Can I rely on financial numbers that came from the broker, not the seller?

Financial summaries in a listing package reach you through the broker, so ask where each figure came from: the seller’s statements, tax returns or an adjustment. It is safest to treat the package as the seller’s information presented by the broker, and to plan from the start to check it against source documents. A broker’s polish is not verification.

What an Ontario broker must do

Ontario’s Code of Ethics, made under the Trust in Real Estate Services Act, 2002, says a registrant must make best efforts to ensure that any representations are accurate and are not misleading, and must not engage in or be a party to misrepresentation. The Act also bars a registrant from furnishing false or deceptive information or documents relating to a trade in real estate, and it defines real estate to include businesses. Other provinces run their own regimes, so ask which rules cover your broker.

Why that is not a guarantee

Best efforts is a standard of care in how the broker handles information. Neither the Act nor the Code says the broker audits the seller’s books or stands behind the figures. The Code also says a registrant who represents a client must promote and protect that client’s best interests, so ask whose client the broker is before you rely on its framing of earnings.

How to test the figures

BDC says due diligence is about trust and verification, making sure the numbers match the reality on the ground, and that an accountant can help you analyze the company’s financial records. BDC also notes that a seller should expect buyers to ask for historic and interim financial statements, projections, tax returns and other records. Ask for those, and check the broker’s summary against them:

• Which figures came straight from the seller’s statements and which were adjusted by the broker or the seller.
• Whether each adjustment is explained in writing and backed by a document.
• Whether the seller’s accountant prepared the statements, and whether you can speak to them.
• Whether the tax returns and the statements tell the same story.