Is Multiple Representation In Real Estate A Conflict Of Interest?

There has been a lot of talk in the media lately about ‘Multiple Representation’ in real estate. Premier Winn took aim at ‘Multiple Representation’ it in her 16-point ‘Fair Housing Plan’.

We thought we would clear the air and explain things in simple terms.

What is Multiple Representation?

Multiple Representation is most commonly described as when the same real estate agent represents both the buyer and the seller in the same transaction. However, the general public in most cases doesn’t realize that it’s also Multiple Representation when two people from the same brokerage represent 2 different people in a transaction as well.

How does Multiple Representation happen?

In many cases, the buyer simply calls the listing agents for sale sign and decides to put an offer in with the listing agent or maybe they meet at an open house. So in this instance the listing agent is representing both the buyer and seller. Is this a conflict of interest? ABSOLUTELY! How can the agent represent both parties to their best ability? How are supposed to get the best price for the seller and the buyer?

How does Multiple Representation impact buyers and sellers?

This is where we find the most complaints happen in real estate because the agent did not clearly explain this or the client felt they were not fairly represented. The act (REBBA 2002) states that when in a Multiple Representation situation that registrant (realtor) cannot discuss money, motivation or terms with either party (unless instructed to do so in writing) or it could be to the detriment of the other. To this I ask – well then what the hell good are we in the transaction if we can’t discuss these items as these are the most important things in any agreement? Also keep in mind that that majority of real estate agent get their business from their sphere of influence (friends, family, co-workers etc). So if you approach the listing agent to do an offer as a buyer how can you be sure of their relationship? What if it is one of their good friends? Where do you think their loyalties will lie?
Many buyers will gladly enter into a Multiple Representation Agreement because they feel that the agent will cut their commission which in turn will get the seller to accept a lower price than they would have otherwise. In my experience, this is not the case at all. A competent buyer agent is going to be able to negotiate more favourable terms or a far better price than the 0.5-1% the listing agent might be willing to throw into the deal. Keep in mind that listing agent has their own self-interest in the transaction- if they can get both parties to agree they get more commission- again a huge conflict of interest. So it’s not only a conflict of interest for which client to negotiate for but also they have their own self-interest to contend with.

I have long thought this was a huge issue in our industry and always felt very uncomfortable in these situations as I am a very ethical person. Putting myself in a Multiple Representation where someone could question my motives was something I hated, especially in multiple offer situations where other agents are involved. I almost preferred that other agents would beat out my offer so the agent would not think anything “funny” was happening but at the same time if I hoped for that I really wasn’t doing the best things for my buyer.

You see the problem?
It is for these reasons that our brokerage has collectively decided that we will no longer be entering into multiple representation agreements with the same listing agent and same buyer agent. If a client approaches the listing agent to make an offer they will be referred to another agent within our brokerage. We pride ourselves on being leaders in the industry and we feel this is the right thing to do to protect our clients and the integrity of the industry. Now I know I am going to get a bunch of realtors emailing me and saying that it is still multiple representation if two agents from the same brokerage are representing two parties to a transaction and that is true but in my mind we have at least solved some of the potential problems that arise. The second agent can give fair and unbiased advice to the buyer and provide at least some buffer between the parties. This also stops the biggest conflict which is the agent double ending the commission and trying to push a sale through to line their own pockets.

In my opinion this is likely the measures that will come from the review currently under way by our governing body RECO and the Fair Housing plan. It is just too difficult to completely get rid of multiple representation all together for example there are some small towns that only have 1 real estate brokerage- so how do you avoid buyer and seller being represented by the same brokerage- it’s just not realistic but you can add a layer of buffer by requiring at least that they be represented by different agents. Our aim is to educate you and give you the best information that we possibly can so that you can make an informed decision. Is multiple representation going away? Not likely, since it happens in large brokerages multiple times a day, every day. You can, however reduce your risk by making sure that the same realtor isn’t representing both sides of a transaction that you’re involved in.

As always give us your thoughts and feedback.