OREA Real Estate College

Exercise Care and Skill

REALTOR with young couple

One of the duties owed to clients and customers is duty of care, defined as duty owed to clients and customers established by objective standard.

The duty of care to a client involves everything done (or that ought to be done) by the agent (i.e., the brokerage) for that client. A relationship is established by representation agreement. A relationship can also be established by verbal agreement or implied. The duty of care to a customer is more limited because they are agreeing to limited services from the brokerage, as outlined in a customer service agreement.

Regardless of whether one becomes a client or a customer, potential home buyers and sellers are consumers about to make one of the most important decisions of their lives. This makes them vulnerable.

As a REALTOR®, your obligation is to provide professional services and to treat all consumers with honesty and due care. You should also consider the following consumer vulnerabilities and address these with your client or customer.

1.  Representation confusion

Most consumers do not understand the complexities of a real estate transaction. They may not understand agency law, the duties to be performed, and representation (whose interests are being protected and why).

Your duty is to explain these concepts. You must disclose, among other things, the nature of the services you are providing, what alternative services are available through the brokerage, the difference between clients and customers and the obligations owed to each, and multiple representation.

The Code of Ethics requires REALTORS® to disclose in writing the nature of the services they are providing, and requires a signed representation or customer service agreement.

2.  Property inspections

The importance of having a property inspected professionally before purchase cannot be stressed enough. Ensure that your buyer clients understand this and advise them to seek out the appropriate professionals on matters such as structural components, electrical systems, environmental concerns, and municipal compliance.

If your client decides on a property inspection, include an appropriate condition in the offer and the buyer’s options should the inspection uncover structural deficiencies.

3.  Clauses 

Real estate agreements are complex. For example, OREA’s Agreement of Purchase and Sale has 28 printed clauses. Your duty is to ensure your clients have a clear understanding of these clauses before signing the document. Carefully review all clauses and conditions with your client. Ask questions if in doubt.

4.  Conditions 

It is prudent to include conditions in any agreement of purchase and sale that address matters such as mortgage financing, property inspections, sale of an existing home, and water wells or sewage systems. Customize conditions to address your clients’ specific circumstances.

There are two types of conditions:

•  condition precedent – calls for the happening of some event or performance of some act before the agreement becomes binding on the parties

•  condition subsequent – refers to a future event upon the happening of which the contract becomes no longer binding on the parties

5.  No ‘cooling off’ period 

A ‘cooling off’ period is a time period in which consumers can cancel transactions they have taken. This does not exist in real estate (except for timeshare agreements under provincial consumer protection legislation).

An agreement of purchase and sale is a binding contract. There are some exceptions when the contract can be rescinded. However, do not allow your client to sign an agreement without full comprehension of its contents.

6.  Respect deadlines 

Because real estate agreements are contracts, all terms contained within must be met.

Agreements may include dates regarding the taking action, forwarding deposits, and giving/receiving notices. These dates must be met. Failure to do so may result in the termination of the agreement and possible litigation.

7.  Finances 

Advise clients to get their finances in order.

If applying for a loan, advise clients that lenders will review their credit history, seek confirmation of employment and financial resources, and generally scrutinize their financial stability and capabilities.

If personal funds are limited, advise clients to refrain from acquiring ‘big ticket’ items and applying for new credit cards, and to pay their bills on time.

Remind clients of the additional costs involved in a real estate transaction, such as legal fees, title insurance, property inspections, and a variety of other issues incidental to each transaction.

Reference: Ontario Real Estate Association (2014). Real Estate as a Professional Career. Don Mills, Ontario: Ontario Real Estate Association.


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