Conflict Of Interest?


5 minute read

March 8, 2013

If a Realtor has two or more clients looking for the same exact property, is that a conflict of interest?

Some say yes, others say no.  What do you think?

“Conflict of Interest” is defined as:

The circumstance of a person who finds that one of his or her activities, interests, etc., can be advanced only at the expense of another of them.

Taking those words to heart, it could be VERY tough for a Realtor to do his or her job on a regular basis…

There are 35,000 Realtors working in the GTA, and some are busier than others.

Some Realtors are retired and just have their license to collect referrals, some Realtors hold their licenses to do 1-2 deals per year for friends and family, some Realtors work part-time, some Realtors work full-time but aren’t that busy, and then some Realtors are absolutely slammed.

For the full-time Realtors that are constantly on the go, it’s impossible not to have business overlap.

At the present moment, by turning my head slightly to the left and taking a look at my “ACTIVE CLIENTS” database (and by database, I mean small piece of paper with names on them, pinned to the wall next to my desk…), I see that I currently have 14 active buyer clients.

Are all of my current active buyers looking for something completely and totally different?

Yes.  And no.

Let me explain, from both sides of the equation…

I currently have three couples looking for a 3-bedroom house in Riverdale.

I have two couples looking for an authentic hard-loft in King or Queen West, with red brick, timber beams, and high ceilings.

I have two investors looking for bachelor condos in the financial core under $250K.

Does this mean that these three sets of clients are conflicting with each other?

Is it possible for me to work with three different sets of buyers, all looking for 3-bedroom houses in Riverdale, without having any conflict of interest?

Before I answer that question, let me tell you a story.

About five years ago, I had two friends, who we’ll call Joe & John, who were both looking to enter the real estate market.

Interestingly enough, both Joe & John liked the idea of buying a triplex, living in one of the units, and renting out the other two units to pay off the expenses, and live expense free.

I showed Joe a triplex at Dufferin & Dupont one afternoon, and the next day, John emailed me the listing and asked to go see it.

John asked me to find out a few things about the property, and I said, “Oh I know this; I already saw the property yesterday with Joe.”

John was upset.

John asked me, “How the heck can you show me the property, when you’ve already shown it to Joe?  Why are you showing Joe the same properties that you know I’d want to see?  You know what I’m looking for!  You can’t be showing the same kind of property to another client!”

I never thought this was going to be a problem, but perhaps the onus was on me to educate John a little bit.

I told John that I have many active clients, and sometimes, clients overlap.  I was never going to withold properties from John, and the city of Toronto can be a small place when it comes to real estate.

I further explained to John that Joe was looking at everything – condos, houses, multiplexes – he didn’t know what he wanted.  But if he was interested in a property, any property, I was going to show it to him.  And if Joe happened to be interested in a property that might also be interesting to John, then so be it.

Ironically, both John & Joe bought properties that were nothing like the one that I showed to both of them at Dufferin & Dupont, but that is not only the moral of the story, but the point I wanted to make about any potential “conflict of interest.”

If a Realtor has one client looking in one area, and another client wants to look in that area too, all parties involved would be naive to think that the Realtor isn’t going to show ALL properties to ALL parties.

Think of it this way: the average buyer probably looks at 12-15 properties before buying; maybe more, maybe less.  So it makes no sense to say, “Client-A is interested in this property, so I can’t show it to Client-B,” when there is, on average, a 7-8% chance that the client will purchase that property.

I could have a client tell me, “I’m looking for a 3-bed, 3-bath, detached house in Davisville Village, with a private driveway, on at least a 25-foot wide lot, with a finished basement that has 7-foot ceilings or more, and a large back deck.”  Then I could take that client to exactly what he or she described – that 3-bed, 3-bath, detached house in Davisville Village, with all of what I described above, and that client could say, “I think I’m going to pass; I’m just not feeling this one.”

And what if I had a second client who had the identical search parameters, and I didn’t let them know about the property because I was being “loyal” to my first client, and trying to avoid some bizarre connotation of conflict of interest?  How am I supposed to know if a client is going to buy or not?  How am I supposed to know if I should hold back the house from a second, third, or fourth client?

So if we, as Realtors, were to start plugging one client into one property, and never showing the same property to another client, we’d all be out of business.

And that’s about as simple as I can make this.

There’s truly no such thing as a “conflict of interest” when it comes to showing properties, as every single property in the city is different, to some degree.  Even identical condo units, both the “04” floor plan, one floor apart, will have different finishes and paint colors.

So when could a true, potential conflict of interest take place?

When you have two clients that want to offer on the same property.

I’ve only ever had this happen ONCE in all my years, and it was handled in the only way I know possible.

I told both clients as soon as they expressed interest in the property, “Just to let you know, I have another client who is interested.”

This was in 2008 or 2009, during the insane condo boom where every non-CityPlace condo in the city was getting multiple offers.  The property was a unit in my old building at 230 King Street that received eleven offers, and both my clients were in the mix.

The only way I knew how to deal with it was to tell the client I’d been working with for a longer period of time, “I’m going to represent you for this offer presentation,” and tell my other client, “I have another client that I’m representing, so I’d like my colleague to present your offer tonight and guide you through the process.”

Both clients understood, and thanked me for my honesty and forthcoming nature.

I probably wouldn’t have been upset if my second client said, “Forget you; I’m not going to work with your colleague!  I’ll go find somebody else!”  Those are the breaks, and since this has only happened to me once before, I’d understand if the second client wanted to walk away, since it’s somewhat of an unexpected circumstance.

I coached both clients in advance of the offer, and discussed pricing with both clients, but never divulged the nature of the other client’s offer, or their motivation or expectations.  When it came time to sign and present, my colleague took over for my other client, and guided him through the offer, and the eventual “send-back” of ALL eleven offers (I blogged about this back when it happened, since I was pissed that the agent sent back eleven offers to “improve,” even though 7-8 of them probably weren’t even close).

Neither client got the property, and I continued to work with both.  That experience was a blip on the radar, and neither client made anything of it.

If you’re a buyer, and you’re hoping that your Realtor isn’t working with anybody else who may potentially maybe possibly be interested in maybe considering seeing a property that maybe possibly YOU might also want to see, then your expectations are far too high.  All you can do is hire a Realtor with one week in the business, who has no clients, and take the good with the supposedly-bad.

Toronto can be a very small city when it comes to prime real estate, and we’re bound to step on each other’s toes once in a while…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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  1. AsianSensation

    at 9:37 am

    David, what about cases of when you’re both the listing agent for a home and representing a client interested in that home?

  2. Geoff

    at 11:27 am

    @ AS – that’s double representation and discussed at detail in his blog archives.

  3. Nerd

    at 3:12 pm

    When I was younger we were in one of those situations that AsianSensation mentioned. Our agent was also representing the people selling the home. We ended up buying it but my parents really regret it and feel they could have gotten a much better price. They’re usually pretty smart people so I’m not sure how they let him get away with that…

  4. lui

    at 9:03 am

    David how about update video of your hamster…I mean puppy….

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