Customer or client? Why you should be concerned!

Duty of care to clients and customers 

When you meet with a realtor to discuss either having your home put on the market or, being shown homes that you might consider the purchase, be sure to know your rights. Real estate agents (registrants) are obliged to treat you as either a client or a customer and knowing the difference is crucial one in real estate.

The key difference in these two terms, “customer” and “client” can be thought of this way. Have you ever walked into a store to buy a shirt and walked out with more items than you intended to buy, maybe not even the shirt! You might even have buyer’s remorse for having made a larger purchase than you originally intended. Sure the salesperson helped showed you around and told you about their products but they are working for the store and their primary goal is to make sales for the store and not necessarily put your best interests over those of the store. In this scenario, you are a customer.

Let’s now assume that you have a personal shopper for yourself. That person will help you the same way the other salesperson would but, they would also shop in all the stores for you, and check online sales and personal ads until they found you just what you wanted within your budget. They would tell you which places were more likely to lower their prices and even negotiate. On top of that they would also point out all the flaws in the products preventing you from making a bad choice. You would be more comfortable telling this person all your needs and how much you were willing to spend knowing that they are going to go out of their way to get you only what you want for the best price possible. In this scenario, you are a client.

“The key difference is from the point of view of consumers,” says Brian Hoffman, an instructor at the Ontario Real Estate Association. “They must know up front what our obligations as REALTORS® are to them and what services we provide. If they are our clients, we will look after their best interests, but if they are customers, we aren’t obliged to provide that same level of service because the duty of care to clients trumps the duty to customers.”

The idea of a customer versus a client is so important real estate registrants are required to discuss this at the earliest practicable opportunity to ensure that buyers and sellers are fully aware of the obligations and can make the best decision for themselves based on facts. If you are meeting with an agent be sure to ask for this information if they don’t offer it up right away.

A duty of care is defined as the obligation owed to clients and customers, as established by an objective standard. The level of obligation to these two groups is different, particularly as it relates to the representation agreement.

For clients, the duty of care involves everything that is done (or ought to be done) by the agent (i.e., the brokerage). A relationship is established through a representation agreement. As such, the brokerage owes the client fiduciary obligations (taking care of your money) under agency/common law, and regulatory obligations, as set out in the Real Estate and Business Brokers Act, 2002, and associated regulations.

For customers, your duty of care is more limited due to the absence of a representation agreement. However, a customer may enter into a service agreement with a brokerage. The duties owed to customers include honesty, providing accurate information and responding to questions and performing functions to which the brokerage has agreed.

“We don’t have the same obligation to respect confidentiality with a customer that we do with a client,” says Hoffman, a Thornhill REALTOR® who has worked in the field for 30 years.

“If a customer inadvertently reveals something to me, he may not realize that this could hurt his interests because I must provide full disclosure to my client. For example, if a customer tells me his motivation, he may not know that I’m obliged to share details with my seller because I’m representing my client’s best interests. A customer should limit what he tells me. If he then wants to make an offer on my seller’s property, I’m representing the client’s best interests, not the customer’s.”

The relationship with the consumer should be established and clarified from the start, says Hoffman. “It’s vital to address this right off the bat and explain in detail the difference between client and customer,” he says. “People must understand our obligations and duties and the services we provide. If they are a client, we will look after their best interests, but if they are a customer we aren’t required to give that same level of service and they should understand that.”

Note that two duties are owed to both clients and customers: (1) exercising care and skill, and (2) ensuring honesty.

REALTOR® have general and fiduciary obligations to clients. The general obligations owed to clients are as follows:

  1. Exercise care and skill: have the requisite knowledge and skills; provide complete and accurate information; recommend relevant experts, where applicable
  2. Ensure honesty: demonstrate honesty of intent in all dealing

The following additional duties are owed to clients

  1. Negotiate favourable terms: advance the client’s interests by assisting in negotiations; draft favourable terms and conditions for agreements arising from the negotiations
  2. Maintain confidentiality: maintain confidentiality regarding all matters (e.g., client’s personal information, client’s motivation for buying/selling, and the amount to be paid or accepted during negotiations)
  3. Disclose information: disclose information pertinent to the client (e.g., actual or potential conflicts of interest); disclose matters relating to the transaction
  4. Act in person: perform duties personally, unless otherwise instructed
  5. Obey instructions: obey the client’s instruction, unless it’s not lawful (e.g., the client asks you to create a misleading advertisement regarding the property)
  6. Perform mandate: perform the mandate as set out in the representation agreement; act only within specified authorities; seek clarification if you are uncertain about said authorities.

The fiduciary obligations owed to clients are as follows:

  1. Maintain utmost loyalty: the client’s interests come first and are best achieved in single representation (i.e., you represent the interest of only one party to a transaction)
  2. Avoid conflicts of interest: be aware of situations that may lead to conflicts of interest, such as: representing two or more clients at the same time (multiple representation); acquiring the client’s property; selling your own property to the client
  3. Disclose conflicts: disclose any personal or third-party interests that do or might conflict with the client’s interests; disclose the exact nature and extent of the conflict(s), in writing and signed by the client
  4. Do not make secret profit: do not make a profit at the client’s expense (e.g., providing improper advice, accepting payment from another party without the client’s knowledge and written consent)
  5. Do not misuse confidential information: do not use confidential information (e.g., confidential details about the client, the property, and/or the transaction) for your own interests, to harm the client, or to interfere with the client’s endeavours.

The Real Estate Council of Ontario has produced a video on representation that addresses these issues.


There are no comments

Thank you! Your comment has been submitted and is awaiting approval.

Robert Atkinson

Robert Atkinson

CENTURY 21 Leading Edge Realty Inc., Brokerage*
Contact Me

Blog Archives