TRESA – The New Trust in Real Estate Services Act

So, we have new legislation in place in Ontario that governs realtors and how transactions can be handled. The biggest change is that in a multiple offer situation, the seller now has the right to decide (without the buyer’s consent) to disclose any or all parts of an offer or even something from one offer and something else from another offer, to other interested buyers at seller’s sole discretion. So they can release information, for example, about the highest price in an offer they’ve received, but not necessarily that it’s a conditional offer. Or they can release a closing date, or the amount of a deposit from one, and something entirely different about another. It’s entirely up to them and they can decide at any point in the process to either do this or to change their mind and not continue it, even if they’ve already started disclosing.

I suspect most sellers won’t use this new power, because it doesn’t really favour them — blind bidding has always favoured sellers because buyers are forced to bid without knowing what price they are competing against. If you’re the seller’s agent presenting offers to the seller, it’s not uncommon to see a cluster of offers at around what you think is fair market value and then an outlier– someone who really, really wants the property and pays a lot more than the other bidders. The seller won’t likely want to disclose the highest offer in that situation; it’s not going to help them. But they might want to in a situation where two offers are fairly close, and they want to see if one party is willing to pay more in order not to lose out.

We had some discussion at the office about whether a buyer who puts in a high offer might want to include a clause saying that if the seller discloses any information about their offer, their offer will be null and void. The problem is, of course, that the seller has not accepted the buyer’s offer, so there is no privity of contract binding the seller to that term. On the other hand, if the seller wants to disclose that information anyway, and are prepared to take the chance on losing that offer if it turns out that clause is considered valid, then they have to disclose to other buyers that they now have one fewer offer than they had to disclose. Do they have to disclose it’s the highest offer that dropped out? No one really knows.

My concern about this change is that it puts control in the hands of the seller, who will act in their own interest, and gives no control at all to the buyer. And yet in multiple offer situations, it’s the buyer who wants (and arguably needs) more information about what they’re competing against in order to feel treated fairly by the process.

A lot of agents think we should all include the “disclose it and lose it” clause in all our offers as a way of hampering the seller’s ability to disclose details of an offer to other buyers. Others think that it’s going to be quite a balancing act for the seller, particularly if there are two or more close offers and one offer has that clause and the other doesn’t–consensus seemed to be that you could release the price in the one that didn’t have the clause but the other buyer with the same price won’t know you didn’t disclose theirs after they had expressly said not to, so it could get messy.

I would say that all of this has to roll out on the ground before we will know how to advise our sellers and our buyers, and luckily the market is slow right now, so we’re not seeing a lot of multiple offers, but but I think it has the potential when the market picks up to create some real problems. Our general consensus was that while we want to have a full and frank discussion with our sellers if we think there may be multiple offers, we may want to hold off on getting instructions on this stuff until we know if we do, and have a bit more information about the content of those offers.

Also, the same duty of confidentiality about personal information remains — a seller can’t disclose to another buyer your name or any identifying details.

Other changes in the legislation will do away with the idea that if two agents in the same brokerage are acting on opposite sides of a transaction, that creates a multiple representation situation — it treats them now as if they come from different brokerages.

And there is a new 12 page Guide that realtors are required to send to clients or prospective clients before they offer services (we may need to get that signed and acknowledged as part of our paperwork). It really emphasizes the importance of a buyer or seller not acting on their own, as they are now considered completely unrepresented — in the past, they were called “Customers” instead of “Clients,” which was confusing, I think. This is a good change, although I think a shorter Guide would make it more likely that people will read it — 12 pages is a lot!

Other than that, we are still figuring out some new forms we’ll have to use. In a multiple representation situation in the future, we’ll have a new document that will have to be completed by the parties so that it’s clear who is acting for who and what their duties are. Many of the revised forms need further tweaks: one, for example, has the section that is to be completed to confirm there is NOT a multiple representation situation right under a Boldface heading for Multiple Representation, so it’s going to get missed for sure.

And there are new forms for Seller Directions on this question of what to disclose during multiple offers. Just remember that once signed, these are instructions that the agent has to follow, but that these can be replaced or revoked at any time by new instructions from the seller. So when you go into a multiple offer situation as a buyer, just be aware that the price you offer (and closing date and conditions) may or may not be disclosed by the seller to other buyers at any point in time and that other than including a clause in your offer that says your offer will be null and void if they disclose any part of it (which may or may not be valid), you can’t control that disclosure from happening.