What a broker or agent needs to know when buying or selling for himself

Source: ACAIQ

July 2006 • Each year, the Info ACAIQ telephone information center receives numerous calls from real estate brokers and agents who wish to buy or sell a property for themselves and want to know what the Real Estate Brokerage Act has to say in this regard, in order to make sure the transaction complies with the regulations. Please note that under section 22 of the Act, an agent or broker must disclose his quality as broker or agent in all cases.

Based on the principle that an agent who buys for himself or sells his own property is not acting as an intermediary, here is a quick summary of five potential scenarios:

1. A broker or agent wishes to buy directly from an owner (FSBO).

In this scenario, there is no brokerage contract and no intermediary. Therefore, there can be no compensation.

Here, the broker or agent has the following obligations:

Disclose his quality as broker or agent in accordance with section 22 of the Real Estate Brokerage Act

Act in good faith.

Take all necessary steps to avoid causing a prejudice to the seller.

Advise the seller to get representation or use his own agent.

The ACAIQ recommends to act prudently. Members should use ACAIQ forms and amend the promise to purchase by crossing out the words “through _______, real estate broker, represented by ________” from clause 2.1 and to cross out clause 7.3.

2. A broker or agent wishes to buy his own listing.

In this second scenario, the agent or broker must terminate the brokerage contract. At that point, there is no intermediary, therefore there can be no compensation.

All ACAIQ obligations and recommendations listed in scenario 1 above apply.

3. A broker or agent wishes to buy the listing of an agent from the same office.

In this third scenario, the buying agent is not an intermediary. He is not acting on behalf of the broker and is not entitled to compensation. However, since the contract is held by the broker, he is entitled to compensation as listing broker.

The buying agent may be represented by another agent. In this case, the collaborating broker will be entitled to compensation.

In addition to the obligation to disclose one’s quality as broker or agent, the ACAIQ recommends that ACAIQ forms be used. Clause 2.1 of the promise to purchase should indicate the name of the broker and the agent representing the buying agent or, if not represented, the name of the listing broker or agent. The name of the buying agent must never appear in clause 2.1 of the promise to purchase.

4. A broker or agent wishes to buy another broker’s listing.

Here again, an agent buying for himself is not an intermediary. He is not acting on behalf of the broker and therefore is not entitled to compensation.

The buying agent may be represented by another agent. In this case, the collaborating broker will be entitled to compensation.

The buying agent or broker must fill out the notice of disclosure and have it signed by the seller at the first opportunity, i.e. before the seller enters a contract agreement. He must therefore fill out the notice of disclosure and have it signed by the prospective contracting party (seller) prior to the acceptance of the promise to purchase.

And finally, the ACAIQ recommends that ACAIQ forms be used and that clause 2.1 of the promise to purchase be amended, depending on whether or not the agent is represented. Clause 2.1 of the promise to purchase should indicate the name of the broker and the agent representing the buying agent or, if not represented, the name of the listing broker or agent. The name of the buying agent must never appear in clause 2.1 of the promise to purchase.

5. An agent or broker is selling his own immovable.

In this last case again, the selling agent is not an intermediary. He is not acting on behalf of the broker and is not entitled to compensation.

The agent may give the brokerage contract to his own broker and be represented by a colleague. He may also give the contract to another broker. Either one is entitled to compensation.

IT IS NOT RECOMMENDED for a real estate agent to act as listing agent for his own immovable (section 5 of the Rules of Professional Ethics of the ACAIQ). The legality of the brokerage contract when the agent designates himself as the listing agent could be called into question (contract concluded by the agent with himself and absence of intermediary).

If the agent still chooses to list his own immovable and drafts a brokerage contract in which he is designated as his broker’s representative, he must check with his insurer whether his professional liability insurance will cover the transaction. In addition, this agent is bound by all the obligations of a listing agent, notably all ethical obligations towards buyers and the agents representing them, including the obligation to collaborate.

Due to the conflict of interest, NO AGENT listing their own property may represent the buyer.

In such a case, the agent must refer the buyer to a broker in order to get representation. If the buyer refuses, the agent may give the forms to the buyer (e.g. Promise to Purchase, Annex G, Annex A, Annex B) for him to fill out himself. However, he should keep proof in the file to the effect that he duly notified the buyer that he could not represent him in any way or draft the documents for him.

The agent or broker must disclose his quality (sect. 22 of the Real Estate Brokerage Act) at the first opportunity, i.e. before the buyer enters a contract agreement. He must therefore fill out the notice of disclosure and have it signed by the prospective contracting party (seller) prior to the acceptance of the promise to purchase.

A continuing education activity to find out more

The five scenarios summarized above come from an ACAIQ continuing education activity entitled “The broker or agent who buys or sells”. This activity helps clarify various principles that come into play when a real estate broker or agent has an interest in a real estate transaction.