A Question Of Ethics

A friend of mine, who is just about to get into the real estate business, has been asking me about a dozen questions per week for the last……oh, maybe two months.

Most of his questions result in blunt, quick, obvious answers.  It’s truly the only way I know.

But a question earlier this week stumped me: “Have you ever, in your real estate career, been greased?”

He was asking if I’d ever taken money, for something I shouldn’t have, and the answer wasn’t that simple.

Bear with me here, and give me some leeway, as I detail a story that no other Realtor would dare…

Bribery

I’m in a people business.  Surely there is no doubt about that.

In the average week, I probably interact with two hundred people or more, and if you’ll excuse my bravado, I’d say that I know a thing or two about people.

I know, more often than not, about thirty seconds into a conversation with a person on the phone whether I want to business with this person or not.  And again, if you’ll excuse my bravado, I’m in a position where I can choose who I want to work with, and sometimes, the voice on the other end of the line does not make me feel warm and fuzzy.

I had a guy call me last week who said something to the effect of, “I know so many people who are going to buy real estate in the next two years, and if you sell my condo for free, I’ll introduce them to you.”

It was a longer conversation than that, but I’m paraphrasing.  And the bottom line is, the reason I’m able to work seven days per week, every week, and absolutely love what I do for a living, is because I love the people I work with.

Mr. Run’n’Gun; Mr. Big Deal; Mr. Talk-The Talk – I’m not looking to do business with him.  Whether or not he’s legit, and could “introduce me to people who want to buy real estate,” i just didn’t like the vibe I was getting on the phone, through a six-minute conversation, and I didn’t see myself sitting in the car with him for hours on end, calling him at 12:30am, and genuinely enjoying a working relationship with him.

I run into all kinds of different people, from all walks of life.  It’s what makes this job unique.

But when there are big dollar values, and massive life decisions hanging in the balance, you’re going to see the best, and worst, of what the industry has to offer.

Several months ago, I had a listing that garnered just shy of ten offers.

On “offer day,” I basically sat in my office for eight hours, fielding calls.  From 9am, right up until 7pm, I was on the phone, fielding a vast array of questions about the property, and the offer process.

Just before 6:00pm, I got a call from somebody who I had yet to speak with, which is odd on an offer night, when you’ve usually talked to every interested party well in advance.

The person on the other end of the phone didn’t sound “all there,” and there was just something off about him.  Honestly, I thought it was a prank, for the first twenty seconds of the call.  But it turned out to be legit, and I had no idea what was ahead of me that night.

The person, who I’ll call……..hmmmm……”Frank,” was a registered real estate salesperson, who was not a practicing agent.

He was basically a person who had a real estate license, just to do deals for himself.

He was a self-described “whale” who “bought and sold properties for breakfast,” but he wasn’t the type of person that I wanted to break bread with.

There was something aloof about him, and his questions and statements during our brief phone conversation were all treading on unethical, and always straddling “the line.”

He basically said to me, “I want to pay $10,000 more for the property than the highest offer you receive,” which is something people have said before, without thinking.

So I told him what any self-respecting listing agent would tell him: “The highest offer is one-billion-dollars, so would you like to offer one-billion-plus-ten-thousand?”

He didn’t blink.  He acted like it never happened.

“David, I would be willing to go $15,000 higher than the next highest offer, if that’s what is required,” he said.

But then he hit me with something I’ve never seen before: “And I would be more than pleased to pay you the entire commission I would earn from this sale.”

Wow.

The property was in the $600,000 neighbourhood, so he was basically offering me a $15,000 bribe, tax-free, to help get my seller-client more money for his property.

Sounds like everybody wins, does it not?

Unfortunately, that’s not my style.

I told him quite frankly, and pardon the unintended pun, “Frank, I don’t run that kind of operation.  Offers are at 7:00pm at 290 Merton Street, and we have eight offers registered.  We’re looking for a very quick closing, given the property is vacant, and I would expect your offer to be unconditional.  Please register your offer with my front desk at 416-322-8000.”

And that was that.

I really don’t feel the need to expand on what I just said.  I don’t run that kind of operation, and it’s not who I am.  Debating the merits of a bribe, or the ethics, or the frequency with which it may or may not happen in our business, is not the point of this blog post.

At 7:00pm, we had nine offers on the property, and Frank was one of them.

We reviewed all the offers, and believe it or not, Frank blew everybody out of the water with his offer.

He was one of the sketchiest people I’ve ever met in this business, and I honestly think he was high that night.

He didn’t have a certified deposit cheque with him, but he did offer me $20,000 in cash (which for some reason he had in a bag in his car…) as collateral, but I told him I would take his personal cheque.  Trust me – I discussed this with my sellers, but his offer was so much higher than the next offer, that we were willing to take the personal cheque, in exchange for a bank draft the next morning.

After we signed the deal, we all shook hands – the sellers, Frank, and myself, and I began to walk Frank out.

Frank told me that he had “something special for me,” and I told him that I didn’t want it, whatever it was.

Apparently, I wasn’t clear enough.

An hour later, after my clients had left, and I was the only person left in the building, Frank sent me a text message: “David, I slipped a little something through the drop-slot in your building.  Thanks again for tonight.”

My heart started to race, and not in a good way.

I remember when I was 12-years-old, and I went to the old “National Trust” on Bayview Avenue (remember before the “Big Five” banks??), to deposit $30 in cash.

I updated my bank book (remember those), and to my surprise, there was a deposit for $1,330.30.

I don’t think I ever rode my bike as fast as I did that day!

I flew down Millwood Road, and across Bessborough Drive, and I went home and told my Dad what just happened.

My Dad, the criminal lawyer, explained that to withdraw those funds would be a criminal offence, and that the mistake would eventually be corrected.

When Frank slipped “a little something” through the after-hours drop-slot at Bosley Real Estate, I did not feel the same way as I did back in 1992.

I remember standing on the landing at the top of the stairs, and looking down to see this tiny red envelope on our blue carpet, shining at me in the moonlight that came through the window.

I went down, picked it up, and found $1,000 in one-hundred dollar bills.

I felt disgusting.

Honestly, it wasn’t just the dirty red envelope that felt gross.

I thoroughly rinsed with Purell, and then washed my hands, but I couldn’t get the stink off.  My hands felt greasy, and my fingertips felt grimy.  But it wasn’t really the physical dirt that was bothering me.

I left that red envelope on the ledge at the front of our building overnight, partially hoping it would be gone the next day.  Maybe the cleaners would take it, and one of them could put that money to good use.

The next morning, I found the envelope where I had left it, and I picked it up, and decided what I was going to do with it.

I told somebody in my office (who shall remain nameless), that I wanted to donate $1,000 to the Bosley Breakfast Program, which is a program we run at Thorncliffe Park Public School to provide meals every morning for the kids who go to school hungry.

“The person” looked at me, and the red envelope, and said, “Where did this money come from?”

He/She knew, and didn’t really even have to ask.

I told him/her the entire story, and I was told in return, “Get the f*** out of my office with that, and don’t talk to me about it again.”

I know what you’re thinking – the money was going to a good cause, so what’s the harm?

But once I reasoned a bit further, I realized that just because I give this money to a good cause, doesn’t change where it came from.  It’s still me that’s accepting the money to begin with, no matter what I turn around and do with it.

It was a bribe, albeit after the fact, and something I never agreed to, from somebody who was dirty, sleazy, and goes through this industry leaving a trail of unethical behaviour.

If I gave this money to the Breakfast Program, it wouldn’t change where it came from.  I’d still be accepting it, when I shouldn’t be.

So I did the only logical thing, in my mind: I put it in an envelope, and couriered it to the agent directly at his brokerage, such that only he could sign for it, and accept it.

The envelope was in limbo for two days, but eventually, the agent signed for it, and the mysterious red envelope was returned.

So call me a fool.

Call me naive.

Call me a do-gooder.

Or tell me that underprivileged children went hungry because I had a conscience, because that’s what I struggled with.

But no matter what you tell me, there is a counter-argument, and I don’t know if we could reach a consensus on what the “right” course of action was.

I run my business a certain way, and I never waver from that, no matter what.

I’m one-hundred percent certain that I made the right decision, at least, based on my values.

And that’s what matters most.

Does it not?

28 Comments

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  1. Rickdeckard says:

    Wow you deserve a cookie.

  2. Joel says:

    Could you not have just given the 15K and 1K to the sellers?
    He put in the highest bid and wasn’t the winner because of it. If he gave you the money after the fact it has nothing to do with the previous transaction. You don’t keep the money and the seller gets the money. You have done nothing wrong and the seller has an extra 16K in their new home search.

  3. Lots to discuss here…

    @ Noel – I appreciate your comments on all my blog posts. I don’t expect, or want, 100% positive comments all the time, otherwise this would be a very boring website. I know you’ve asked questions of me in a few previous posts that I never got to, and I apologize for that. The market is crazy and I just haven’t had time to get to them. But your contributions are appreciated.

    @ Glenn – He didn’t really have and end game. He thought he was doing me a favour. He told me, “It’s Chinese tradition, please accept this.” Perhaps it’s a cultural thing, and he told me that he does this on every deal he completes, and that I’m the first person that’s ever given the money back.

    @ Kyle – He wasn’t saying he would keep the $15K commission, or reduce his commission by that amount. He actually offered me $15,000, in cash, to ensure that he got the property. It was wild!

    @ Tina – I did ask him to make a donation to the breakfast program.

    @ Mike – My blog traces IP addresses and user ID’s, so I’ve gone back and read your last 20 comments. They are all negative, spiteful, and very personal. Thank you for your lecture on ethics.

    @ McBloggert – Vacuum, indeed. I don’t want to get into the “what would other people have done” conversation, but unfortunately, I think most agents would have kept it. In fact, I know they would have.

    Good stuff overall, thanks for all the comments guys!

    1. RPG says:

      I can’t believe David had the balls to post this story, which nobody else would ever do in a million years, and he’s catching hell from people.

      “You didn’t give the money back RIGHT AWAY! You’re unethical!”

      Mike, you’re a bigger troll than Noel. You make Noel look like a fanboy. Mike, I’d love to see you get an envelope full of cash in whatever sh!t job you work and see if you quickly read a Bible quote and then give the envelope back. You know, before you stop by the soup kitchen to help out, send some money to your sponsor child in Africa, and pick up your Little Brother to go to a Blue Jays game.

      David, I don’t know how you do this. I would go mental if I had to read this nonsensical bullsh!t from these guys every day.

      Excuse my language. But they got to me. They don’t seem to get to you, but they just represent all that is wrong with our anonymous, judgmental, holier-than-thou society.

      1. Noel says:

        David notes above he appreciates my contributions. That is all I need to hear.

        1. Mike says:

          Obviously a flagrant attempt by RBG to get mentioned in David’s thank you notes.

          As for what David said about Mike, fine, you know who I am. That was obvious, you leave yourself open to criticism, don’t complain when it finds you.

          I know your broker and most of the people you work with (though I don’t work in real estate so there is no conflict there (or any conflict between you and I)) just a guy who is interested in real estate and reads whatever he can.

    2. Mike says:

      David,

      Not sure it’s the last 20 but yes, I guess a trend has developed. I use to enjoy your blog, it’s entertaining and sometimes informative. I also admire that you’re willing to discuss your observations and experiences from your point of view.

      Yes, it’s easy to sit and criticize you from the other end of an anonymous (to all but you) keyboard but that’s what happens when you post stuff on the internet. I think my tone changed when I read all your posts about how you were against holding back offers and then talked about how you hold back offers on your listing (or something along this line).

      As for this one, you come out and say “I did the right thing” when you didn’t. Granted, you could have been a lot less ethical but at the end of the day you made an ethical violation. There is a reason your colleague reacted the way that they did you had money that was paid to you in a way that broke the rules that you agreed to work under.

      You talk about being an advocate for change in your industry and just being one man, but have you reported this guy?

    3. Noel says:

      Thanks. I really appreciate your comment. It seems you let us a bit more into your minute-by-minute thought process on this issue than most people would have. I have to respect you for that.

  4. Mike says:

    I don’t know if you want to be bragging about ethics on this one.

    Your first inclination was to accept the illicit payment and donate it to the Bosley Breakfast Program. Accepting the illicit payment is the unethical part, not what you ended up doing with it.

    To use your example of when you were 12. You noticed the extra funds in your bank account and decided to withdraw the funds to give to your schools United Way campaign. Would your dad say, “yes son, stealing is wrong in most cases except when you steal for good causes”? I highly doubt it. So why would ‘today you’ think it was okay to keep the funds and donate them to charity? Let’s ignore the fact that you’d get recognition and most likely a tax receipt for the donation which in itself is reward gotten from the illicit payment.

    The ethical thing to do would have been to call the agent and tell him that he needed to pick up the payment first thing in the morning (an email would be better but you’ve never mentioned having an email address) and then send an email informing your Manager of exactly what happened. If the agent didn’t pick up the funds that morning, you and your manager contact the agent’s manager at twelve noon informing them of what has happened and making arrangement to return the funds to their office. Then follow up with formal complaint to the regulators about the other agents actions.

    Alternatively you just leave the envelope at the front door where the agent dropped it off, never accepting the “gift”. Hopefully someone with actual ethics would find it, turn it over to your manger who would send an email asking if anyone knew how the red envelope came to be and you could come forward and tell your story.

    Ethics are what happens when no one is watching. Your first reaction was to keep the money (though you say you wanted to donate it) which is a clear cut violation of the rules that you agreed to uphold. In other words a violation of ethics.

    1. Kyle says:

      Can you explain how the $1000 is illicit? Because i don’t see any law or rule that was actually violated.

      1. Mike says:

        Kyle,

        Other than the fact that it was cash in an envelope dropped in a mail slot in the middle of the night?

        I Googled it and came up with:

        Real Estate and Business Broker Act, 2002

        Commissions
        23. (1) Subject to subsection 33 (3) of the Act and subsection (2), a registrant shall not charge or collect a commission or other remuneration in respect of a trade in real estate unless,

        (a) the entitlement to the commission or other remuneration arises under a written agreement that is signed by or on behalf of the person who is required to pay the commission or other remuneration;

        1. Kyle says:

          The deal was done and dusted (above board) by the time the envelope entered the picture, so it wouldn’t be considered remuneration or any form of payment associated with that deal. Like i said, no rules were broken.

          1. Mike says:

            If that was the case then why are we having the conversation?

            A bribe was offered prior to the contract being signed, a payment was made immediately after agreement was signed, the payee considered keeping the payment. Three facts, all violate the law as written.

          2. Kyle says:

            We are having this conversation because you clearly have an axe to grind and despite all your sanctimony, you clearly are not above bastardizing the English language and twisting facts in your campaign against him. A bribe was offered…AND DECLINED, a payment that was never part of the deal was offered up after the fact, which again IS NOT illegal, but made David feel sketchy, so he subsequently returned it. Those are the facts and none of them violate the law as written.

          3. Mike says:

            Kyle,

            SNC Lavalin needs you to write their defence.

            Until now, no one really understood how things worked. You figured it out.

            Congrats.

  5. Tina says:

    You could’ve asked him to donate it to the breakfast club.

  6. Glenn says:

    David, what do you think this guy’s end game was? Was he trying to corrupt you so he could blackmail you into getting better deals for himself in the future? I don’t understand what his motivation would be.

    1. Kyle says:

      Could also be money laundering

    2. Kyle says:

      Be aware that whenever someone tries to pay for a large item using a bag of cash. you are obligated to report them to FINTRAC:

      http://www.fintrac.gc.ca/reporting-declaration/Info/rptstr-eng.asp

    3. Noel says:

      Yes it makes no sense when you have already won the game that you then provide a gift. You don’t need to provide any incentive at that point! That would only make sense if there was something David did beforehand that would have warranted a gift but David did the complete opposite which was acted the way he was supposed to with respect to the offers.

      The only reason is the one you mentioned, ie that he was trying to get on David’s good side to attempt to draw David into his lair on later deals. There can really be no other explanation other than he somehow thinks mistakenly that David did actually help him which does not appear the case from the facts David presented.

      1. daniel says:

        The deal hadn’t closed at that point. Having a conditional (I’m presuming it was conditional) offer accepted with a deposit is a long way from having the transaction completed.

  7. Kyle says:

    I don’t work in RE, so this could be totally wrong, but I thought a licensed Agent representing himself as a buyer, would be entitled to the 2.5% commission split (approximately $15K on this $600K house). In which case, Frank obviously has an advantage and can make an offer 15K higher than the other buyers, because he’ll be getting that back in commission. I also thought that Buyer Agents were able to elect to reduce their commission in order to make the economics work. My understanding is that all of these actions are above board and perhaps that was what Frank was trying to negotiate, albeit in a sleazy manner.

    Lots of unknowns in the story, but it does not appear to me that any rules were actually broken. It would be very different if Frank’s offer wasn’t the highest, or if he was tipped off by David what amount he had to offer in order to be the highest in exchange for $$ or some sort of different commission split, but that wasn’t the case. The fact that he put extra money in an envelope after winning fair and square doesn’t make him sleazy, it makes him an idiot. But yeah, if i were in David’s shoes i probably would have texted back same night and asked him where i could return his envelope.

  8. Noel says:

    A couple things stick out in your article:

    You wrote “Unfortunately, that’s not my style.” It doesn’t seem to me to be an issue of style but rather that it is against RECO rules, no?

    Then, even though you say emphatically that is not your style your first reaction is to accept it and donate it to charity. WTF? Just because you were intending to donate it to charity does not erase the fact you were going to accept it. It should not have taken the reaction of a co-worker to make you realize that was improper. I would have thought that given it was not your style your initial knee jerk reaction upon seeing tha tmoney would have been to immediately send it back to Frank in the manner you eventually did.

    Yes, I know we all make mistakes but you claim one style before you received the money and then react in the opposite manner once the goods arrived.

    1. Steph says:

      Noel, do you realize that you are the very definition of a “troll?”

      You have never posted anything positive on here.

      This is my first comment, ever. So maybe that’s what you add to this blog. You’re so obnoxious, that you encourage people to get involved.

      1. E says:

        Yea I didn’t think it needed pointing out but I agree. What’s that saying about stones and glass houses? Noel, until you give us your name, age, occupation, and maybe throw a T1 in there, you’re just another random internet user that could be living in his mother’s basement.

        1. Noel says:

          That was a troll comment if I ever read one! WOW.

      2. Noel says:

        Hardly. I call it like it is. I provide useful criticism and ask tough questions and a very good balance with my positive comments. Also, in case you haven’t noticed this is not the mutual admiration society website. No website is.

        No one is forcing you to read my comments so please don’t and post something constructive instead of lashing out at other people because you can’t process what they write.

    2. McBloggert says:

      @Noel

      I think you are really reading this post in a perfect human condition vacuum; and failing to see the real message, which is a sliver of insight into what might occur in the day to day life of an agent transacting in Toronto RE market. I don’t have the confidence that of the 50,000+ agents in the city – that they would be a) making the choices David did in his post; and b) posting about it in a public forum!

      Let’s look at Frank’s initial offer: David gets a full 5% commission on sale vs. 2.5%. Plus his client will get the top dollar for the property. No one gets hurt and everyone wins; however, the rules are broken and ones ethics are compromised. I am not sure how many other agents would do this. And don’t give me the RECO argument – because those rules gets tossed out the door on a daily basis – just have a look at how some bully offers get treated and double ended deals without any real enforcement. Like golf, I get the impression that RE is a game of self report; some are honest, others turn that double bogey into a bogey…

      Re: The “gift” – well yeah, I guess I would have been inclined to just pop it in a courier bag and send it back (or would I?). But there is no breach of duty, rather a determination of what makes you feel OK with yourself at the end of the day. I think making sure this guy didn’t feel like he did you any favours is key!

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