There are many questions about buying a home or selling a home in Toronto I receive frequently, but without a doubt, the one which garners the most discussion is the concept of Dual Agency, also known as multiple representation.
What is Dual Agency?
In modern real estate, the idea of both the buyer and seller having unique representation is commonplace. A listing has a unique agent who helps bring the property to the market and negotiates on behalf of the seller, and an interested buyer has their own agent who assists in showing the property and preparing offer documents to negotiate on behalf of the seller. While this is overwhelmingly the most common circumstance, it is permissible in Ontario (and by extension Toronto) to have a single agent represent both the buyer and the seller in the transaction. This situation is known as Dual Agency, or Multiple Representation.
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Is Dual Agency in Real Estate Allowed in Canada?
This answers the singular most common question I receive about Dual Agency, is it permitted. As stated above, yes, it is permissible for one agent to represent the buyer and seller in the same transaction. This may come as a surprise to some, as Dual Agency isn’t allowed in British Columbia for example, nor is it allowed in eight different states down south. The fact that it is multiple representation in real estate is allowed in Ontario prompts further questions. Is transaction in a situation with a dual agent worthwhile, and what are the potential benefits and risks?
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Pros and Cons of Dual Agency in Real Estate
To understand this, you must understand the history of multiple representation. Decades ago, before the introduction of the buyer agent known as the “co-operating agent”, nearly every transaction was done with multiple representation.
A brokerage would have listings, and interested buyers would search through the inventory to find brokerages with listings that fit their criteria and would reach out. They’d then reach out to those brokerages to schedule showings of the property directly through the listing agent, and if they were interested, they’d make an offer through the listing agent, who would work to facilitate a deal.
Given that, individuals who have transacted real estate for a long time sometimes prefer to purchase through dual agency, as it is what they are most familiar with.
There are also countless buyers in the market who believe they can reach a more agreeable deal if they leverage multiple representation (which shouldn’t be true if the agent in this case is ethical) or they are after a reduction of commission paid from the proceeds of the sale as the agent in this case will be getting the commissions allocated to the selling agent and the buying agent.
This circumstance is known colloquially as “double-ending” the deal. While this is possible, it is far more complicated than it seems as the agent has to disclose the reduction of the commission to all interested parties and their agents, and can be a significant reputational risk for the agent if it is perceived they forewent the best offer in pursuit of increasing their take home commission, so it’s very challenging in a property that has lots of interest.
This topic is worth a larger blog post at some time, but it’s important to understand that more often than not, the benefits that the average consumer believes they are getting from multiple representations are often misunderstood.
Buying or selling a home is a big decision. It’s important to make sure you’re protected from start to finish. Here are a few more posts you might find interesting:
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How to Protect Yourself in Multiple Representation
In order to do a transaction in multiple representation, additional legal documents are required to ensure all parties are clear on what the risks and benefits of multiple representation are and further to ensure that all parties are aware they are even in a dual agency situation.
This process has been simplified in recent years following the introduction of the Trust in Real Estate Services Act (TRESA) in late 2023. Prior to TRESA, representation was always considered to be made at the brokerage level, so if one agent at a singular brokerage was offering on a property listed by a different agent at that brokerage, it was considered multiple representation.
Post TRESA, the concept of a “Designated Representative” was created, meaning that representation can be handled on an agent-by-agent basis, eliminating the concern of Multiple Representation between agents with the same brokerage, but still considering one singular agent representing both parties in a transaction, which is a more practical way to protect the consumer.
Do you really need a designated buyer’s agent to buy a home in Toronto? Read our blog to learn more.
Risks of Dual Agency in Real Estate
Ultimately, Dual Agency has a time and place, and it is critical that an agent communicate the situation to their clients to ensure they completely understand the context and can assess the risks and benefits.
I wrote a lengthy article for our Insights Magazine about an example of Dual Agency that worked, which, if you are interested in, you can read here: Navigating Multiple Representation
The risks of Multiple Representation are fairly apparent.
- Can one agent really represent the best interests of both parties in a transaction?
- How can that agent maintain a fiduciary duty to both agents, and ensure they don’t breach any confidentiality obligations they have to the clients?
It’s difficult not to bias your advice to one party or another, even subconsciously, and that challenge is magnified when the possibility of earning twice the commission is at stake. If there are multiple offers, how can you ensure that you give all parties a fair chance to buy the property when you’ll always know the price to beat?
Instances When Dual Agency Might Work
On the other hand, no one knows the property better than the listing agent, and they are best equipped to communicate the features and drawbacks of a property to a prospective buyer. In a slower market, that edge can be the difference between a property selling or floundering on the market, and ultimately the goal of a seller is to get the listed property sold.
In some cases, listing agents are more experienced and capable than the average buyer’s agent, and they may be able to facilitate a difficult negotiation better than someone with less experience.
Finally, if both parties in the transaction are comfortable with it, dual agency can streamline the communication by reducing the number of stakeholders from 4 to 3, which will allow for a clearer dialogue and slightly change the role of the agent from negotiator to arbitrator, which I liken to the way contracts in professional sports are often resolved.
The agent can ensure that both parties are on the same page in terms of comparables and help find a valuation that makes sense for everyone more easily.
Selling a home soon? Check out these posts next for answers to some of your most pressing selling questions:
- What Do Home Sellers Need to Disclose?
- What is the Worst Time to Sell a House?
- How Many Showings Does it Take to Sell a House?
Dual Agency in Real Estate is a Bit of a Grey Area
In the end, the use of Dual Agency must be assessed on a case-by-case basis, and should only be done with clear communication around what it exactly is and what the parties are gaining and giving up.
As a general rule, we at TRG believe it can be beneficial in circumstances where the property hasn’t garnered a ton of attention, and can certainly be used effectively in leases. It should be avoided where possible in circumstances where there are multiple offers or when the property is receiving a lot of interest, and should never be done if either party to the transaction is uncomfortable with the concept.
A seasoned agent can communicate the situation clearly and understand when and where it is appropriate, and if done correctly, can result in a conclusion which is satisfactory for all parties, and ultimately, that’s the goal of any real estate transaction.
If you have any further questions about Multiple Representation, Dual Agency, or the real estate market in Toronto as a whole, do not hesitate to connect. We always love discussion real estate, and love hearing from you!
Get in touch by filling out the form on this page, calling us at 416.642.2660, or emailing us directly at admin@torontorealtygroup.com.
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