Realty Executives of Sudbury Ltd.
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It was announced this week that significant changes are coming to the Ontario Real Estate Industry from Queen’s Park. The consequences of the changes themselves are different from both the customer and the Realtor® perspectives, but they are substantial even though the majority may not be directly noticeable to the client. But one big one sure will.
The first of the changes, that is somewhat inconsequential to the general public, is our ability as Realtors® to incorporate. Forever, we’ve been handcuffed by having to remain self-employed entities. This change will now bring us in line with other professional designations like doctors, accountants, lawyers, etc. Not every Realtor® will deem this change as worthy to their particular circumstances, but finally giving us the option to explore what’s best for our business with our own accountants, instead of government determining what’s best for us, is a welcome change.
The second change is coming to enforcement through the Real Estate Council of Ontario (RECO). This is the professional standards body that is supposed to be in charge of protecting the consumer and taking errant behaving Realtors® to task for their poor or unethical performances. Until these changes, RECO really didn’t have any teeth. A lot of bark, but not much bite as they say. When we would see unethical behaviour, we were told we had to discuss it with the other Realtor® first, then their Broker of Record and then we could inform RECO of the issue that wasn’t being remedied. In all honesty, nothing ever happened unless it fit in the parameters of “extreme”.
Now, RECO will have the ability to smack down some severe penalties to both Realtors® and their brokerages, they will have broader investigative powers and will also have the ability to hit Realtors® with more administrative type penalties. These penalties will be similar to non-criminal type driving infractions – improper record keeping, failing to fulfill timelines, etc. – but they will hit us in the pocketbooks as a reminder to make sure we’re colouring within the lines. Personally, as I know our team operates with the utmost professionalism and maintains the highest ethical standards, I look forward to the implementation of RECO’s new powers to make sure the entire profession is playing along in the sandbox and following the rules.
The third change will have an enormous impact on both the clients and Realtors® themselves in the case of Multiple Offers – aka. Bidding Wars. This change allows the seller to authorize their Realtor® to release the details of all other offers to all the parties in an ongoing basis.
This is a HUGE change as, currently, we’re legally bound to not provide details of any other offer to any other party. This is why Escalation Clauses were deemed illegal as, once enacted, provided the important detail of what price the next highest offer was.
For those who don’t know, Escalation Clauses came in for a brief period of time. This clause would state something along these lines - “notwithstanding the buyer’s offer price of $425,000 herein, the buyer is willing to pay $1000 more than the highest offer up to a maximum of $500,000”. So, if this buyer won the bidding war and the final purchase price was $478,000, they knew the next highest offer was $477,000, therefore illegally releasing the details of another offer to another party.
So, after retracting the Escalation Clause because it released pertinent details illegally, they’re now suggesting we blow the doors wide open and let everyone know what everyone else is up to.
My personal opinion, I’m torn. As the listing agent, this is highly beneficial for my seller as it will, more than likely, drive the price up higher for them as it basically becomes a live auction. But, on the flip side, only the seller has the right to instigate the release of the information contained in the offers and I think this infringes on the rights of the buyers. They don’t have an option anymore to submit an offer and ensure their privacy is retained. I have to question the legality of this on it’s face as it places the rights of one party above the other parties in the transaction.
On another side of it, I do look forward to the transparency of this change as, lately, I’ve recognized a disturbing trend with the infamous “double-ender”. When a listing agent sells their own property, it’s called a “double-ender” as the agent gets both “ends” of the transaction.
But what we’re seeing lately is the amazingly high percentages of just how often the listing agent is winning bidding wars on their own listing. Why would this percentage be so high for this? My guess - because they have all the offers in their hands before they present them to the seller, but we have no way of knowing when their own offer was submitted.
I’ll be blunt – there is no way the listing agent’s buyers are coming up with these "miraculously, a hair higher than the second highest" numbers on their own. Yet, according to Multiple Representation rules (when a Realtor® works for both parties), the agent is not allowed to discuss price with either party and must supply comparable sales data for them to make informed decisions on their own.
Now, I’ve never felt that the Multiple Representation rules were fair to the listing agent and their buyer in a Multiple Offer scenario. The other agents get to discuss strategy and price on what to offer and the listing agent is supposed to say to their buyer, “I can’t provide you with advice. Here’s some past sales, now tell me your number”.
But, when it comes to transparency, I always play on the overly transparent side of the fence. When I have an offer on my own listing in a bidding war, I bring in one of the other agents in the bidding war to witness my presentation to my sellers so I’m not pulling any “tricks” behind closed doors. No other agent has been this transparent in my experience – not saying they aren’t, just personally haven’t seen it.
But, circling back, I was also being illegal as much as I was being transparent as I was divulging details of an offer to another party. How can you be transparent without breaking the rules the way they’re currently written? Such a gnarly web these bidding wars weave…..
Gary wrote about bidding wars in a past blog about “just jumping in” and I agree with this sentiment. You can’t win if you don’t play, so buy a ticket and get in the game. But this tricky game of multiple offers is changing, once again, and navigating through the changes will be interesting to say the least.
Will they finally get it right or will this be another change full of legal challenges? Will all parties feel they had a fair shake, or will some feel their rights were infringed upon? Will the high percentage of listing agents winning their own bidding wars drop now that their offers have to be revealed for all to see or will it make it less likely that any other buyer has a chance when the listing agent is the only one behind the closed door with the seller who holds all the power? As a very technical and self-proclaimed “legal mind”, I’m anxious to see the language surrounding these new rules.
Change is good. Evolution has to happen to create the ideal conditions. Will this be another meteorite, like the one that hit the Sudbury basin almost two billion years ago, that completely wiped things out and made us restart? Or will this be a big step in the evolution of bidding wars in creating a level playing field? Only time will tell.
No matter what, it will be entertaining.
As always, real estate is an everchanging process and it's imperative that you have professionals on your team that are up-to-speed on the current landscape. We are those professionals. Never hesitate to contact us at firstname.lastname@example.org to discuss your real estate needs. If you're looking for listings, you can search all MLS™listings here. Don't forget to check out all our other great blog topics and browse our website for great info on buying and selling in Greater Sudbury and surrounding areas.
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Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact us immediately at email@example.com.