Toronto Real Estate: Double-Ended Deals: Who Do They Benefit?
November 25, 2016
There was recently a piece on CBC Marketplace that questioned the ethics of some Toronto real estate agents. The piece dealt primarily with those who ‘double-end’ deals.
The process is legal, and when they’re following the rules of the Real Estate Council of Ontario (RECO), it just means the sales representative is representing both the buyer and the seller (who have agreed to this in writing). The Realtor keeps details which could affect either parties negotiating power, such as a buyer’s maximum budget or a seller’s minimum budget, confidential.
“Double-ending” can make the process move a little more quickly and there is an ease to the process, but it’s admittedly more difficult for the Realtor because they must ensure that both parties best interests are maintained, fairly. The benefit to a Realtor is that they will be paid a full commission. The benefits to the buyer or seller are a little less tangible.
WHAT’S THE ISSUE?
The problem is that when there are multiple buyers for a property, listing sales professionals who also have interested buyers are promising to give their buyers an unfair advantage over other buyers represented by other realtors. Thankfully, the majority of registered salespeople follow the rules and regulations as stipulated through RECO but there will be Realtors who break the rules to make it more profitable for themselves, as you can see in the video that CBC posted. Buyers in today’s market have been lead to believe that if they approach a listing agent directly, they’ll have an inside scoop on the property and in turn have a financial gain…. sometimes it’s true, but any information the Realtor may have cannot be used to create an unfair advantage for one party over the other.
Personally, when I’ve listed a house or condo for sale and multiple buyers are interested, it’s imperative that I keep it a level playing field to make sure that every potential buyer has a solid chance of getting the property. It’s morally the right thing to do. From the start of the relationship when listing a home, I work in the interest of the seller – if I try to manipulate the process to give an unfair advantage to any buyer I may find through marketing the property, then I’m not working in anybody’s best interest other than my own and that’s not legal.
The piece from CBC feels very skewed to me and I realize it was designed that way. They focused on a particular group of agents in order to get as many people as possible to break the rules. Some of the agents had done 30-50% of their deals double ended, which is why they were chosen to speak with and recorded by the undercover buyer. If they had come to my office or any another office in my market place, I think they’d be hard pressed to find many realtors who’d be willing to break the rules.
In this competitive market, I am often called by buyers who believe they’ll get some benefit over other buyers if they go through the listing agent. From my perspective, the only benefit to them in a multiple offer situation is that I know the property better than any other agent and I can advise them accordingly; there’s no financial advantage or cut in commission.
HOW CAN WE CURB THE PROBLEM?
One simple solution is to eliminate the legality of double-ended deals, which fall under the category of multiple representation. The issue is that this category also covers two agents who work for the same brokerage. If you get rid of multiple representation, you’re excluding anyone who works in the same brokerage which doesn’t help us do our job. Part of the reason we’re hired is to find a buyer – sometimes a seller feels we aren’t doing our job if we don’t find a buyer. Often the agents in my office are the first to find out about a new listing – we talk at meetings about upcoming properties and buyers we have and what they’re looking for. If there’s a match within the office, it can save time for both the buyers and sellers.
I think the challenge with RECO is that they are set up to deal with things after the fact. The rules aren’t preventative and the penalties they have are not strong enough.
If someone has to face a $5,000 fine to make a $50,000 commission, that can be the price of doing business, but I think it does a disservice to the vast majority of real estate agents who work ethically. The media focuses on the bad apples because that’s more interesting, but at least it helps shed some light on the practice so buyers and sellers are more aware of the pitfalls when the same agent represents both the buyer and seller.
If you have any questions about double-ended deals or the Toronto real estate market in general, please don’t hesitate to get in touch!