Ban “Double-Ending?” Or Introduce “Designated Representation?”

The choice is yours, folks!

Oh wait, nevermind, it’s actually up to a wing of government who is going to tell us what’s best for us…

Talk of banning multiple representation, or “double-ending,” has been going on for the better part of 2017, but the Ontario Real Estate Association has proposed the introduction of “designated representation” as a compromise.

Comments on online newspapers are inherently negative, but I’m curious to know what my readers think about this…

RealEstateTransaction

I double-ended a property last week.

Or I should say, I double-ended a sale.

That’s where the term “double-ending” comes from; it’s a sales term.

In real estate, brokerages track how many “ends” their agents produce.  Each transaction has two ends: a buy-end, and a sale-end.

And thus the term “double-ender” for management and brokers to fawn over when their agents strike gold.

That’s how the public wants to see it, right?

It’s all about the agents, their ends, and their money.

And this is why I’m somewhat frustrated, because the issue of “double-ending” isn’t about the ends, it’s about representation.

The mere fact that the media uses the term “double-ending” instead of “multiple representation” shows the angle they’re taking with their stories.

The sexy story is real estate agents, how much money they make, how many sales they do, and (fingers crossed!) them screwing over either their buyer, or seller, or both.

If newspaper headlines talked about “multiple representation,” it just wouldn’t have the same spin.

Last week, two of my clients found themselves in “multiple representation;” one on the buy-side, and one on the sell-side.

I had a listing coming to market, one that I knew about for a few weeks.

I also had clients that were looking for a property; something they could downsize to in a few years, but where their daughter could stay as she did her Masters degree at U of T, perhaps renting the other bedroom to a friend.

My buyers were looking for something with space: maybe 1,200 square feet or more, but space in terms of functionality – something you don’t find in today’s new micro-condos.  So after showing them units in King West that were the right square footage, and with the outdoor space they coveted (something 300 sqft+, where you could barbecue), they found that the style of newer-builds and the layouts they offered just weren’t going to work.

I told them about the listing I had coming up, and they sounded interested.

This happens a lot in my business; you always have somebody looking, and something coming up, but rarely do the two connect.

In this case, my buyers loved the description of the unit, and they much preferred the east side.

So a few days before the listing was scheduled to come to market, I showed it to my buyers.

They didn’t jump; they took their time.

But when I brought the unit to market, they said, “Okay, you know what?  We want it.  Let’s buy it.”

So how did I represent both sides?

It sounds cliché, folks, but it’s the truth: honesty.

I told my buyers that we had priced the unit slightly above fair market value, since we did.

And I told them that one of two scenarios could play out.

The unit could sit on the market for two weeks, and they might be able to get it for, say, $20-$30K under the list price.

But the unit might also garner significant attention, result in multiple offers, and sell $20-$30K over the list price.

In fact, the amount that properties sell for over list is usually substantially higher than the amount properties sell under list price, in this market.  I don’t think anybody would dispute that.

So I told my clients, “If you want to tie up this property today, you’d have to offer the full list price.  However, that doesn’t preclude you from instructing me to draw up an offer with ANY price of your choosing.  As your agent, I could offer $1 on your behalf; it’s up to you.”

In the end, they simply said, “We don’t want to mess around.”

This property was going to represent their retirement, and the bottom line was: they weren’t all that price-sensitive.  If they paid $950,000,  or $980,000, or $930,000, it wasn’t going to make or break this decision for them.

They wanted the property, they thought the list price was reasonable, and  they didn’t want to take the downside risk, that other offers materialized, in exchange for upside reward, that the property sits on the market, and they could get it for less.

The sellers were ecstatic with the sale price, and relieved that they didn’t have to stay out of the condo for two weeks.

The buyers were as happy as can be with their purchase, and can’t wait to take possession.

Tell me I’m wrong in my approach here, and tell me what I did was unfair.

Tell me that there was potential for a conflict of interest, and I won’t disagree.

But not every potential for a conflict of interest, results in a conflict of interest.  Let alone one party’s interest being put above and beyond the other.

I’ve heard a lot of metaphors and comparisons for multiple representation in real estate.

“A lawyer can’t represent both the defendant and the plaintiff.”

“A baseball player can’t call his own balls and strikes.”

I’m sure you could come up with a few beauties yourselves.

The comparison to a lawyer representing both plaintiff and defendant might seem to have some similarities, except in that case only one of them can win.  It’s a zero sum game, and one person’s loss equals the other person’s gain.  Representing both buyer and seller in real estate, as I’ve shown in the example above, does allow both parties to win.

As for calling your own balls and strikes, well, I don’t think this really applies.  That’s essentially saying you are your own moral authority, determining what is right and what is wrong.  But RECO is the moral authority, and ultimately so too will be your clients.

And that’s really what it all comes down to, in my opinion.

I really don’t want to sound like an anti-government nut, based on my blog from Monday and now following it up with this, but I really, truly don’t think it’s the government’s place to decide who can work with whom in the real estate market.

It should be entirely up to the consumer.

I’m not in favour of taking choice away from the consumer.

I understand why the government has made it illegal to not wear a seat-belt, but then again, the government has allowed consumer to decide if they want to smoke cigarettes, eat fatty meats, and come next year, smoke weed.

So why is it up to the government to decide on behalf of the consumer whether or not a real estate agent can work for both buyer and seller?

I have a very simple solution, and this is more simple than what OREA is proposing.

A buyer signs a “Buyer Representation Agreement.”

A seller signs a “Listing Agreement.”

Let’s create new forms that have a section pertaining to multiple representation, but at BOTH the brokerage level, and the agent level.  Because by definition, “Multiple Representation” refers to the same brokerage representing buyer and seller, not the same agent.

When it comes to the debate about “double-ending,” that’s directly referring to the same agent representing both buyer and seller, so let’s not confuse the two.

Now, as for the Buyer Representation Agreement and Listing Agreement, let’s have check-boxes, where the client must initial for the following:

1) I hereby give my consent for my agent to engage in multiple representation at the brokerage level.

YES  ________        NO  ________

2) I hereby give my consent for my agent to engage in multiple representation at the agent level.

YES  ________        NO  ________

Every buyer and seller, via the Buyer Representation Agreement and Listing Agreement, must specify whether or not they would allow their agent to either “double-end” their deal, or, have anybody from their brokerage work on the transaction.

Now here’s the kicker, folks, and agents will not like when I suggest this.

There should be a clause in the Buyer Representation Agreement that specifically states if the buyer agent happens to have a property listed for sale, as a listing agent, and the buyer under contract did NOT consent to multiple representation at the agent level, then that buyer is free to pursue that property, and only that property, with another agent.

Is that fair?

It allows a buyer to work under contract with an agent, but if that agent has a property listed that interests the buyer, and the buyer does not feel comfortable working with an agent “double-ending,” then the buyer has an out.

I welcome your thoughts on this, since again, to reiterate, I really, truly believe that the decision should be left to the consumer, and not forced upon the market by the government.

Also keep in mind that nine times out of ten, any issues arising from multiple representation, specifically “double-ending,” are on the buy-side.

Show me a seller who will toss away an offer from a buyer, who happens to be represented by the seller’s agent.

In competition, if there were ten offers, does the seller really care who “wins?”

Well, even though I’m seeking to make a point, let me combat the point with an example…

A few years ago, I brought an offer on behalf of my buyer clients on a property listed by Bosley Real Estate.

There were three offers, and I was told by the listing agent, “You’re the highest, but…”

Do you know what that “but” referred to?

You’ll never believe it.

The seller didn’t want to work with a Bosley-represented offer.

I couldn’t believe it!

The sellers told their listing agent, “We don’t like the optics of this.  We feel it might not be well-received, and if it’s up to us, we’d simply rather work with one of the other two offers.”

Of course, the other two offers were lower!  So now the sellers really had to put their money where their mouth was, literally, and decide if they wanted to accept a lower offer, that wasn’t from Bosley.

They gave both the other bidders a chance to improve, and not us, which you will argue is “unfair” or “against the rules,” but those so-called rules aren’t written anywhere, other than many generic sections in REBBA and the CREA Code of Ethics about “fairness in dealings.”

In the end, one buyer stuck, the other improved, but not enough, and we got the property.

But imagine my explanation to my buyers if we didn’t?

Earlier this week, an article appeared in the Globe & Mail entitled, “Realtors Realtors Lobby For Revised ‘Double-Ending’ Ban”

The article quotes Phil Soper, CEO of Royal LePage, who said the following:

“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.  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.”

Sooooo………pretty much what I’ve been saying?

On July 23rd, 2017, the Ontario Real Estate Association, who has effectively become a Realtor-lobbyist now that the education programs have been taken away from them, released a 44-page report, sent as a “letter” to Tracy MacCharles, the Minister of Government and Consumer Services.

The author(s) of the report waste no time, with the first page of the report showing “KEY OREA RECOMMENDATION” in big letters, and then the following:

Multiple representation under REBBA was established in 2002 and modernization is needed to ensure it is in line with best practices in other jurisdictions. The real estate market, consumers’ expectations and industry practices have change signifi cantly in the past 15 years. That is why OREA worked hard to convince the province to reform REBBA, including addressing practices like multiple representation. Specifically, OREA is calling for multiple representation to be reformed in favour of the highest national standard that maintains consumer choice in a real estate transaction.

To that end, OREA supports mandatory designated representation (MDR) and strongly recommends that MDR include the ability for consumers and registrants to enter into “transactional representation” with their REALTOR® in order to protect informed consumer choice.

OREA gives the following cheezy example of Mandatory Designated Representation:

John and Cynthia have been working with David, their REALTOR®, for 6 months as they search for their fi rst home. They signed a Buyer Representation Agreement (BRA) with David making them a client. John and Cynthia really like David. He provides great service and has showed them dozens of properties. They trust David and have built a good relationship with him. John and Cynthia have also shared with David the maximum price they qualified for through their bank and their income. David lists a property that fi ts the criteria that John and Cynthia were searching for.  John and Cynthia attend a showing and decide to put an off er on David’s listing. Under a mandatory designated representation model, David would have to choose between representing John and Cynthia or the seller since both parties are his clients. David decides to keep his seller clients and refers John and Cynthia to two registrants in his office. They are reluctant to work with a complete stranger who they have just met and are angry they can’t work with David. It’s his listing after all. Who knows more about the property than David? In this example, what is in John’s and Cynthia’s best interests as consumers?

Now I’m confused.

OREA supports Mandatory Designated Representation, but then gives us an example, and asks us, somewhat rhetorically, “What is in John and Cynthia’s best interests as consumers?”

Perhaps they haven’t worked it out either.

In any event, I could go on about “Transactional Representation,” but I feel as though you’re already skimming this, and scrolling to the comments section to provide your two cents.

So let’s do that then.

I won’t be offended if you say that all real estate agents are snake-oil salesmen, who should die in a fiery car-wreck, somewhat ironically caused by highly flammable snake-oil that was already pre-sold.

My only requests:

1) If you are against multiple representation, then distinguish between the brokerage level and the agent level, because REBBA currently does not, and I think that’s where this conversation starts.

2) If you’re against it, you have to provide an alternative.

I welcome your thoughts.

12 Comments

Post A Comment

Your email address will not be published. Required fields are marked *

  1. FAIR REALTOR says:

    So David i hope you gave a discount to your sellers for double ending that deal. Thats the problem these days to many realtors are greedy

  2. Negotiator says:

    David, in the example you gave you disclosed what should have been confidential information about the seller’s pricing strategy to the buyer. You basically told them what they would have to bid to win. Even though your sellers were happy with the price (which you knew they’d be) they might have left money on the table by not testing the market further.

    Also your point about actual vs. potential conflicts of interest is way off the mark. This is undoubtedly an actual conflict of interest because the buyer and seller’s interests are inherently adverse. Now the outcome of this conflict may not be bad for either party, but there’s no question that the conflict actually exists.

    In answer to your questions, I’m more concerned with multiple representation at the agent level, assuming that there can be an effective chinese wall at the brokerage level (and not being in the real estate industry I don’t know how realistic that is).

    The alternative – if you are representing a seller and one of your buyer clients wants to offer on it, you should refer them to another agent and should preserve the confidentiality of your sellers. Seems simple enough.

  3. DVS says:

    My concern is also unethical agents. I don’t
    Support multiple Representation at the Agent level.
    I’m ok with it at the Brokerage level.
    There’s a bond of confidence created when working with a client. Besides their finances, you also have the privilege of knowing a lot About their sensibilities.
    Your negotiating to get them the lowest price right??
    On the listing side , you have this same information and this same code of confidence. Your role is to get them the highest price right??
    You’ve priced the home based on your opinion and your
    insights. Now your advising both sides on a number
    that you picked. Lol
    Forget all the other complications of disclosures and
    if the deal dies after going firm.

    Another concern. 5 offers on offer night. Your the
    listing agent . Also One buyer offer is yours.
    Guess who’s The ONLY buyer agent that knows all the prices, conditions and relationships. Yup, you.
    You also have a personal mortgage, kids etc..and could make a sweet 2.5% buyers commission if the listing owner picks your buyers offer. Need i say more .
    It can be managed, if your an ethical professional . However if your one of the other 4 buyer agents …do you think those clients have a shot?

    Thank you for the opportunity to comment.
    Let’s make some changes to make the profession
    better. As an aside , Would love to see you have a discussion on Education, and the criteria needed
    to become an agent in Ontario.

    Full Disclosure. I’m a Realestate agent

  4. Not Harold says:

    The problem is unethical and incompetent agents.

    Challenges from an agent double ending can happen just as much in a firm (the pushback from agents who may get screwed depends on their experience, independence, etc.. much like basic honesty of an agent). Of course it gets absurd if you say no kalles or remax agent can rep a buyer of a kalles/remax property but on basic principles once you’re writing the law they look similar. This is the Liberal government that has deleted hard drives, sacrificed gas plants, and is trying to bribe the province with a “power price cut” that just borrows money at bad rates… They’re unethical idiots who can’t do basic math, why would they think different of anyone else.

    Personally I’ve had an agent fck me on a double ended deal.. telling the seller that since I’d already bought another property that they should go with another offer. I didn’t give this agent the full context (as I didn’t trust him) and he screwed me and his buyer by making assumptions about my ability and desire to execute deals.

    With current prices and the size of the market it is hard to discipline agents. They don’t expect to deal with people again and you can make good money doing a few transactions a year. Jimmy, Elise, Boris, Bob Greenberg, our host.. they have reputations, volume, and plans. Random 26 year old who may or may not speak English, bored Leaside/Leslieville housewife, etc who knows.

    Get a regulator that is hungry for heads – only pay investigators on conviction and give them 20% of fines. Make the fine 200% of the transaction value, payable by the agent, broker of record, and franchise under joint and several liability. Then you can weed out bad behaviour. Until you get AGGRESSIVE nothing will change.

  5. DJL says:

    Let me begin by stating my bias. A family member used to be a real estate agent. I’ve heard all sorts of stories about agents misbehaving. As far as I’m concerned far too many are likely to put their own interests ahead of their clients when they think they can get away with it.

    From my POV, the biggest problem is clearly outlined by the OREA cheezy example, “[the buyers] have also shared with [their agent] the maximum price they qualified for through their bank and their income.” In other words, before the potential conflict of interest has even arisen, the buyers unintentionally disclosed information to the listing agent that could hurt their bargaining position. This is exactly what Buyers Representation was supposed to prevent. The only solutions I can see are to advise clients not to disclose financial information to their own agents (which likely means that the agents can’t service their client to the best of their ability – so no a great option), or require that brokers and agents establish themselves as exclusively representing only sellers or buyers. That way it’s impossible for an agent, or a broker to represent both seller and buyer. Of course the chances of this happening are about the same as me being elected King of Canada.

    So that brings us back to giving buyers the opportunity to pursue a property listed by their agent or broker using a different agent from a different broker. I would insist that this be the default condition, and that buyers not have to decide about this option at the time they sign the BRA (since I don’t trust agents not to tell their clients ‘it’s standard, just initial it’). Instead, if a potential conflict arises the buyers should be notified, in writing, that they have the option and then they can waive their right, in writing, if they so choose. The whole process should be in writing, that way both sides (client and agent) have a record in case there ends up being some sort of legal disagreement down the road.

  6. Juan says:

    In this example the sellers expectations matched up almost perfectly with the buyers, so the “double ending” was not really a problem. Though I could argue that if your clients were eager to buy at list price there may have been someone else willing to go higher, so it’s possible your seller left money on the table.

    But the real issue comes when the buyer and seller’s expectations aren’t in alignment. Then the double ending realtor has to “choose” which party they need to help most (typically the seller). When this happens the buyer is going to end up paying more than they would if they had their own representation.

  7. Joel says:

    If you want take away the incentive for a realtor to push their clients ahead of others then only pay half commission on ‘multiple representation’. Without a financial incentive the realtor would have no reason to talk a client into paying too much. If they had the best interest of their clients at heart, and not their pay, then this would work.

    Personally I don’t have a problem with the current rules and think that as long as both sides are aware of the fact that the same brokerage or realtor are representing both sides then there is not a problem and potentially some benefit to both sides.

  8. Kyle says:

    I think the issue with double ending is the incentives are all misaligned. Most of the proposals only try to govern the transaction, but it does nothing to address the non-transactional poor behaviour, like listing Agents who prioritize showing their own listings to their buyer clients over any qualified listing, or listing Agents who uses open houses as a way to attract buyers they can represent rather than attract all qualified buyers, etc.

    As for an alternative, my crazy idea (and i know many will hate it) is why doesn’t real estate work on a rate card, where buyers pay for their own representation and sellers pay for their own representation. The current model where Agents make 0%, 2.5% or 5%, based less on the amount of work they do, but more on whom they happen to represent, makes little sense to me.

  9. Appraiser says:

    P.S. Lawyers ‘doublend’ real estate transactions quite legally on a regular basis.

    Is that because lawyers are inherently more honest than realtors?

    1. Daniel says:

      I think David was referring to civil litigation lawyers, but you’re right; real estate lawyers work for both buyer and seller all the time. Many refuse, but most will do it.

    2. Marko says:

      That’s not true. Lawyers are not allowed to double end in real estate, except for non-arms length transactions (i.e. transfers between immediate family members).

  10. Appraiser says:

    There’s absolutely nothing inherently wrong with ‘double-ending’. The current rules if followed, are sufficient.

    And try as we might with ever more rules and regulations, I fear that it is impossible to legislate honesty and fair dealing.

TWEETS