Toronto’s real estate market is currently facing unprecedented growth. Hefty real estate commissions and a lagging economy in other job areas have attracted many people to the career of a real estate agent. While the majority of agents complete a transaction in the client’s best interest, it is clear that there are not enough legal regulations to protect the public from the few bad apples in the bunch who complete deals for their own financial gain. One example of the perfectly legal but shady practice is a “double-ending deal”— i.e. where the real estate agent represents both the buyer and the seller, collecting a commission from each side. While double-ended deals can be fine if the agent clearly communicates their role, conflicts and what they can and cannot do, these types of transactions expose both sides to a high level of risk that their agent may not be acting ethically. Not only do these transactions give rise to conflicting duties to the client (and it is unclear which client the agent is fully advocating for), they can result in both sides paying more for the transaction, despite the agent’s promise of a lower commission rate.
Last November, a CBC Marketplace investigation revealed six real estate agents making promises in clear violation of the Real Estate Council of Ontario’s regulation and Code of Ethics. Captured on hidden cameras, the agents promised open house walk-ins that if they chose to use them (the seller’s agent) to buy the property, they could “control the sale” guaranteeing that the buyers would win the home purchase or that they would use insider information to leverage their offer over others.
Another concern is about agents who offer “exclusive listing” sales where the buyer’s agent encourages them not to put their home on the open market but instead sell it within the agent’s pool of potential buyers. The research is clear: higher prices are obtained for homes that are placed on the open market. Usually, the one to two percent savings that the agent offers to buyers willing to go through these transactions is paltry compared to the higher price they would have seen on the open market (see this Huffington Post article).
Sellers should always be the ones to decide when the solicitation of offers ends. A buyer should be wary if their agent pushes for “one-and-done” offer rounds or to avoid multiple rounds during a bidding war. If the seller’s agent also represents the buyer they should present their own client’s offer first, not last.
Other red flags are poor or non-existent photography in the MLS listing (which makes open house walk-ins the primary way of selling the property) or lack of communication with interested buyers (which dissuades growing interest in the property).
While I agree with some commentators’ position that an outright ban on double-ended transactions would offer an easily-enforceable solution, I also believe that more should be done to raise the standards of entry for the profession as a whole. Right now, it only takes 213 hours to become a licensed real estate sales professional and the focus of the model is on individual agents, instead of the brokerage as a whole. Placing more responsibility on the brokerage to oversee their agents’ conduct is also a solution that should be considered. With that being said, the best protection from the few unscrupulous agents in the industry is buyers and sellers who know their rights and how to spot practices that raise red flags.
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“This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”