A political hot potato in a fraught market
Rule review to boost protection against realtors who break rules
If you were getting a divorce would you hire the same lawyer who was representing your soon-to-be ex-spouse?
So if you’re buying a house, why would you use the same real estate agent as the seller?
On the surface, it doesn’t make sense, said Christopher Alexander, regional director for Re/MAX Integra.
But sometimes there are legitimate reasons the buyer and seller would use the same agent, particularly in rural communities where there are fewer agents than the Toronto region, he said.
Alexander is among real estate representatives, who agree that better consumer protections are needed in real estate transactions where the buyer and seller are represented by the same agent.
He also supports a call for tougher fines and penalties for agents who break the rules around what’s known as doubleending. The practice — known in the industry as multiple representation — has become a political hot potato in the Toronto region’s fraught housing market.
This fall, the Ontario Liberal government plans to announce new rules it says will boost consumer protection around multiple representation.
It’s the first phase in a review of the 2002 Real Estate Business Brokers Act (REBBA), the law and code of ethics that govern real estate agents’ conduct.
“Consumers don’t really know what they’re getting into when it’s multiple representation so better disclosures, making sure the client really understands what they’re getting into, will really help,” said Alexander. But, he said, “I do believe in multiple offer situations there should be no multiple representation or doubleending whatsoever.”
The issue was already on the radar of the Real Estate Council of Ontario (RECO), said registrar Joseph Richer.
As early as 2016, RECO was “hearing from consumers and (real estate agents) about the lack of transparency in some transactions” — scenarios that just didn’t pass the smell test, according to Richer.
Everything, including the elimination of multiple representation, is on the table in the provincial review, said Andrew Lang, a spokesperson for Government and Consumer Services Minister Tracy MacCharles.
But the industry, which opposes the elimination of double-ending, is being heard, he said.
“We consulted with the stakeholders and double-ending is going to be impacted through the REBBA review and the way it is going to be impacted is going to be a fairly balanced reflection of stakeholder input and our job to protect consumers,” said Lang.
No Canadian province has gone so far as to completely eliminate multiple representation, said Richer.
It’s not clear how many Ontario home sales are double-ended transactions. Real estate representatives say they only account for a small percentage of deals, and agents who abuse the system are rare. The Toronto Real Estate Board (TREB) told the Star it doesn’t report or track “any statistics at the brokerage or individual realtor activity level.”
Brad Henderson, CEO of Sotheby’s International Realty Canada, said his company doesn’t keep statistics but he estimated fewer than 10 per cent of transactions are multiple representation deals and the numbers would be lower in the Toronto area where 48,000 of Ontario’s 70,000 agents work. The scant number of RECO complaints suggests the problem isn’t prevalent, Henderson added.
RECO said it received 30 related complaints last year and there have been 37 so far this year. In 13 cases last year RECO issued written warnings and required their agents to do additional training. The same training and warnings were issued for six cases this year. Twenty are still ongoing. RECO takes a progressive discipline approach, said Richer. A relatively minor issue and a first offence typically results in the agent being ordered to take a course. But a repeat problem or a serious case of misconduct is treated more severely, he said.
In 2015, RECO fined agent Zahra Shaker-Shariat-Panahi $15,000 for failing to disclose multiple representation, and failing to disclose a reduced commission agreement she facilitated between the buyer she represented and the seller.
There’s no way to know why the number of complaints has risen in the last year but media attention and increased awareness may be part of the explanation, said Richer.
“We do know that the market was already hot in 2016, and yet there were fewer complaints related to multiple representation than we are seeing this year,” he said.
Real estate representatives say they’re on board with stronger consumer protections but also consumer choice. The problem, in many cases, boils down to consumer education about how they are being represented by their agent or brokerage, said Henderson, who was part of a working group on multiple re- presentation for the Ontario Real Estate Association (OREA).
“It’s cloudy and the public doesn’t fully understand it because most people are only involved in a transaction every, say, five years, sometimes 10, and in some situations sometimes maybe once or twice in their whole lifetime,” he said.
Bosley Real Estate agent David Fleming says the government has no business stepping up regulations for a perceived problem that came to attention because of a brief spike in the Toronto area market.
“God forbid the market is a down market,” he said. “People will be dying to have their agent bring a buyer to their property.”
Fleming says he would like to think that most agents understand they’re only as good as their reputation. But there will always be some who will be open to cheating.
“It’s like eradicating drugs in professional sports. It’s impossible,” he said. “You’re going to have to test people every single day, every single player, every sport.”
Every industry has unethical representatives, said Fleming.
Richer and Henderson both point out that in most double-ended deals both parties walk away happy.