all its agents – represent you. They must all promote and protect your best interests (though you’re likely to have one agent as your primary contact).
- Designated Representation – One or more of a brokerage’s agents work for you and must promote and protect your best interests, while keeping your personal information confidential. The brokerage and its other agents are required to treat you impartially and objectively.
The most important difference between Brokerage Representation and Designated Representation is how clients are treated when the agent or brokerage represents both the buyer and seller in the same transaction.
Bspoke Realty Inc. – and thus the BREL team – is a Designated Representation Brokerage – meaning that when you work with one of our agents, they will only ever represent you – your BREL agent will never represent both the buyer AND the seller in a transaction.
Our Best Advice
Whether a brokerage chooses to be a Designated Representation Brokerage or not, it’s likely only important if you want to avoid multiple representation and ensure that your agent works for you and you alone – in which case, a brokerage operating under designated representation may be a better choice for you.
Multiple representation is the term used when a designated agent or brokerage represents more than one client with competing interests in the same transaction.
- Brokerage Representation – Multiple representation exists when the brokerage represents both the buyer and seller in the same transaction or two or more competing buyers interested in the same property — even when the clients are working with different real estate agents.
- Designated Representation: Multiple representation exists only when the same real estate agent is the designated representative for both the buyer and the seller in the same transaction or for two or more competing buyers interested in the same property.
It’s important to note that multiple representation is not permitted unless each of the clients involved agrees.
As per the RECO Information Guide: If you agree to multiple representation, the brokerage or designated representative:
- Must treat each of the clients involved in an objective and impartial manner;
- Cannot maintain undivided loyalty to you or promote and protect your interests over the interests of the other client; and
- Cannot offer advice to you about such things as the price you should offer or accept or terms that should be included in an agreement of purchase and sale.
- Cannot share confidential information you provided to the brokerage or the designated representative when you were represented without your written consent.
Our Best Advice
Avoid multiple representation whenever possible. You deserve to have an agent who works exclusively for you.
New Rules About Disclosures
TRESA places more onus on the Seller and their REALTOR to disclose what they know about a home that’s listed for sale. Sellers must disclose every major hidden physical defect that they know about – including what a home inspector might not be able to see. That might mean disclosing structural defects, mould, major leaks that haven’t been repaired, knob and tube electrical wiring, etc. If you or your agent know something about the home, it MUST be disclosed.
Agents representing buyers now have greater duties of due diligence and are expected to find out everything that would matter to you in order to protect you.
Note: A murder or suicide that occurred inside a home does NOT have to be disclosed – but you can’t ask your REALTOR to lie if someone directly questions them. So if a death has occurred in your home, be prepared to instruct your REALTOR about how to respond, keeping in mind that they cannot be instructed to lie.
While the new disclosure rules might seem onerous, they will greatly reduce the lawsuits and headaches that inevitably follow when sellers try to conceal or misrepresent their homes. Many agents (including the BREL team) have already been operating like this for many years.
Our Best Advice
- If you’re a seller, be honest with your REALTOR about your home – nobody wins if you don’t disclose what you need to disclose.
- Be cautious about getting a pre-listing home inspection, as you’ll have to disclose anything it uncovers. You won’t be able to just file the inspection report away and pretend it never happened.
- If you’re a buyer, make sure your agent knows what’s important to you and is asking all the right questions.
Changes to Bidding Wars
While Ontario home buyers have always had a right to know if there are other offers on a property (and the number of offers), the contents of the offers – price, closing date, terms and conditions, etc. – had to remain confidential. This is often referred to as ‘blind bidding’.
Under TRESA, blind bidding is still permissible…but…a Seller can now choose to disclose the contents of the offers to the other bidders, provided that they give the same information to every person who has submitted a valid offer.
This rule change means we can now have open auctions for homes in Ontario and ushers in the possibility of greater transparency in traditional bidding wars.
As a Seller, you can direct your REALTOR to share the highest price, closing dates, deposit amounts and/or terms and conditions with the other offers. Names and other personally identifiable information must still remain confidential. You’ll be asked to provide that direction in writing – and can change or revoke your wishes at any time. The Seller is always in control of what – if any – information is released.
As a Buyer, it’s important to know that the details of your offer may be shared. That might work to your benefit if you aren’t the top offer – for example, knowing that the top offer is $25K more than yours can help you decide how to adjust your bid to win; but it also might work against you – for example, your offer is the highest and is used to get the other bidders to increase their offers. There are ways to structure your offer to keep it confidential – make sure to discuss the pros and cons of each strategy with your agent before you submit an offer.
Our Best Advice
- Before you list your home for sale, make sure to talk to your agent about the pros and cons of sharing the contents of offers, in the event that you get a bidding war. If your top offer is $50,000 more than the next best offer, you may just want to continue with the blind bid. But if the top two offers are $5,000 apart, it might make sense to reveal that information to everyone – and see what happens.
- The opportunity to have open offers and auctions is new in Ontario and we’re navigating and learning as we go.
New Forms! More Forms!
Just what we were all hoping for, right? Lol
While only the nerdiest of real estate nerds get excited about new forms, we did write some detailed blogs about the new paperwork:
- Understanding the Paperwork for Buyers
- Understanding the Paperwork for Sellers
Our Best Advice
Always read what you are signing and make sure you understand it.
New Code of Ethics and Penalties
The new TRESA aims to better protect consumers by increasing the potential penalties for agents who misbehave. Individual agents now face potential fines of up to $50,000, while brokerages face potential fines of up to $100,000. TRESA also makes it easier for the Real Estate Council of Ontario (RECO) to revoke REALTOR licenses.
Pheww….that’s a lot of new stuff. Have questions? Talk to your REALTOR!