Buyer Representative Compensation: Disclosure, Disclosure, Disclosure

For real estate buyers, it may be all about location, location, location – but for real estate professionals representing buyers, it should be all about disclosure, disclosure, disclosure.

This is especially true when it comes to buyer representatives disclosing compensation they will receive from the sellers or the seller’s brokerage during a real estate transaction. Real estate professionals, when representing buyers, have an obligation to disclose compensation to their clients.

So, what exactly do the Rules say about disclosure?

When a buyer and a real estate professional enter into a written service agreement, the amount or method of calculating the remuneration and the circumstances in which it will be paid must be included in the service agreement. If there is any change to the amount being paid, the written service agreement must be amended to reflect the altered amount. In the case of a Buyer Brokerage Agreement, the obligation to disclose remuneration is satisfied through the agreement and all amendments that follow.

In the absence of a written service agreement, the Rules say industry professionals must disclose how they will be paid for their services. Does this mean when an industry professional has told the client they will be paid by the seller, and the buyer client asks no further questions, that the obligation to disclose is satisfied? Well, not exactly.

The Rules also say, when representing a buyer, industry members must disclose to the buyer, in a timely manner, all relevant facts known to the industry member affecting a property or transaction. A bonus incentive offered by sellers designed to entice professionals to bring their clients to their property is considered a relevant fact, and should be disclosed to buyer clients. Bonus incentives are often offered in buyer’s markets, and although the Alberta market is currently balanced, certain sectors, like the new homes market, remain weak, and professionals may notice more bonuses being offered by new home builders.

A recent RECA Conduct Review file involving a country residential property in a “buyer’s market” showed the buyer’s representative receiving a $5,000 bonus in addition to the commission offered. The bonus was not disclosed to the buyers. When the buyers and the sellers met, the sellers mentioned the bonus. Needless to say, the buyers were upset and filed a complaint against the
industry professional.

The best practice when representing buyers is to disclose, in writing, the amount or method of calculating remuneration and the circumstances on which it will be paid whether or not there is a written service agreement. Any changes to that amount or method of calculating the remuneration should also be disclosed as the information becomes known to the agent. Bonuses and buyer brokerage incentives must also be disclosed.

When representing buyers, how do you disclose remuneration?