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This FAQ outlines the various disclosures a real estate professional may make to you during a real estate transaction, and the forms those disclosures will take.
Many factors go into making a decision when buying and selling real estate, or when renting out your home or trying to find a property to rent. Some things are easy to find out, such as the cost of the property etc., but many facts require the help of a professional to discern. Hidden defects in the home, and the risks you face if you choose to represent yourself in a transaction, all require additional information that can be challenging to obtain.
When working with real estate professionals, the legislation that governs their conduct, the Real Estate Services Act, outlines what information must be disclosed to clients. Some of those disclosures are required to be in writing on mandatory forms, while others can come in the form of a written communication such as a text message or email. Some can even occur through conversation. This article will provide you the information you need to know when a disclosure must be made, and how.
You may call a real estate professional to ask questions about a property, including the price or size of the property but this does not necessarily mean that they are representing you in any way. In fact, they may already be representing the seller or landlord. While a real estate professional can provide you with factual information without creating what is known as an ‘agency relationship’, they are unable to provide you any advice.
Should you want to enter into an agency relationship with a real estate professional so they can help you sell, buy, or rent a property, they will provide you with a Disclosure of Representation in Trading Services form. This form must be completed any time a real estate professional takes on a client and protects you by outlining all the responsibilities and duties you are owed and will even include information on how to file a complaint should an issue arise.
This form must be signed by you and your real estate professional before they can provide any real estate services.
How do I know if the seller of a home or a buyer interested in my home is a real estate professional?
When a real estate professional who licensed to sell properties wants to sell, buy, or rent a home for themselves, there are a few things that must occur to ensure the consumer on the other side of the transaction knows who they are dealing with.
The real estate professional must complete a Disclosure of Interest in Trade form which will tell you:
- That they are licensed and if they are representing themselves or someone close to them that the legislation calls an associate. Associates can be a spouse or company that the real estate professional or spouse have an interest in of at least five per cent;
- If the professional plans on reselling the property, and the terms of the sale; and
- How much money they are earning for the transaction if they are acquiring the real estate.
This form must be completed and given to you whether they represent themselves or hire another real estate professional to represent them. Having this information will protect you by letting you know that the person you are dealing with on the other side of the transaction is a professional who has a greater knowledge base than most consumers. You may then choose to hire your own real estate professional to protect your interests.
If the real estate professional is not licensed to sell real estate but is licensed as a rental property manager or strata manager, they must provide you with the same disclosure even if they are represented by another real estate professional.
When rental property managers and strata managers represent themselves, they must additionally disclose to you in writing that that their conduct is not covered under the Real Estate Services Act which means that they are just like any other seller and you will not be able to file any complaints with BCFSA should an issue arise. This exemption under the law does not apply to those licensed to sell properties whose conduct is always regulated by the Real Estate Services Act.
If I represent myself in a real estate deal, how do I know what the real estate professional representing the other side can do for me?
Consumers sometimes choose to represent themselves in real estate transactions. While this is perfectly acceptable, there are risks they may not realize could impact them.
If you decide to be an unrepresented party, the real estate professional representing the other side will provide you with a form called the Disclosure of Risks to Unrepresented Parties. This form will outline all things you need to understand in order to protect yourself and will also inform you of the limited services the real estate professional can provide for you (such as providing factual information, or drafting a purchase contract to your specifications).
You must remember that the real estate professional in this situation is representing the other party to the transaction. Any information you provide them, whether confidential or not, will be shared with their client to further their client’s interests. The same will not be done for you with information about the other party. The professional will also not be able to provide you any advice when it comes to the drafting of a purchase contract as that could disadvantage their client. It is strongly recommended that you retain the services of your own real estate professional to protect you and your interests.
Hidden defects that can not be discovered upon ordinary inspection (such as with the help of a property inspector) are called material latent defects. If they are known to the listing real estate professional or rental property manager, they must be disclosed in writing.
This disclosure cannot be made in the contract of purchase and sale, or lease but must appear in a separate written document. You will receive this disclosure before you agree to enter into a contract with the seller or landlord so that you have an opportunity to decide whether the defect impacts your decision to buy or rent.
If, however a seller or landlord has already disclosed a material latent defect to you in writing, such as on a Property Disclosure Statement, the real estate professional does not need to provide you with a second disclosure.
What about anything else I may need to know about a property or buyer/seller? How can I get that information?
When you hire a real estate professional, they are required to provide you with all material information about the property and the real estate transaction itself. While your real estate professional will provide you with all the information, they believe you should know, other factors of importance may differ from person to person. Some buyers may want to avoid purchasing a home where someone has died, and some sellers may only want to deal with buyers who are preapproved for financing. You should discuss anything of importance to you at the outset of your agency relationship so that your real estate professional can provide you with all the information and investigate anything of concern for you. If they are unable to get the information you need, they will advise you of that and suggest options for obtaining the information.
While there is no obligation that this information be given to you in writing, if something is important to you, confirm the information you have received in an email or text.
I know that my listing contract tells me what percentage of the sale price gets paid as commission, but I still find it confusing. How do I know how much I will end up paying and to whom?
When you decide to sell your home and you hire a real estate professional, you will negotiate the total amount of commission that you will pay in your listing agreement. Typically, this amount is expressed as a percentage of the total sale price and part of that amount may go to pay a professional representing the buyer. The amount you are paying to your real estate professional and any amount that gets shared with a buyer’s professional is completely negotiable between you and the professional you are working with.
When a buyer brings an offer to purchase your home, your real estate professional will provide you with a Disclosure to Sellers of Expected Remuneration form. This form will break down in dollar format, how much you will be paying your professional’s brokerage and how much will go to the buyer’s professional’s brokerage. This figure is based on the percentage of commission you negotiated in your listing agreement. Should you choose to counter the offer, or should the buyer counter your counteroffer, a breakdown of commissions you will pay will be recalculated for you on the form. This information can help you negotiate a deal that works best for you.
It is important to remember that there are other expenses that you will incur when selling your home such as penalties you may pay to your lender, legal expenses etc. These are not calculated on the Disclosure to Sellers of Expected Remuneration.
While sellers usually negotiate commissions into a listing contract, unless you enter into a Buyer Agency Agreement with your real estate professional, you may think you will not know what your professional is earning. In fact, anytime a real estate professional represents you, they must disclose all remuneration they are earning from any third party including the seller.
It is important to note that it is actually the real estate brokerage your real estate professional works for that earns the commission. That is the amount that will be disclosed to you and not the percentage of the total amount the brokerage pays to the professional themselves.
What if my rental property or strata manager gets a benefit by hiring a contractor for me? Does it have to be disclosed?
Yes. If at any time a rental property or strata manager receives or anticipates receiving a benefit as a result of expenditures made by or your behalf, the nature and extent of the benefit must be disclosed in writing to you and the real estate professional’s brokerage before the benefit is accepted.
For instance, if a rental property manager hires a company that is owned by their spouse, or that they own a percentage of, the benefit they receive must be disclosed to you in writing before allowing you to enter into that agreement.
Will I always know if my real estate professional is representing the other party to the transaction also?
When a real estate professional represents two parties with competing interests in a transaction, it is called dual agency. Limited dual agency is only permitted in very specific circumstances. You can find more information in the Dual Agency Consumer Guide.
Dual agency can occur with a buyer and seller, two buyers competing for the same property, or a tenant and landlord (which can only happen if the tenant is represented in finding the property and the professional also represents the landlord in the management of the property). Should this occur, before any of the consumers enter into a transaction agreement, the real estate professional will outline the conflict to everyone and provide a Disclosure of Risks Associated with Dual Agency form.
Should all the legislative requirements be met, and all parties agree to it, then, and only then, can the real estate professional represent everyone.
Other than dual agency, how will I know if my real estate professional and I face other conflicts of interest?
The legislation requires that your real estate professional disclose any perceived, potential, or actual conflicts of interest as soon as they become aware of them. Once you have been given the information, your professional will outline how the conflict may impact your agency relationship and what the options exist to deal with them.
These resolutions to the conflict may include modifying your agency relationship, not entering into transactions where the conflict exists, all the way to you severing your agency relationship and getting independent representation. You and your real estate professional can determine what is in your best interest.
Should modifying your agency relationship be the best option so that you can keep working with your real estate professional, the changes to any duties owed to you by the professional will be added to any service agreement you may have signed through an amendment.
Yes. Real estate professionals, whether licensed in sales, rental property management, or strata management, are able to manage their own rental properties. When this happens, they fall under an exemption in the law which says that for the purposes of that rental property, they are not governed by all the Rules that other rental property managers are governed by.
Because the same Rules do not apply when real estate professionals manage their own properties as when independent real estate professionals do, the professional must provide you with a written disclosure indicating that while they are licensed, they are not governed by the Real Estate Services Act and are not able to earn any remuneration for the work they are doing.
This exemption also applies when real estate professionals manage rental properties for a spouse or child and the same disclosure requirements come into play.
I own a condo unit in a strata corporation and one of our strata council members is a licensed real estate professional. Does that need to be disclosed?
A real estate professional can provide management services to a strata corporation in two ways when they are a unit owner in the same complex.
- They may sit on the strata council; and/or
- They may manage the strata corporation on behalf of the strata council.
In either case, the Rules say that a licensed real estate professional can provide management services to up to two strata corporations where they own units. Prior to providing those services they must give written disclosure indicating that while they are licensed, their conduct is not covered under the Real Estate Services Act, and that the strata corporation will not receive the same protections as hiring an independent strata manager who is governed under the legislation.
Should the strata corporation still wish to have the real estate professional offer services to them, the signed disclosure must be provided to the brokerage of the professional as well.
This content was developed with financial support from the Real Estate Foundation of BC.