I’ve been reading all the stories about Trump Towers over the past ten days, and I don’t disagree with what’s been written.
However I have to make ONE major clarification, and point out something that nobody has talked about…
Do you know what it means to “register” for a new condo development?
Think of the advertisements, be it on the radio, in print, or online; they all say, “Register Now,” and encourage interested parties to go to the developer’s website and fill out a form with their personal information.
Well in case you weren’t aware, there are two reasons for that:
1) It helps the developer to provide timely information about pricing, availability, etc.
2) It makes you the developer’s client, and cuts out any Realtor who wants to work on your behalf.
As you might assume, #2 is the point I want to talk about today.
You all know how I feel about pre-construction condos, but most of the time, my issue has to do with the insane pricing structure, the shoddy workmanship, and the delays. But there’s something that could be more important than all of these items together: representation.
When you walk into the sales centre for a new condominium development, as soon as you sign the “Registration,” you effectively become their client.
If you want somebody to represent you, ie. an experienced, professional Realtor, that’s just too damn bad because you belong to the developer.
That’s why developers offer all this “Register Now” garbage; it’s not necessarily to give you information about upcoming projects, but rather to make you their client, and ensure they don’t have to pay a cooperating Realtor.
Then there are the developers who simply say, “We don’t cooperate with outside brokerages.” You could physically walk through the front door handcuffed to your client, and the developer still won’t work with you.
So how does that make you feel?
As a consumer, would you be comfortable knowing that you’re not allowed to be represented by a Realtor once you’ve walked into the sales centre and “registered” with the developer?
I don’t blame the developer for not wanting to pay a cooperating agent, but I do blame the system itself, because it means that most buyers are not being represented.
You can’t possibly argue that the 23-year-old girl, six months out of university, standing in the model suite who is paid by the developer is going to accurately represent you, with your best interests at heart. They work for the developer, and it could be considered a severe conflict of interest for them to also work on your behalf.
But the way the system is set up, sometimes you have no choice. Unless you “cross the threshold” with your Realtor in tow, the developer cuts the Realtor out of the process.
In the case of Trump Towers, they took things to a whole new level.
Majority of the time, those people in the condo sales centres are registered real estate salespeople, with a real estate licence from the Ontario Real Estate Association. At the very least, they are Realtors, even if they work for the developer. The same cannot be said for the people who worked at Trump Towers in pre-sales.
I can’t divulge the name of the individual I spoke to last year, but he/she was the director of real estate sales for Trump International Hotel & Tower.
Would you believe that he/she was NOT a Registrant under the Real Estate Council of Ontario? This means that he/she isn’t a Realtor, and isn’t governed by the Real Estate & Business Brokers Act.
If you want to look up any Realtor in Ontario, go to this link:
There’s a giant link at the top that says “REGISTRANT SEARCH” where you can look up anybody who is (or isn’t…) registered under RECO.
So I typed in the name of the person who handled the sales at Trump Tower, and this person is not registered.
How does that make you feel?
Do you care? Do you think “they’re all the same” when you’re asked to decipher between a Realtor, a salesperson, or anybody handling real estate sales?
Because I can tell you that they’re not all the same, and yes – you should care.
These people are under no obligation to disclose that they work for the developer, or explain the relationship.
But we Realtors are under obligation to do so.
We have agency forms, disclosure statements, and there are rules that govern how we operate with respect to representation.
When it comes to Trump Towers, not only were they under no obligation to disclose any relationships, they also weren’t actually representing the buyers!
Anybody who walked through the front doors of the sales centre, all wide-eyed, with cash-in-hand, was scooped up by the developer’s salespeople, and never represented by a licensed Realtor.
The current issues at Trump Tower are numerous, but it seems that many buyers feel misled by lack of explanation on the “Hotel/Condo” relationship.
A cynic would say, “It’s pretty simple: they bleed the condo owners to pay for the hotel,” and that person might not be wrong. There’s more to it than that, but I’m willing to bet that not a single buyer was accurately informed on exactly how the hotel/condominium would operate, what expenses they would share, who would pay for what, how the rental pool would work, etc.
I’ll be quite honest: I think the Trump Tower is a money pit, and I think the condo owners are going to be bled dry.
Many of these owners are at fault simply for biting off more than they could chew. I don’t feel bad for somebody who thought of this as an “investment,” since I’ve been openly, freely lecturing about the perils of pre-construction for the past three years. Every day in this city, buyers ignore my advice, and dive head-first into a $700/sqft condo development, with illusions of grandeur about making boatloads of cash.
So while I sympathize with these buyers/owners, I don’t feel bad for them. Even the one “blue collar immigrant” who borrowed $175K from his relatives to finance his downpayment. He should have known better.
Or, he should have hired a Realtor.
I’m not going to make this into a public service announcement for CREA, but I do think that anybody who purchases a condo through the developer without representation is an absolute fool, and if they are misled, or in any way disappointed, then they have nobody to blame but themselves.
You probably wouldn’t defend yourself in a court of law, would you? No, you’d hire a lawyer to represent you; a lawyer who understands the law!
So why do people walk into a sales centre with no representation? Why do people make massive financial decisions without their interests looked after?
A few years ago, one of my colleagues purchased a pre-construction condo, and he took the Agreement of Purchase & Sale and marked it up like a grade-nine history exam. He changed a dozen sections, inserted a few dozen clauses, and probably spent ten hours going over the agreement with a fine-tooth comb, and altering the document to suit his needs.
This is how a Realtor buys a property through a developer.
So don’t you want that person working on your behalf? No? You’d rather go into the developer’s lair and buy on “Standard Builder Forms” through their in-house salesperson?
“At any time that you work with a licensed realtor they must disclose, to all parties, on whose behalf they are working, in writing. For years I have been hoping that Ontario would make disclosure part of all sales that happen in the province. Currently only realtors who are licensed under the Real Estate and Business Brokers Act 2002 must do so. Consumers would be better protected if all parties involved in real estate transactions — including lawyers, private sellers and new construction on-site salespeople — were required to do so. It’s only fair; anyone acting on behalf of someone else should have to disclose their relationship.”
How can anyone possible disagree?
Those on-site pre-construction salespeople act as if they’re working on behalf of the buyers who walk through the door, when all the while, their only job is to protect the developer’s interests.
Representation and disclosure need to be a bigger part of our industry, or what happened at Trump Towers won’t be an isolated incident.
It will become the norm…