On June 15, 2018, new rules came into effect that change the way a REALTOR® can provide services to consumers. The REALTORS® at Nyrose & Associates believe it is important we help you understand the changes and new forms you will see if you are considering buying or selling a home in Kelowna.
The New Rules Include The Following:
- Privacy Disclosure and Consent: Much like the old form Working with a REALTOR®, but this now outlines why and what we will do with your personal information.
- Disclosure of Representation in Trading Services: Before providing trading services, there is a new form otherwise known as the 5-10 form REALTORS® must show and get signed by consumers. This states how the REALTOR® and persons are going to move forward in a relationship: “Client” or “Unrepresented”.
- Disclosure of Risks To Unrepresented Parties: In some cases the consumer may choose to be unrepresented in a real estate transaction. A REALTOR® will provide a form and explain the risks associated with being unrepresented, and encourage consumers to seek independent professional advice. Previously, we had Limited Dual Agency to help both parties impartially. Now the unrepresented buyer will have to inform the REALTOR® exactly what they want to offer and which subjects they want in the offer. The REALTOR® can not give expert advice or any real estate info to the unrepresented party.
- Disclosure to Sellers of Expected Remuneration: The expected commission to the brokerage(s) and licensees must be disclosed with every offer that is presented to the Seller by the Sellers REALTOR®. This form will create more confusion because the commission is shown is calculated on the offer from the Buyer, not necessarily from the Sellers counter which was accepted.
- Dual agency: the practice of a licensee representing two or more parties with competing interests such as both a buyer and seller or two or more competing buyers is now prohibited, except in rare circumstances.
How The New BC Real Estate Rules May Affect You, the Consumer:
The new regulations were created in an attempt to thwart unscrupulous REALTORS® and limit dual-agency relationships, while providing more transparency in the real estate process.
While these new rules were created to protect you, in some cases you may come across a situation where you’re not able to utilize the services of your first-choice REALTOR®. This may be alarming or confusing; however, in these (hopefully rare) situations we encourage you to discuss the reasons and your options with a REALTOR®.
Real World Examples of the New Rules At Play:
Let’s look at some examples of situations where the new rules change the game for you, as a consumer.
- Unrepresented Parties vs Client: You may be asked to start as an unrepresented party so the REALTOR® is able to show you their current listings. If none of the listings they currently have work for you, then a new Disclosure of Representation in Trading Services (5-10) may be signed as a client and the search and discussions can broaden. This new 5-10 form will then hinder your ability to go back and make an offer on a home listed by your REALTOR®. This is what was known as Limited Dual Agency prior to June 15, 2018. As REALTORS® are no longer able to represent a buyer on their own current listings, important decisions will need to be made. However, if one party agrees to become Unrepresented and both parties sign the form agreeing this. The Unrepresented party may move forward but without the help and guidance of your trusted REALTOR®, or: If you wish to make an offer on a home currently listed by your REALTOR®, your REALTOR® will have to excuse himself from the entire transaction, which means cancelling the listing with the seller and not being able to work with you as the buyer. The Real Estate Council believes in these situations, the agent can no longer work for both parties impartially. The seller and buyer now have to be referred to another REALTOR®, even though both parties chose their current REALTOR®.
- Commission Structure: Buyer’s agent sends in an offer for $500,000 on a home listed for $600,000. The Sellers REALTOR® will draft the form to reflect commissions to be paid on the offer of $500,000. With every offer from the Buyer, the appropriate commission will need to be outlined. If The Sellers REALTOR® sends a counter offer of $600,000 to the Buyers agent and the Buyer accepts this offer, the final commission to be paid by the Seller will be calculated on $600,000 not the original offer of $500,000 which was the commission calculated and presented to the Seller to sign off on. In this situation, when the home completes the Seller will realize commissions will be approximately $3,500 more.
- Buyers’ Representation: Let’s say you have selected me to represent you as a Buyer. We visit the perfect house and you’re ready to make an offer. I have another client who is also interested in that home, also ready to make an offer. I now have to disclose to both of you the situation and pick only ONE of you to represent, and you both have to agree to this. Or, I have to refer both of you to another REALTOR®, and it cannot be another Nyrose & Associates REALTOR® either. As we would have developed a relationship with a bond of trust, you may not be happy having to start fresh with another licensee.
Initially, change can be hard and complicated in its implementation. It’s still early days and it will take time to see how everything plays out. We’re optimistic buyers, sellers and REALTORS® will adapt to the new changes and experience the same level of trust, professionalism and choice to feel confident in their upcoming real estate transactions.
We believe that in time, these regulations may adapt, be revised and will come to be the new normal. Sure, the additional upfront paperwork may surprise you, but keep in mind the goal is to protect your best interests. And, regardless of which licensee you choose to work with, you will be presented with and asked to sign the exact same documents.
I have been in real estate when 7% GST came into effect. Then 5% GST, then HST and the abolishment of HST. Through these changes and adjustments, we have survived and only became stronger in what we do as Nyrose & Associates. If you are considering buying or selling in Kelowna or the Okanagan and would like to better understand how these new rules or regulations protect you, give me a call. I’d love to chat.