Christopher Alexander is regional director at Re/Max Ontario-Atlantic Canada.
Much ink has been spilled on these pages and elsewhere since the April unveiling of the Ontario government's Fair Housing Plan, which was aimed at making housing more affordable for buyers and fixing what many perceive as an unstable and unfair marketplace. In addition to trying to curb rising prices in the Greater Golden Horseshoe (GGH), the government outlined its desire to explore ethical issues within the real estate industry to better protect consumers and make Ontario a leader in real estate standards.
With sales volumes and price increases in the GGH slowing since the introduction of the measures, the government has now turned its attention to perceived ethical issues. As part of the consultation period that closed last month, the government proposed changes to the Real Estate and Business Brokers Act (REBBA), the legislation governing realtors in the province, focusing in particular on the practice of double ending.
Double ending is a form of multiple representation in which a realtor represents both a buyer and the seller in the same trade. Many argue the arrangement is fraught with the potential for conflicts of interest. With the seller of a home looking to get the best price for their property while the buyer looks to negotiate the lowest price, it becomes difficult for a realtor to serve their fiduciary obligation and operate in the best interests of both parties.
However, the practice of double ending is not in fact inherently bad for the consumer. Importantly, the vast majority of real estate professionals already operate in line with the highest ethical standards and work with their clients' best interests in mind, even in multiple representation situations.
In some instances, particularly in rural communities where there simply are not enough realtors, double ending can be an important tool to facilitate marketplace activity.
That being said, no industry is immune to "bad apples." Current REBBA legislation has not been updated since 2002 and fails to reflect changes in the industry.
We at Re/Max support the government's efforts to update the legislation and raise the bar; however, we want to ensure the changes are relevant to the industry as a whole and not just a reaction to the current conditions of certain markets.
Under current rules, double ending is allowed as long as all parties involved in the trade are aware that a multiple representation situation may arise and have provided written consent.
The legislation currently falls short in protecting consumers in instances where there are multiple offers on a property, as has very often been the case in the GGH in recent years. In a double-ending scenario in which there are multiple offers, a real estate agent can too easily block out offers that compete with their buyer's bid, potentially resulting in a loss of profit for the seller.
We support the Government of Ontario in its efforts to implement what is known as a designated agency. Already in use in other Canadian jurisdictions, a designated agency model that does not allow a single realtor to represent both the buyer and the seller – except in cases where there are few realtors serving an area or in private family arrangements – is the best way forward to protect consumers.
As part of this legislation, brokerages would be allowed to represent both parties in a single trade, but they would be required to designate separate brokers/agents to represent the seller and the buyer while also implementing additional "firewalls" to protect client confidentiality.
This change would clearly demarcate how individual agents and brokerages alike can proceed in multiple representation scenarios and protect consumers from agents that have used the practice of double ending in an unethical manner. At Re/Max, many of our larger brokerages have already implemented similar policies. And we applaud the government's plan to increase fines for code-of-ethics violations from $25,000 to $50,000 for individual salespersons and brokers and $100,000 for brokerages.
Ensuring consumer protection is paramount to the well-being of the real estate industry as a whole. Without it, the trust that buyers and sellers have in the system would erode.
We therefore support the government's efforts to update legislation to ensure that all agents and brokers are held to the highest ethical standards. The future of our industry depends on it.