UPDATED December 2, 2023
It's been in the works for some time, but the new real estate regulations are now in full effect.
Beginning yesterday, December 1, 2023, new legislation kicked in governing real estate transactions in the province of Ontario. The title of the Real Estate and Business Brokers Act, 2002 (REBBA) will change to the Trust in Real Estate Services Act, 2002 (TRESA).
But it’s not just the title of the act that’s changing. Let’s take a look at what this means for home buyers specifically.
Historical consumer confusion has led to changes in the way real estate rules will operate in Ontario after April 1, 2023. The upcoming TRESA changes sprang in part from the need to clarify relationships, roles, and responsibilities for consumers and brokerages in real estate transactions.
This article covers how home buyers may experience the process differently after TRESA takes effect.
The Search for a Home: Before & After TRESA
When searching for a home, buyers typically begin online. Since there is no shortage of internet venues providing this service, the exercise often led to signing up for multiple platforms to receive MLS® listings from a wide variety of sources.
What some consumers may not have realized is, each of those internet platforms traces back to either a real estate brokerage or a real estate professional (except for REALTOR.ca which is operated by the Canadian Real Estate Association, or CREA).
The end result is that home buyers could be receiving emails from several real estate agents, with only the best of the bunch calling to offer assistance (or, like us, providing highly customized support).
Most REALTORS® we know have experienced situations in which a potential client asked to visit one or more houses on a Saturday with one real estate agent, with plans the following day to view homes with a completely different agent on a Sunday.
Why? Home buyers didn’t always feel comfortable signing an exclusive Buyer Representation Agreement in the first meeting. This is understandable. It’s a legal document after all and, as such, a binding agreement.
And under the old rules, it was not mandatory to have a home buyer sign the buyer representation document in the first meeting. It was only required that the agent discuss what it meant to be represented by a brokerage, and hand over the documents to the home buyer. This would allow a house hunter to view homes with the understanding that they were represented by that brokerage by implication.
However, without a signed agreement at this early stage, the door was left open for home buyers to utilize the services of many REALTORS® without being required to commit to any of them.
The truth is, home buyers are usually transparent and mean well. We find most buyers sincerely appreciate the time, effort, and money invested by their real estate agent and want to be sure that the agent, their partner in the process, is fairly compensated for their work.
That said, before this legislative change a lack of clarity lingered in the process.
TRESA works to reduce this ambiguity and clarify some of the moving parts.
How the Process Will Change for Home Buyers
TRESA brings an important change to the real estate process for home buyers.
It will no longer be operationally feasible for home buyers to view houses with a REALTOR® without first agreeing to being represented.
In the earlier version of the legislation, a real estate agent was required to explain what it meant to be represented by a brokerage, ensure understanding, and hand over the documents to the home buyer.
However, no signature was required from the buyer at this stage.
Going forward, a home buyer can either be represented by a brokerage (assisted by the real estate agent from that brokerage), or a buyer can be self-represented.
If a buyer chooses to be self-represented, the only way they can view a home after TRESA takes effect will be to (1) contact the listing agent directly, (2) attend an open house, or (3) contact the seller of a property that is not listed on MLS® (i.e. for sale by owner).
What does this mean for home buyers? If you are working with a real estate agent in your search for a home, you can now expect to be presented with documents before your first showing together.
Remember, in the past you were not required to sign these documents prior to a showing.
Going forward, however, it is likely your real estate agent will request your authorization, in writing, to be represented by their brokerage before that REALTOR® will show you any homes.
This is to protect against the eventuality that a buyer utilizes the advice, guidance and knowledge of a real estate professional only to declare themselves self-represented at some later time.
During this pre-showing conversation, real estate agents will be required to explain what it means to be represented by a brokerage, and what it means to be self-represented. You will be asked to acknowledge that this conversation transpired, that you understand what it means, and you will likely be asked to either sign an exclusive buyer representation agreement or declare yourself self-represented.
Brokerage Representation vs Self-Representation
Representation by a brokerage has several implications, as in the past. When you are represented by a real estate brokerage, you are owed what’s known as a duty of care. Key to this duty are fiduciary responsibility, confidentiality, honesty and fairness. The brokerage representing you has a duty to protect and promote your interests.
Alternatively, buyers can choose to be self-represented. In this case, a real estate agent will not be permitted to assist you unless doing so is in the best interests of their client (a seller). Without brokerage representation, real estate agents will not be permitted to offer professional advice or guidance to self-represented parties.
Once you have declared yourself self-represented, agents will not be able to show you properties, discuss pricing, offer strategies, or provide comparable properties to review.
As a self-represented party, buyers will need to coordinate showings directly with the listing agent for a property. Alternatively, home buyers can attend open houses where a listing agent is present, or speak directly with a home seller who is themselves a self-represented party (i.e. For Sale By Owner).
Offers will need to be handled through a lawyer, in the case of a self-represented buyer, because the listing agent will no longer be permitted to do it for you.
For a comprehensive review of what it means to be self-represented, visit the Ontario.ca website which includes a full review of the legislation.
You’re Ready to View Homes. What Happens Next?
For buyers already represented by a brokerage they trust, perhaps assisted by a REALTOR® used in the past, it’s likely the conversation about brokerage representation has already transpired and the buyer agreement has been signed.
For other home buyers who may be working with a real estate professional new to them, especially if they have not met in person yet, expect your REALTOR® to schedule time with you in advance of any showings to discuss the pros and cons of representation versus self-representation.
Since only buyers represented by brokerages can be shown properties in the traditional way (eg. 3-4 consecutive homes on a Saturday afternoon), most real estate agents will be having this conversation with potential clients in advance of the first showing.
Moreover, it will no longer be practical to chat about representation in the driveway of the home a buyer is about to view unless that buyer is prepared to sign a buyer representation agreement before entering the house.
That said, the early conversation does offer consumers a great opportunity to ask questions to ensure clarity. Ask your real estate agent what brokerage representation means, and what responsibilities each of you has in the relationship.
Discuss the term of the agreement. How long are you comfortable committing to the brokerage? There is no set time period. A term of 3-6 months is customary, but this is something you should discuss and come to agreement on with your real estate agent.
Talk about the geographic range of the search. Will you limit representation to a single city, like Oakville, or would you prefer to cover all of Halton Region for example?
Most of our clients don’t realize that the Buyer Representation Agreement can limit representation to a narrower geographic area if a buyer so chooses.
Finally, discuss who you will be working with from the brokerage. Some of our clients have been surprised by unfamiliar faces at showings in the past when dealing with a team, for example. Find out if you are in fact working with a team, where agents you may not know will be assisting you, or if you are working exclusively with the REALTOR® handing you the documents.
If you have not yet chosen a real estate professional in your home search, get in touch with us today. We work hard to keep our clients informed, educated, and protected in the home buying process.
For a full review of TRESA, 2002 and the changes coming in real estate please visit the provincial website found here.***
* TRESA, 2002 includes a variety of changes to the rules that govern the trading of real estate in Ontario. This article focuses solely on the impact to home buyers in the process of searching for and visiting homes to purchase. The article does not purport to be an exhaustive list of either TRESA, 2002 changes or potential impacts on or implications for home buyers, and is designed as an opinion piece only.
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