Q. What is the change?
A. RECA is preparing to implement a rule change that will require written service agreements between brokerages and all clients. Translated, this means that REALTORS® will need to enter into a written service agreement with buyer clients as they currently do with seller clients.
As your professional association, AREA is participating in this collaboration to help facilitate communication and support materials for members as they apply the change.
Q. When will the change take effect?
A. The rule change will affect all industry sectors and is expected to come into effect mid to late 2013.
Q. Why the change?
A. The primary reason for the rule change is to ensure that the role of the industry member is clear to the client. Written service agreements will be a key tool through which this clarity will be achieved.
RECA’s research indicates that, when clients are better informed, there is less confusion and fewer disputes.
Additionally, establishing written service agreements with all clients may offer some benefits and protections for industry members.
Written service agreements are also in keeping with our collective desire to have the consumer view our members as professionals, as this is a step that models other professions.
REIX, the real estate boards and AREA are all in support of this change, both for the protections it offers both industry members and consumers, and for the potential benefits to members (See possible benefits below.)
Q. What are the implications for REALTORS®?
A. REALTORS® who represent buyer clients will be required to establish a written service agreement with them.
This topic often results in two main concerns. These concerns are listed here with how they will be addressed in the rule change. Hopefully, the approach RECA is taking towards these two areas will alleviate much of the potential concern that REALTORS® may have in applying the new rule:
Binding Service: The written service agreement will not necessarily bind the buyer client to an exclusive service arrangement with any one member. Practitioners and clients will be able to opt to enter into either an exclusive or a non-exclusive agreement.
Financial Obligation: The written service agreement will not necessarily bind the client to a financial obligation. For example, the written agreement can stipulate that buyer brokerage compensation may come from the seller or seller’s brokerage.
Q. How will this benefit REALTORS®?
A. There are several potential benefits for REALTORS® that could arise from this rule change:
Greater Client Loyalty:
Clients who sign a written service agreement with their practitioner are more likely to remain loyal because the process of building a written service agreement creates a more concrete relationship than serving a client without one – even if the agreement the client signs is a non-exclusive one.
The requirement for all practitioners to use written buyer brokerage service agreements lessens the chance that a client will opt to work with a practitioner who does not require them to sign an agreement.
Enhanced Professionalism:
Industry members are pushing for higher standards of professionalism and ways that their image can be enhanced in the public eye.
Written service agreements can help:
One way to demonstrate professionalism is to outline, in writing, what the industry member will do for the client and then deliver on those expectations in an exemplary way.
Completion of a written agreement with the client not only models other professions, the process creates an opportunity for dialogue. It also helps ensure that the client clearly understands the roles and responsibilities of each party to the agreement – the real estate professional, and the client.
Opportunity to Educate the Client:
Completing a written agreement with the buyer client creates an opportunity to educate them about the member’s services, the nature of the relationship and how the practitioner gets paid – all important aspects of building a relationship of trust and demonstrating professionalism.
The written buyer brokerage service agreement need not be exclusive nor bind the client to any financial obligation, lessening the likelihood that the client will resist signing it. The agreement simply needs to state whether it’s exclusive or non-exclusive and that the buyer brokerage compensation may come from the seller through the seller’s brokerage.
Supports More Buyer Representation:
More and more practitioners are moving towards buyer representation, as evidenced by the number of Alberta practitioners who have attained their ABR® (Accredited Buyer’s Representative) designation. While buyer clients assume the practitioner is working for them, the relationship isn’t always defined in writing.
Establishing written service agreements for buyer clients puts the relationship with buyer clients on an equal footing with seller representation.
Liability Protection:
Our society is tending towards more law suits and industry members can be better protected against liability by having something in writing with clients
Even if a client chooses not to litigate, a written service agreement reduces the chances of dispute and dissatisfaction on the part of the client, because the client has a written record of the roles and responsibilities of both parties to the agreement.
Fewer claims lessen the likelihood of the need to increase E&O premiums to cover law suits.
Q. What happens next?
A. RECA is collaborating with AREA on a joint plan to introduce this change.
Near-term next steps include:
Focus Groups: RECA and AREA are jointly conducting focus groups in Edmonton and Calgary with members later this summer as a means to test the implementation plan, including reaction to proposed messaging, suggested resources for members to aid them in applying the rule change, and the proposed timing of the rule change. The local boards have been asked to provide potential candidates from their membership to participate in the focus groups. While the boards have supplied candidates against a set of criteria (to ensure participants are demographically representative of our membership), you can also contact AREA if you have a desire to participate.
The focus group results will help us to fine-tune the implementation plan, and then AREA will get to work on building resources to assist members in applying the rule change, once it comes into effect.
Stay tuned!
Questions? Need More Information?
Please feel free to email AREA at communications@areahub.ca call toll-free 1.800.661.0231 or you can contact Natalie Scollard, at RECA, at nscollard@reca.ca.
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