The days of bidding wars and unconditional offers to purchase may be over. But what if you bought your
dream home right before the market collapsed? Perhaps it was bad timing or just plain bad luck. Most
are unaware that under certain circumstances, it may be your Realtor who is responsible for a real
estate deal gone wrong.
Generally speaking, there are several duties or obligations that a Realtor owes to: 1) everyone; and 2)
clients, whether it be a Seller or Buyer. For example, Realtors must ensure they treat every person they
deal within the course of a real estate transaction fairly, honestly and with integrity. In addition, a
Realtor must promote and protect the best interests of his/her clients and provide services of a skilled
real estate professional. When your Realtor provides you with information about your property, it is
critical that the Realtor understand their own limitations. For example, a Realtor should not be providing
opinions or advice regarding a property’s value if they do not have the education or experience related
to the valuation of real estate. However, normally, Realtors are expected to advise of and show
comparable properties and provide a Comparative Market Analysis which provides some guidance
concerning property values.
When acting for a Buyer, a real estate agent should normally include conditions in offers dealing with
home inspections and mortgage financing, plus any other conditions related to the specific
circumstances of the client and/or property being purchased. When acting for a Seller, the agent should
also advise their client to include conditions which may be appropriate to protect the client’s interests.
The above-noted duties and obligations, if breached by a Realtor, can lead to serious consequences.
These consequences may not be known until after a real estate transaction has closed and a party to the
transaction suffers a corresponding loss.
For example, in the court case of Wemyss v. Moldenhaeur (2003), a Realtor was found negligent because
the Realtor failed to advise the Buyer of a change in a condition that was submitted in an offer to
purchase a property. In that case a Buyer wished to purchase a property but was worried about the
home’s septic system and thus wanted to get out of the deal if there was a problem with the septic
system. The initial offer made by the Buyer was conditional on the Buyer obtaining an inspector’s report
satisfactory to the Buyer concerning the septic system. However, the initial offer expired, and the
Buyer’s Realtor prepared a new offer which should have included the conditional clause regarding the
inspector’s report concerning the septic system. Unfortunately for the Buyer, on signing back the new
offer, the inspection clause was changed to provide that it was conditional on the Buyer obtaining an
inspector’s report satisfactory to the Buyer that there were no “structural defects”. The alteration of the
condition to reflect “structural defects” was not brought to the Buyer’s attention by the Realtor, and
when an inspector’s report disclosed problems with the septic system, the Buyer advised the agent to
cancel the transaction. However, it was only at this point that the Buyer’s Realtor noticed that the
condition regarding the septic system had been altered to include “structural defects”, and the Buyer
could not get out of the deal and lost his deposit. The court found that the Realtor did not meet the
standard of reasonable care and skill expected of a Realtor. The court ordered the Realtor to reimburse
the Buyer for his deposit of $50,000.00.
As seen in the case above, Realtors could be on the hook for financial losses suffered by their clients if
they are negligent.
If you are or have been involved in a real estate transaction and have concerns, contact Frank Feldman
Law for a consultation. We can advise you of your rights and explain your options to ensure you are
completely satisfied with your purchase or sale transaction.
By: Vick Balkaran
Please note these materials have been prepared for general information purposes only and do not constitute legal advice. Readers are advised to seek legal advice by contacting Frank Feldman* regarding any specific legal issues.