Who Do You Work For?

Business | May 12, 2021


Pop quiz!

You sign a listing agreement with me.  Who do I work for?

Wait, that’s a trick question, since you don’t sign a listing agreement with me, but rather with my brokerage.  The listing is signed at the brokerage level, not the agent level.

Alright, so you sign a listing with me and my brokerage, who do I work for?

That’s a silly question, right?  It’s hard to believe that this is even leading somewhere worthy of a discussion?

Yes and no.

Yes, because I obviously work for you, the seller.

No, because the general public doesn’t seem to understand this concept, and as the heat turns up on real estate agents in Toronto in 2021, the public has to realize that they simply can’t have it both ways.

By “have it both ways,” I’m referring to a double standard that is quite common.  Think about it: you hate the way that real estate is sold in Toronto, with the under-listing, and the multiple offers, except when it comes to your time to sell, you love it.  You can’t believe it.  All the showings, all the interest, all the offers – and the sale price!  Yay!

Out there right now, there are a lot of folks on the buy/lease side that don’t understand, or don’t want to accept, how agency representation and fiduciary duties work.  Those that don’t want to accept are guilty of that double standard, since their refusal to accept stems from self-interest, because it would be impossible for them to feel the same way if the shoe was on the other foot.

I think a brief history lesson might help.

If you were looking to buy a house in Toronto in 1965, you would walk into a real estate office and ask them, “What properties do you have listed for sale?”

There was no House Sigma, let alone MLS, let alone internet, let alone, let alone…

The reason that real estate brokerages started posting listings on the window of the brokerage storefront was because so many people came inside to inquire.  Why not just post the listings on the glass so people could look at them from outside?

In a small town, or on a main drag, you’d have ABC Realty, XYZ Real Estate, and 123 Realty Brokerage all flyering their front windows with real estate listings, so you could just walk up and down the main drag browsing listings.

If you happened to be interested in one of those listings, what did you do?

You spoke to the listing agent.

You worked with the listing agent.

You bought through the listing agent.

And who had your best interests at heart?

Nobody.

My Dad tells me stories about buying a house in 1978 through the listing agent, who had sold another house to the seller, and that house had been bought by another client.  They were all tied together, and if one person couldn’t close, then none of the deals closed.  Back then, the seller might have to “take back” a mortgage just to get a deal closed, or risk a chain of events that could unravel several purchases and sales.

In 1965, or in my Dad’s day in 1978, or even later in the 1980’s, there were no “buyer agents” because there was no “buyer agency.”

Every single agent worked for the same person.  Do you know who?

The seller.

Under law, every agent worked for the seller, no matter what.  Is that nuts or what?

Now, fast-forward to 2021, and do you know that if you’re not under a Buyer Representation Agreement, by law/definition, the agent you’re speaking to still works for the seller?  Yeah, not in reality.  But by definition, they do.

So let’s say you’re a buyer, working with an agent, or not working with an agent – doesn’t matter.  And you call me about my listing, and ask something like “What do you expect this property is going to sell for?”

How would you expect me to answer that?

How would you like me to answer that?

In the past couple of years, I’ve become very direct, cold at times, and almost robotic in how I deal with calls like this.  I do this not out of frustration of disinterest, but rather out of necessity.

“Are you currently working with an agent?” I ask them.

I don’t ask because, like you might assume, or like most other agents in this position, I’m interested in their business.  I’m generally not interested in their business (more on that in a moment), but I have to ask them because it’s the right thing to do.

If they say that they are working with an agent, then I ask that agent to call me on their behalf.  Why?  Because I don’t like broken telephone and I don’t like speaking to other agents’ clients.  It runs the risk of improprieties and implied representation.

If they say that they are not working with an agent, then I tell them the only thing they need to know: “I work for the seller.  I can’t give you guidance on the value of this home.”

Simple, right?

Except that many of you reading this feel like those folks that call me up.  You feel like I’m being a jerk, or unhelpful, or unfair.  But who do I work for?  Who is my contract with?  To whom do my fiduciary duties lay?

The seller.

Time and time again, I am taken to task for simply doing my job.

Case in point: I have a luxury lease listing for $10,000 per month.

Last week, I received an email from somebody who said, “Can you tell me a little bit about the landlord?”

What do you think?  Is this a fair question?  Would you ask this?  Maybe.

Except that this email is through Realtor.ca and I have no idea who I’m talking to.

So I email back and say, “I’m happy to speak about the property.  Do you have time for a quick phone call tomorrow?  Please let me know what time is convenient and at which number I can reach you.”

Fair?

I think so.

Except some of you might think, “I don’t like talking on the phone.  I text.

That’s fine.  But I’m representing my client here.  I’m looking after his $4,000,000 property, and frankly, I don’t care how you prefer to communicate.  The only thing that matters is the job I’m doing for my client.

This person wrote back and said, “I don’t have time for a phone call.  I just need to know a little more about the seller to make a decision on this property.  What line of work is he in?  Does he have other properties?  How old, what’s his background, etc.  I want to know who I’d be renting from.  Thanks.”

Fair?

Not even close.  And don’t try to convince me that it is.

If this person submitted an offer, accompanied by a rental application, employment letter, credit check, and I was able to look him or her up on LinkedIn, then I might consider divulging information about my client.

But to a person who says, “I don’t have time for a phone call,” and then demands information about my client, I simply write back and say, “I’m sorry you don’t have time for a phone call, please note my contact information below and feel free to call me at your convenience when you’re ready.”

I never heard back from that person, by the way.  So tell me, “David, you just scared away a perfectly good renter for your client!  You’re not doing your job!”  Except, I’ll vehemently disagree.  Fraud is rampant in the rental industry, and when a monkeylover88@gmail.com emails me and asks for personal and background information on my client, I would be a fool to provide it.

Here’s another story…

A few months ago (and I may have written about this, but it’s been a long year…) I had a listing for a house that was literally sinking into the ground.  Literally.  Major structural problems existed, and we had no choice but to sell this house in as-is condition with no representations or warranties.

I probably received over forty cold calls on the house, and every buyer wanted to “work with the listing agent,” because they all think they’ll get a deal, or a break, or that there’s some sort of advantage.

I told every caller, “We’re not representing any buyers in this sale.”

They couldn’t believe it.

In this area, in this community, everybody wants to work with the listing agents because those listing agents all use their listings as lead farms!  They all want to double-end their listings, and those calls to listing agents are typically very-well received!

I told every buyer, “This property appears to have structural damage.  The property is being sold in as-is condition, with no representations or warranties.  We cannot work with, or show through, any buyers.  We do not want to create a scenario where implied warranties or implied representations are present.”

Those words fell on deaf ears.

I had people yelling at me, borderline threatening me.

“If you don’t show me this house and present an offer to me, I’ll report you!”

They demanded that I show them the property.  They told me I had a responsibility!  A duty!

In reality, no such duty exists.

I wasn’t refusing to show them the property because I’m lazy but rather because the seller is my client, not them!  Here we have a house that could be a potential minefield for my sellers and it’s my job to lead them through the process of selling it, and closing it.

The last thing in the world I want to do is jeopardize the sale and closing of their property because I was answering questions to some random person that called or emailed me, and ended up making an offer through another agent.  Because remember, I would not represent a buyer if I had the listing.

“Implied representation” can exist where the buyer is under the impression, whether factual and accurate or not, that you’re giving them some level of service and care.  And “implied warranties” could exist if they asked you questions about the property and you answered.

One more example which will, once again, demonstrate why I have to make it clear who I represent, but also why I can’t acquiesce to every stranger that calls me on a listing.

A person emailed me about a listing and said he wanted to take a look.

I asked if he had an agent, and the person said, “Yes, I do.”

I then told him that he should have his agent show him the property.

Now, many of you reading this have been in this situation.  You’re working with your cousin who lives in Ottawa because she’s going to cut you a break on the commission, so you ask the listing agent to show you houses.  You believe that the listing agent has a duty to show you the house.

Right?

Nope.

If you wanted to, you could argue that I have a fiduciary duty to my seller-client, and that duty includes ensuring anybody and everybody who is interested in the property is able to gain access, and thus if some buyer under contract with another agent wants to see the property at 2:00 AM, I have to show it to them.

But if you made that argument, you’re ignoring agency and representation, let alone, common sense.

This person told me, “My agent doesn’t work in Toronto.  I would like you to show me the property.”

I wanted to respond that maybe he should consider working with an agent who actually lives in the city in which he’s selling properties, and question how an agent from Timmins, Belleville, or North Bay would be able to work in his best interests, but that’s not my job.

I said, “I can’t show you the property because you are under contract with another agent and I work for the seller.”

I further explained that I do not interfere with other agents’ client relationships and that I do not put myself in a position to make implied representations or warranties about the property.

He said, “You don’t have to say a word to me.  You just unlock the door, I walk through on my own, and then I walk out and leave.”

But this merely presented another problem, you see, since I work for my seller!  I can’t have a stranger walking through my seller’s home, unaccompanied, and unsupervised.

Is this person a robber?  Probably not, but I’m not here to play the odds.  When somebody I don’t know says, “I want to walk through your seller’s house, unaccompanied,” I’m not taking any chances.  I’m not saying that this person was going to steal anything, or look at any personal, financial, or privileged information, but I’m just not in a position to allow that.

This person yelled at me too.  He told me how awful I was, how I wasn’t doing my job, how he hated real estate agents, and then some.

I wished him good luck in his property search, but he hung up on me before I could finish.

So am I a bad guy?

After having read all the preceding, do you wish that I would simply throw away my contractual obligations, agency representations, fiduciary duties, standard of care, and common sense?

Because over the last few months, I’ve had a lot of phone calls and emails from both represented and unrepresented buyers and lessees who simply don’t care.  They want what they want, when they want it, and there’s no convincing them otherwise.

What I like about the saying, “the shoe is on the other foot” is that you have two feet, a left and a right, and at some point in your life, the shoe will have been on both.  For any would-be buyer or would-be tenant, they simply have to see things from the other side and understand that when it’s their turn to sell, or lease out their property, they won’t want their representative doing the same things that they’re demanding, today.

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17 Comments

  1. Pingback: Best Real Estate Agent In GTA – Who Do You Work For? – Toronto Realty Blog
  2. Jenn

    at 8:32 am

    Interesting topic! Personally I would never call a listing agent on a property. That’s literally the very last person I would engage. I’m curious why people are doing this? Is this a new thing maybe pandemic related?

    1. Sirgruper

      at 5:05 pm

      I have bought using the listing agent. David is uber careful but many are not. I bought through the agent who did double end the deal and was quite happy to do so. I am sophisticated enough that I knew exactly what I would pay (actually got a better deal then I thought I would) and needed no assistance with the Agreement. Worked beautifully. That said, I usually use my own agent. I also have bought where the seller used my agent as I paid the commission. David does a ton of transactions so if he didn’t act that way, sooner or later, he’d get burned. My question is why you don’t have a favoured agent to refer those people to and then they reciprocate when in the same situation.

  3. JL

    at 11:22 am

    You’re not doing anything wrong, rather just what you need to in representing the seller, but these stories actually very nicely identify all the pain points and issues in the current system.

    Buyers don’t know at what price the seller actually wants to sell, so they call and ask. Buyers want more upfront information about listings without engaging in agent-to-agent discussions, so they try to ask themselves. Buyers (and sellers) think commissions are high so they look for shortcuts. Not to take a stand on any of these issues, and of course when uninformed people take things into their own hands things can quickly go sideways, but I do think there is a reasonable explanation for some of this behavior, rooted in some of the market issues we’ve been discussing the past few weeks.

  4. Condodweller

    at 11:43 am

    You are right David, I guess you are in the unfortunate situation of having to educate buyers one at a time.

    Of course this begs the question who has the buyers back? You mentioned fiduciary duty 4 times and on the last occasion you implied that you do have a fiduciary duty to your seller.

    I’m curious if this duty also extends to buyers when you wear your buyer agent hat and what the definition of fiduciary duty is in the context of a RE agent? Is winning at any cost sufficient? Does it extend to the finances of the buyer? I can think of two conflicts of interest of the top of my head, and probably wouldn’t take long to come up with a few more.

    The article below brings up some interesting points regarding agents not being able to protect their buyers due to a “throw away” offer that has a condition. It’s from BC but we’re in the same boat and it seems things do seem to tickle down to us. I read somewhere that they have outlawed double agency from the same brokerage. Which is a joke but it’s a move in the right direction.

    https://globalnews.ca/news/7853423/subject-free-offers-bc-real-estate-market/amp/

    They call for a cooling off period similar to new sales and mandatory inspections. They raise a very interesting, and valid point:

    “In real estate, there’s a Latin term called caveat emptor, which has been around forever as related to property and it means ‘let the buyer beware’ and I don’t think our legislation allows the buyer to be aware. It allows the seller to force the hand of the buyer without them having done their proper due diligence,”

    Cooling off on a resale is essentially a condition but that may do more harm than good.

  5. Jennifer

    at 12:29 pm

    What if the buyer doesn’t want to work with an agent – the listing or a buying agent. Does the buyer HAVE to work with an agent when the seller is represented? Can they just represent themselves, or work through a lawyer?

    1. David Fleming

      at 11:03 am

      @ Jennifer

      Great question.

      The buyer can submit an offer him or herself provided the buyer is able to accurately produce an Agreement of Purchase & Sale and get it to the listing agent. Going through your lawyer is an option. I would recommend calling the broker of record at the brokerage to ensure the offer is received and presented. The truth is: a lot of crummy brokerages have crummy brokers of record who may not “present” that offer. Don’t shoot the messenger.

      The problem with the buyer submitting his or her own offer is that they’re never competitive. I’ve seen it before a few times. They’re way off on price, their deposit is 1-2% and they have no cheque, the offer has conditions when all the others are unconditional, their offer has ten mistakes, etc.

      Nobody “MUST” use an agent. But I have never seen an unrepresented buyer successfully purchase.

      Some of the experienced readers will have done so. @Sigruper told stories about how he’s worked on his own behalf in the past.

      I have offers today on 144 Manor Road. I have 8 registered already. I’ve had two buyers tell me they’re bringing an offer “through their uncle in Ottawa,” and the like. Those offers will not be competitive. Trust me. I’ve already seen one, which for some reason was emailed at 9:30am when offers are being presented at 1pm…

      1. Sirgruper

        at 6:53 pm

        David is spot on. I have the advantage of being an experienced real estate lawyer and investor. Even so, I also usually have an agent that knows the area and asset class well. It’s actually hard to draft a good offer and one that fits the situation. Like all specialties it’s worth paying for someone who knows what they are doing.

        1. Jennifer

          at 12:51 pm

          I would take a lawyer drafting the offer any day over an agent. Most agents, not all but most, use the OREA form with very little changes and put in some cookie cutter Schedules. But anyway, in this market where no conditions wins the day, not sure how many changes to the standard form can be made anyway. So agree if you are purchasing a house not in a competing situation but this won’t necessarily apply in a competing situation where you need a “clean” offer.

      2. Jennifer

        at 12:46 pm

        Thank you. Interesting and I guess makes sense. Kind of like agents who represent themselves for their own buy/sell – generally a bad idea.

        But what if someone insists on it, then why can’t they see the property with you standing inside or outside, and you not saying a peep to them as your example above. Otherwise, not sure how an unrepresented, which is allowed, would see a property.

  6. Bryan

    at 3:19 pm

    It seems crazy to me that so many buyers out there act with such a sense of entitlement in a market like this one.

    I do feel for buyers though. An interesting follow-up question to this article would be “who does the buyer agent work for?”. I think that may make for a more interesting and nuanced answer. If you subscribe to the theory that a person works for whoever pays them, then both the buyer agent and the seller agent work for the seller, just like back when David’s dad was buying in the 70s. If you look at it in terms of who’s financial best interests also serve the buyer agent’s financial best interest, it again tilts towards the seller. If a buyer’s agent can get their buyer to spend more, everybody wins!… except the buyer, that is. So what is it exactly that makes the buyer agent beholden to the buyer’s best interest? Perhaps the wishy washy “fiduciary duty”? The increase in likelihood for future business? A lot of opportunity for bad buyer agents to treat their buyers badly.

    I wonder if it is a problem that could be solved by changing the way commissions work. More spitballing than making a serious suggestion, but what if some portion of the Buyer/Seller commission was tied to whether the sale price was more or less than the listing price? If the place sells for list, the split is the same as today (ie 2.5% to buyer agent and 2.5% to seller agent). If it sells for XX% under list then the buyer agent gets more (3% for buyer agent and 2% for seller agent) and if it sells for XX% over list the seller agent gets more (3% for seller agent and 2% for buyer agent). In addition to giving the buyer agent some incentive to act in the buyer’s best interest, it also could potentially serve to minimize the drastic underlisting strategy, giving buyers more independent insight into what a place is going to sell for (though it may push things the other way, who knows). It would likely be tough to get buyer agents (especially the bad ones) to bring their clients to a place they knew was going to sell way over list (and minimize their commission), so sellers would be incentivized to list at a price close to where their agent thought it would sell.

    1. R

      at 6:19 pm

      I like this proposal, even if only in theory. I suggested something similar recently but this weighted split is even smarter than what I had in mind.

      Perhaps it’s also a solution to seller agents making up whatever target price they need to so they get the listing then making excuses when it sells lower.

      1. Bryan

        at 11:26 am

        That’s a really good point. I hadn’t thought of the impact on bad acting seller agents…

        The more I think about it, the less I think this proposal is any more outlandish than some of the others that have been thrown out there.

  7. Libertarian

    at 3:20 pm

    People are trying to do things themselves because that’s how other industries have involved during the internet age. We can book our own vacations, buy stocks, do our banking, and a whole laundry list of things with one touch of our finger on our phone. It’s the real estate industry that hasn’t evolved.

    However, I agree with David that most people these days simply want what they want whenever they want. I’ve been complaining about this for years on this blog. This existed long before the internet came along. I think it all started after the various wars with governments embracing social programs and becoming more and more big brother, trying to give everybody everything.

  8. Marty

    at 9:36 pm

    This is a good, different, and interesting topic.

    Well done.

  9. Appraiser

    at 9:09 am

    “Canada has the lowest number of housing units per 1,000 residents of any G7 country. The number of housing units per 1,000 Canadians has been falling since 2016 owing to the sharp rise in population growth. An extra 100 thousand dwellings would have been required to keep the ratio of housing units to population stable since 2016—leaving us still well below the G7 average.”
    https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-note.housing-note–may-12-2021-.html

  10. Motogonif

    at 3:18 pm

    Unrepresented offers…it’s crazy how little math people are willing to do. That 2.5% that the seller will save on their market priced $1M property translates to $25,000. But the unrepresented offer will be $875K….and the buyer will say. “but there’s no commission to pay, I’m coming direct!” Direct from remedial math class maybe.

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