Why this episode matters: The due diligence effort required under an exclusive representation comprises orchestration of a basket of brokerage activities. We’ll unpack the basket in this episode. 

The prior episode in this series covers the regrettable outcome of a lack of due diligence – the lack of an enforceable fee.

A continuing and concerted effort

A diligent effort to deliver on promised and expected real estate services is a requisite to a broker and their agents fulfilling agency duties owed the seller-client under an exclusive seller representation agreement. [See RPI Form 102]

To meet exclusive representation marketing obligations, the broker and their agents need to engage in a continuing and concerted effort to meet the due diligence standard to locate a buyer.

Due diligence imposes duties on the broker to perform throughout the representation at a level reasonably expected by the seller-client based on the conduct of brokers in the community. Unless a lesser level of services is agreed upon, the client has good cause to terminate the agency and cancel the representation agreement based on failure of a due diligence effort. [Coleman v. Mora (1968) 263 CA2d 137]

The due diligence effort required for exclusive representation comprises the broker’s ongoing orchestration of a basket of activities including to investigate, market, solicit buyers and negotiate and close a sale of the seller-client’s property.

Understanding the due diligence effort

The diligent efforts promised by a broker to meet the seller’s objective under an exclusive seller representation agreement are measured for sufficiency by the broker or their agent’s:

  • analysis of the property, a responsibility imposed on the broker before marketing begins, to gather property information needed by prospective buyers to evaluate the property for acquisition:
    • the standard for what information is gathered is set by the level of property information a competent broker includes in a marketing package;
    • data collected from observations of adverse conditions during a competent inspection of the property by the broker or their agent and noted in the seller’s Transfer Disclosure Statement (TDS) [See RPI Form 304];
    • existing third-party reports on the property’s condition, including a title profile of public information and documents;
    • the property’s operating expenses and any rental income;
    • information about nuisances in the surrounding area; and
  • marketing of the property, to include:
    • publication in the MLS or other broker-accessible platforms for releasing information on properties available for sale;
    • placing “For Sale” signs, distributing fliers, holding open house events;
    • marketing the availability of the property for sale on generally used internet mediums;
    • broadcasting the property at marketing sessions;
    • responding to all inquiries ASAP; and
    • delivering a complete marketing package to buyers or their agents when they seek further property information.

To facilitate broker oversight and ensure fee collection, an agent maintains an activity worksheet in each client file, on paper or digitally. Communications relating to the representation are entered consistently. Without a paper or digital record, a broker is unable to:

  • easily supervise their agent’s activities;
  • confirm the agent is diligent in their analysis and marketing of a property; and
  • have sufficient evidence to earn or retain a fee.

To earn the fee expected for a seller representation, the broker and their agents enter comments in the client file on:

  • information gathered for marketing;
  • money spent in the marketing effort;
  • copies of all advertising material;
  • all solicitation efforts to locate prospective buyers;
  • each contact regarding the property; and
  • identification of each buyer and buyer agent contact who expressed an interest in the property. [See RPI Form 520]

Editor’s note – The next episode in this series will cover all aspects of locating a ready, willing and able buyer.