By now you have seen or at least heard about the CBC Marketplace where an undercover investigation revealed some real estate agents breaking the rules in an effort to “double-end” their sales commissions. The agents are blatantly breaching the code of ethics established by the Real Estate and Business Brokers Act (REBBA), which states that real estate professionals cannot use confidential information to give their clients an advantage, or manipulate a transaction. While this conduct is embarrassing to watch, unfortunately it is not going away, or at least not any time soon. The frequency of these indecencies reflect poorly on our real estate industry as a whole and this practice is indicative of agents treating each other unethically.
When an agent represents and negotiates on behalf of both the buyer and the seller, so long as this information is disclosed to all parties involved in the transaction, we refer to that as multiple representation (sometimes referred to as “double-ending”).There are certain complications that can result from this, and when agents don’t abide by the rules and regulations set out by our governing authorities, problems can occur such as the ones highlighted in the Marketplace report. It should be pointed out that we, as real estate professionals, have certain obligations when representing both the Buyer and the Seller:
- • Written confirmation from both Buyer and Seller that each understand and consent to the agent representing both parties.
- • Act in the best interest of both Buyer and Seller (this is where it gets tricky, as you cannot realistically provide better service to one client over the other).
- • No disclosing confidential information to either side.
In Ontario, multiple representation is legal and commonly practiced, however a small percentage of our fellow real estate agents take advantage of this relationship and use it to their sole benefit.
Enter the CBC Marketplace Report:
A few important notes that we should point out.
1) This investigation was not a randomly selected group of agents. As any good investigator does, they researched the industry and found a group of agents who run bidding wars to their advantage and regularly engage in unethical behaviours. As with any industry, there are those who engage in a less than professional manner and unfortunately that is the only attention given;
2) The sample size of 10 agents investigated does not represent the majority of our Realtors. Considering that there are over 40,000 REALTORS in Ontario, sampling 10 is without a doubt going to skew the results and mislead viewers into believing rigged bidding wars happen more often then they actually do;
3) Bidding wars area a common occurrence in today’s market simply because there are more Buyers than Sellers. The majority of them are above board!
Rigged bidding wars can be defined as: When the listing agent, whose main responsibility is to act on behalf of the sellers, takes a multiple offer scenario into their own hands and brings in a buyer for the property which will ultimately be “the winner” of this war. It goes a little further than just that, with the agent making a promise to the Buyer that their offer will be accepted if they bid on this agent’s listing. “I will make sure that your offer of $’X’ will seal the deal and get you the house”. So the Buyer gets their dream home, and the agent will ‘earn’ the full commission paid. What is infuriating is that the agent ends up the only winner. The Seller’s interests are clearly neglected and even worse, they will have potentially lost by not receiving all fair offers. Despite the fact that the Buyer is happy as they now have the house, they could have had an even better outcome if they had hired their own agent protecting their interests.
Now remember when I said this unethical behaviour is not going away, or at least not any time soon? That is largely in part due to our governing authorities’ less than strict enforcement of rules and regulations. The Real Estate Council of Ontario (RECO) operates on a complaint based system with very minor fines being dished out to those rule-breakers. Until the penalties really sting, there looks to be no stopping these bad apples from tainting the public’s view on an industry already under the microscope.
With the stakes so high, there is no doubt in my mind and practice, that you as a Buyer should have your own representation. That way you will be protected and informed of all the important information you need to know in order to make a sensible offer on the home of your dreams. In one of the hottest real estate markets to date, Buyers are faced with almost certainty that the house of their dreams will see a bidding war, and so they need to put their best foot forward guided by an experienced agent that is on your side!
