A Message from our Broker Ted Zaharko on Designated Agency and the Calgary Real Estate Market

Designated agency is a brokerage model where the agency relationship exists between the client and their REALTOR(s)® – the designated agent – instead of the brokerage. This means that imputed or deemed knowledge (what one agent knows, everyone in the brokerage knows) doesn’t exist, eliminating the need to enter into transaction brokerage for in-house dual agency transactions. Transaction brokerage will still exist for double ends.

Q. Why did you decide to adopt the designated agency model?

A. A lot of people have asked me this question. To be honest, designated agency just makes sense to me, especially for a large brokerage like Royal LePage Foothills. REALTORS® value and protect client information. New technologies allow all REALTORS® to have their our own cell phones, email addresses, and even “fax to email” numbers, so central office phone numbers and fax machines are no longer needed. Client information is simply not shared, even within the brokerage, and that’s the way it should be. So while information barriers are the cornerstone of designated agency, they also exist in most common law offices today. Most Alberta brokerages have adopted the main principles of designated agency without even realizing it. Designated agency also became more appealing to me because RECA recently created a “nonexclusive” Designated Brokerage Agreement for Buyers. This form removes the buyer’s duties and financial obligations and I believe it’s more in line with buyers’ expectations. By simply outlining the designated agent’s duties, we now have a form that no buyer will object to signing.

Q. What are some of the benefits of the designated agency model?

A. I believe designated agency is best for the consumer because it better meets their expectations of how the brokerage operates. When a consumer asks you to help them buy or sell a home, they believe you’re working for them. They don’t understand the concept of imputed knowledge and frankly, it just doesn’t exist in most brokerages. The other aspect I like is that designated agency ensures buyers receive the same standard of service that has always been provided to sellers.

Q. How is Royal LePage Foothills dealing with the transition from common law to designated agency?

A. We’ve made a point to communicate with our associates and have held information sessions to help them understand designated agency and deal with the transition. They’ve been very supportive and have expressed little concern since designated agency is already in line with the way they practice today. Designated agency cannot be phased in, so our biggest challenge will be having our current clients all sign new agreements to switch from common law to designated agency by a set date. We’re working with RECA to see how we can make this happen as quickly and easily as possible. We’re also working with RECA and AREA on designated agency forms.

Q. What else is involved?

A. Since designated agency requires the broker to be neutral, I’ve assigned one non-competing manager to advise associates representing buyers and another non-competing manager to advise associates representing sellers. These managers will provide guidance to our REALTORS® when needed. We’ve also created tip sheets for buyers and sellers, in case they do find themselves in a transaction brokerage situation.

Q. How will designated agency affect how other brokerages work with you?

A. Perhaps most importantly, our brokerage model will not affect how other brokerages work with us. They’ll be required to communicate directly with our associates (email, fax, phone, etc.) instead of our brokerage for private or confidential matters like delivering offers or counteroffers, but this is already common practice in our brokerage.

Q. Sounds like an exciting time for Royal LePage Foothills.

A. This is a very exciting time for our brokerage and I’m looking forward to making the change to designated agency. And so far, my associates all support the change too. In fact, I anticipate that in the future, many REALTORS® will prefer to work for designated agency brokerages since they’ll never be faced with in-house transaction brokerage. Though I’m sure we’ll encounter unexpected challenges, we’ve been working proactively with RECA and AREA to identify potential problems and ensure the transition goes smoothly. I’ll also be assisting AREA and the boards in their efforts to produce tools and resources to help other brokerages adopt the designated agency model.

Ted Zaharko

Editor’s Note: