I was interviewed by Tess Kalinowski of the Toronto Star for input on the real estate rules in Ontario, which is a very hot topic in the city these days thanks to Toronto’s active market. There have been a lot of changes in the industry since I entered in 1983, and I was happy to provide my thoughts on the subject.
Published by: The Toronto Star
Reported by: Tess Kalinowski
January 31, 2019
Should consumers have the right to see competing offers on the same property. Should a realtor represent both the buyer and seller in the same transaction?
Those are some of the issues the province is considering in a modernization of the 2002 rules governing Ontario’s real estate industry, known as the Real Estate Business Brokers Act (REBBA).
The Ministry of Government and Consumer Services is gathering ideas for boosting consumer protection and enhancing the industry’s professionalism through an online survey to close March 15.
“One of the biggest things we’re going to do as individuals or families is buy a home. We want to make sure we’re with the times. We want to make sure we listen to both the consumer and the professional and make sure we have legislation that reflects today’s economy and today’s world,” said Minister Bill Walker.
The REBBA update began under the previous Liberal government, which amended the legislation to allow the regulatory agency, the Real Estate Council of Ontario (RECO), to double the fines for agents and brokers that violated the code of ethics.
But the Liberals were voted out of office before the nuts and bolts around industry education, professional practices, language and disclosures were decided.
A consultation paper released by the province’s Progressive Conservative government puts beefed-up powers for RECO on the table, suggesting tougher penalties for rule-breaking, unethical realtors.
“Right now RECO’s disciplinary proceedings are archaic. Consumers making a complaint can wait years for resolution,” said Ontario Real Estate Association (OREA) CEO Tim Hudak, a former leader of the Ontario PC party. RECO should be able to fine rule-breaking realtors and force them to surrender their commissions which can exceed the penalties, he said.
“The average price (of a home in 2002) was $275,000. You couldn’t buy a shack in somebody’s back yard today for that price,” said Hudak.
Changes to some practices, including the privacy surrounding competing offers, will be difficult, say some agents.
- Multiple offers: Keeping multiple offers confidential among competing buyers has been criticized for driving up prices in hot markets.
Elli Davis of Royal LePage doesn’t want to see it change. “I think a buyer has the opportunity to make their very best offer. They will know if they’re in competition. They will know how many offers there are in total and I think that’s enough to know. I don’t think it’s right that someone sees the private offer of another buyer,” she said.
John Pasalis of Toronto’s Realosophy brokerage said he can’t see how offer details don’t warrant the same confidentiality as other business dealings.
But he acknowledged the system is problematic. “You sometimes end up getting this one buyer who pays $50,000 to $100,000 more than he needed to because it’s a blind auction,” although the highest price offer doesn’t always win, said Pasalis. Sometimes sellers want different conditions rather than more money.
Offers should be disclosed only with the consent of all the parties, starting with the seller, who would have the ultimate say in whether it’s an open bidding process, said RECO registrar Joe Richer. He notes that it’s in the seller’s interest to keep the bids private.
“What is this solving in the broader public interest? You’re going to reduce the risk of the opportunity for somebody to blow everybody out of the water with a $50,000 (bid) over the next best offer. You’re not going to have that because everyone’s going to see everything. As a seller, I might say, ‘I want a chance at that landslide offer,’ ” said Richer.
Nothing prohibits the kind of open bid auction that is standard in Australia, he said. “The thing is, in North America, it’s seen as a fire sale. You’re not going there expecting to pay the highest price; you’re going expecting to pay the cheapest price,” said Richer.
- Double-ending: Properly known as “dual agency,” where one agent represents the buyer and seller in a single transaction, needs to end in Ontario just as British Columbia has prohibited the practice, says RECO. It supports a system called Mandatory Designated Representation that allows a brokerage to handle both ends of a deal but a different agent must represent each client and the brokerage has to ensure that the two agents don’t share client information.
There would be exceptions for remote areas with limited real estate services or circumstances such as the handling of a family estate.
That the act permits realtors to act on behalf of clients while serving another individual known as a “customer” is “bordering on unethical,” said Richer. The realtor is acting in the interest of a client. They may provide service to the customer, but they do not owe that person the same fiduciary duty.
OREA has said that that, as is the case in Alberta, buyers and sellers should be required to sign a form declaring they understand they are using the same agent. But the realtor would not be permitted to share any confidential information.
Davis says she has sold many of the houses she lists to her own clients. “If you hire me to sell a property and I get a lead and I bring … (it), that should be construed as a good thing, not a bad thing, as long as I disclose I could be on both sides of the transaction, I don’t see any problem (with) it,” she said.
There are about 82,000 real estate agents and brokers in Ontario. RECO fined 69 individuals and six brokers a total of $712,950 in 2017. Among the 2,926 complaints the agency received that year, handling of competing offers and competent services was among the most common. It represented 9 per cent and 8 per cent of the totals, respectively.