Big things are happening in the world of real estate in Ontario, which will impact buyers, sellers, and the real estate professionals who work with them.
We're here to break it down for you in simple terms.
REBBA to TRESA - A New Phase in the Real Estate Services Act
On December 1, 2023, a new phase of the Trust in Real Estate Services Act (TRESA) is rolling in, waving goodbye to the old Real Estate and Business Brokers Act (REBBA). These changes are all about making things crystal clear and keeping you, the consumer, in the loop.
So, what's all the buzz about? Here's a rundown of the key changes that you and real estate professionals should be aware of:
TRESA Multiple and Designated Representation
TRESA phase 2 introduces something called "designated representation." This means that in a single transaction, two agents from the same brokerage can represent both the buyer and the seller. No need to choose between multiple or designated representation, but the type of agreement must be decided at the start of each deal. If it's designated representation, the brokerage remains neutral but keeps an eye on both agents doing their jobs.
Let's walk through an example to help you understand "designated representation" under TRESA phase 2:
Imagine you're selling your house, and you've hired a real estate agent from "ABC Realty." In this scenario, ABC Realty has two agents: Jane and Mark.
In a Designated Representation Scenario, you would
1. Agree to Designated Representation: At the beginning of your home sale process, "ABC Realty" informs you that they offer "designated representation." This means they can assign Jane to represent you as the seller and Mark to represent the buyer, who's interested in purchasing your home.
2. Remain Neutral: Although Jane and Mark work for the same brokerage, "ABC Realty," they need to remain neutral. Jane is focused on your interests as the seller, while Mark looks out for the buyer's interests.
3. Transaction Oversight: The brokerage, "ABC Realty," oversees both Jane and Mark to ensure they're fulfilling their respective duties and responsibilities properly throughout the entire transaction.
In this way, both the seller (that's you) and the buyer get dedicated representation within the same brokerage, making sure your interests are looked after.
This new approach helps simplify the process and provides clarity for all parties involved in the real estate transaction.
Can a buyer or seller be Self-Represented?
A "self-represented party" in a real estate transaction refers to an individual who is participating in the transaction without being represented by a real estate agent or brokerage. In this context, they are not a client of any brokerage, and they are handling the real estate transaction on their own, without the guidance or services of a realtor.
Self-represented parties typically take on the responsibilities of negotiating the terms of the transaction, understanding the legal and financial aspects, and completing the necessary paperwork without professional assistance from a real estate agent. This designation is used to distinguish individuals who are not under the representation of a real estate professional during the buying or selling of a property.
In the past, there has been a reference to "clients" and "customers." But to clear up any confusion, TRESA phase 2 swaps "customer" with "self-represented party." This simply means someone who isn't working with any brokerage. Realtors can't offer services or advice to these folks.
Open Offer Process
Under TRESA, sellers have an additional choice when it comes to negotiating the sale of their property. If the seller provides specific instructions to the brokerage, the general regulations of TRESA permit the sharing of competing offers with other potential buyers. It's important to emphasize that no personal details or any information identifying the offeror can be revealed. However, it's worth noting that the brokerage is still obligated to disclose the total number of registered offers to all competing buyers.
Written Agreements and Disclosures
Any services promised to clients, like commission, referral fees, or staging, must be clearly listed in the written agreement. But arguably the biggest change under TRESA is that Realtors helping sellers must also spill the beans on known facts to potential buyers. Traditionally, buyers had to be cautious and investigate properties themselves when making a real estate purchase. Sellers were only obligated to disclose significant hidden defects that made the property unsafe or uninhabitable.
However, TRESA, effective December 1, 2023, changes the game. It states that if a seller has a legal duty to disclose something to the buyer, and the seller's agent knows about it, the agent must tell every interested buyer.
For example, if a pre-listing inspection reveals a hidden problem, both the seller and their agent must now share this information with potential buyers and their agents. This means fewer pre-listing inspections, caution for sellers, and more transparency in real estate transactions.
From the seller's perspective, this information might have remained unknown if they hadn't conducted an inspection or if the inspection report had gone directly to their lawyer, who could decide not to share it.
Consumer Information Guide
The Real Estate Council of Ontario (RECO) will be releasing a helpful guide for consumers. It's a must-give to clients and self-represented parties before any services can begin. Realtors will also walk you through this guide, which aims to keep everyone on the same page. No DIY guides allowed, and realtors can't give advice to self-represented parties until they've got this guide.
Code of Ethics
The code of ethics is getting a makeover in TRESA phase 2. All the ethical stuff stays put, but the technical and procedural bits are moving to other sections. The result? A shorter, more focused code of ethics that really hones in on things like conflicts of interest and confidentiality.
RECO Discipline Process
The RECO discipline committee isn't going away. It's actually getting more power in phase 2. Now, it can handle allegations of law breaches, not just code of ethics violations. Plus, it can suspend, revoke, or add conditions to a registration when needed.
New Standard Forms
You may notice that some of the standard Real Estate forms may change. Work is underway by OREA to create new Forms and revise up to 100 existing Forms. The OREA Standard Forms team will be developing educational guidance specific to the new TRESA rules, to ensure members are prepared for the changes ahead.
Updates on mandatory documented disclosures and acknowledgements:
- Differences between the old and new OREA Forms
- Clarifying terminology to describe brokerage/consumer relationships
- New Regulator Forms, like the “Information Guide,” that will be provided to clients and self-represented parties, and how they will affect Member trading
- Necessary updates to OREA Forms and Clauses to ensure TRESA compliance