CBC Marketplace is airing a program where six of the ten realtors they videotaped with hidden cameras broke ethical rules. They were listing agents, acting for the seller. In each case, they offered to give buyers information about what offers had been received, so that the buyers could be sure to win in a bidding war. In one instance, the realtor told the buyer the exact amount of a prior offer.
All of these breach the ethical rules that apply to realtors. Equally disturbing is that so many of the realtors caught on camera broke them so easily.
Here are my views on double-ending a transaction (acting for buyer and seller).
I don’t do it, period. I advise my sellers I don’t do it because of the potential for conflict of interest. The potential is built into a double-ended situation even if the ethical rules are followed.
Simply put, my job when I list a property is to get the best price for the seller that I can. When I act for a buyer, I am trying to get them the lowest price possible. Clearly, if I am acting for both, I can’t achieve both of those competing interests. It’s an obvious conflict.
The legislation that governs us gets around this by creating a “customer” relationship with the buyer who steps forward, so that they are not my “client” but someone to whom I owe lesser duties. I do not think that being a “customer” provides much protection to a buyer. I owe them only the duty of honesty, not the same fiduciary obligations I owe my actual clients. I can’t advise them on price, or disclose motivations or bottom lines. In those circumstances, the buyer is really flying blind.
Here, by sharing confidential information, the realtors breached the ethical rules — not only did they tell the buyers what to pay in order to be the successful bidder (and thereby receive a double commission), but had these been genuine transactions, they would have done a disservice to their colleagues who brought in offers. They created an unfair playing field, and while they might have achieved the best price for their clients, it was done by giving themselves an advantage.
Tim Hudak, the new head of the Ontario Real Estate Association, today announced that he wants to double the fines for that kind of behaviour. Personally, I don’t think that will stop it. It’s too hard to prove when it happens; after all, there are rarely hidden cameras in place when a realtor meets with their clients or with prospective buyers.
Years ago, when I was a lawyer, we were allowed to represent both sides in a transaction, so long as full disclosure was made to both sides. That practice was banned. I think double-ending should be banned for realtors too.
Hudak thinks that there are times when double-ending can be advantageous to the consumer. Presumably, he means on those occasions where because the realtor is acting for both sides, the realtor agrees to lower their commission.
In those circumstances, the realtor is still prohibited legislatively, and ethically, from disclosing either party’s motivations to the other, advising the buyer on price, discussing bottom lines etc. Frankly, the duty to the buyer is diluted so much that to all intents and purposes, they don’t have a realtor, they just think they do. The realtor’s primary duty is still to the seller. In those circumstances, honestly, I don’t see the advantage.