A for sale real estate sign is seen in the front of a house in Markham in this file photo.Mark Blinch/The Globe and Mail
The association representing Ontario's real estate agents is calling on the province to modify its plans to ban agents from representing both buyers and sellers in property transactions, instead recommending a new model that would allow realtors to work for both sides in a neutral role.
The Ontario Real Estate Association (OREA), which represents roughly 70,000 realtors in the province, said an Ontario government proposal to prohibit agents from acting for both sides in a deal is too severe and would be unfair to consumers who should be able to choose whom to hire as a real estate agent.
Phil Soper, chief executive of Royal LePage and a member of the OREA task force that reviewed the province's rule changes, said the proposal to divide the roles is appropriate in most cases and should become the base standard, but said there should also be a way for clients to use the same realtor to buy and sell a property if they are fully informed about the conflicts.
"It is better to make it the law to need independent representation, but allow the consumer the ability to contract out of that with clear disclosure and high penalties for those who don't follow the rules," Mr. Soper said. "You put it in the hands of people who are actually paying the fees, rather than making it very difficult for them in the rare circumstances where it makes sense for them."
The province is reviewing the Real Estate and Business Brokers Act and unveiled a proposal in June to prohibit the practice known as "double-ending" where agents represent both parties in deals, saying there is an inherent conflict of interest when trying to represent both sides of a transaction.
The province said it would allow some limited exceptions to the ban, such as allowing double-ending in remote areas where there are few realtors, but otherwise realtors would have to refer one of their clients to another agent for representation, including a colleague within the same realty firm.
But OREA said the approach is too limiting, and could require both sides to use different realtors in cases involving sophisticated corporate buyers who do not need independent advice, or situations where people are selling property within a family or transferring a title among related company entities.
Instead, the association said the province should adopt a model it calls "transactional representation," which would allow agents to work with both sides of a deal if both clients elect the option, but would require the agents to remain neutral while acting as an "impartial facilitator" for a transaction.
That means agents could not recommend what price the buyer should offer, which conditions to attach to a deal or what strategy the seller should use in responding to offers.
However, agents could provide statistics and information to both sides on comparable recent deals, offer both sides standardized documents and convey information back and forth that either party wants to reveal.
The model is similar to a system already in place in Alberta and Nova Scotia, where realtors can act for both parties while remaining neutral in the transaction.
"It gives consumers choice and it doesn't impose a one-size-fits-all solution," said Brad Henderson, CEO of Sotheby's International Realty Canada, who was a member of the OREA task force.
Mr. Henderson said he anticipates most deals would still be done under the province's proposed system, but there should be room for exceptions.
"I think you will find that transactional representation is much more the exception in Toronto, and will be a little bit more prevalent in rural areas," he said.
Current rules allow agents to act for both buyers and sellers, but prohibit them from revealing confidential information to either party, including details about other bids.
A CBC Marketplace report last year used hidden cameras at open houses to show six agents not only offering to represent both buyers and sellers in deals, but also appearing to breach industry rules by promising to reveal confidential information about other offers to give buyers an advantage in a bidding war.
Ontario's real estate industry regulator, the Real Estate Council of Ontario (RECO), supports a ban on double-ending with limited exceptions, saying there is too much potential for conflicts of interest and improper behaviour.
"Regardless of the personal integrity of the registrant, an inherent conflict of interest arises when an individual registrant represents more than one party to a transaction," RECO said in a submission on the proposed rule changes.
The regulator said the new rules should also lay out the requirements for internal firewalls within realty firms to ensure agents working on both sides of a deal within the same office don't share confidential information, including personal or financial information about buyers or sellers.