I can’t prove it, nor can I do anything about it, but some recent “questionable” practices within our industry have left me frustrated beyond belief!
As usual, I have to change the names, numbers, and streets, but here is a story that will shed some light on how things should work when your seller turns down an offer that is over the asking price…
Allow me to put the following story into perspective…
You’re shopping at Holt Renfrew for socks. Wait, scratch that. You’re shopping at Winners for socks, and you find a super-neat-o set of ankle socks by Nautica for a lean $5.99.
You approach the cash register at the front of the store, and lay the socks on the counter. With a forced smile, the cashier rings in your future footwear and says, “That’ll be $10.16 please.”
A little confused, you ask, “I’m sorry – I thought those were $5.99?”
She replies, “Oh yeah, sorry about that…the tag says $5.99 but they’re actually $8.99. So yeah, that’ll be $10.16.”
This can’t happen, can it?
No, of course not. Because if it did, that would be a good example of a little thing called “False Advertising.”
In the Consumer Protection Act, 2002, Part III, “Unfair Practices” includes Sub-Section 14 which deals with false, misleading, or deceptive representations. Here is an example straight from The Act:
“….a representation that the goods or services are available for purchase at a specific price, when they are not.”
It’s clearly a misrepresentation if you offer a product at a given price, and then refuse to accept that price.
There are conceivably thousands of ways where prices could be misleading or misrepresented; with varying levels of “deception.”
I was once asked by a client, “How can you list a house at $399,000 and get away with it when you know it’s worth $450,000 and you’re just trying to get $480,000 for it by listing it that low?”
My honest-to-gosh answer is: “Eeek…I don’t know.”
When you hold an “offer date,” it becomes somewhat of an exception to the rule.
If there was no offer date, and you offered the sellers $399,000 and they turned it down, then we get into a massive grey area.
The Real Estate and Business Brokers Act, 2002 falls under the umbrella of the Competition Act, 1985, and as such, the real estate industry is generally monitored by the Competition Bureau and everything we do falls under The Act.
When it comes to “false advertising” in the real estate industry as it pertains to pricing, the most common example would be turning down MORE than the asking-price in a multiple offer scenario, and then subsequently re-listing the property at a price which is less than the original offer that was turned down.
As an example, if you list your property at $399,000, hoping for a windfall and $475,000, and you “only” receive three offers and a high of $450,000, you can’t turn around and try your luck again next week at $399,000. In fact, you have to re-list the property at a price that is greater than that $450,000 offer that you turned down.
Think about it: if you turned down $450,000, and you re-listed at $399,000, this would be considered false advertising since you have no intention of selling the property for that $399,000 price. Empirical evidence shows that you already turned down more!
But since REBBA falls under the Competition Act, this is actually issue of anti-competitive behaviour, and not false advertising. Well, let me clarify – this IS false advertising, but legally this falls under the jurisdiction of the Competition Act, and thus it’s deemed to be viewed as anti-competitive behaviour.
Here is what happened to me last weekend…
There was a house listed in the west end for $599,000 back in December, and they were set to review offers on December 12th.
On December 13th, I called the listing brokerage and the receptionist informed me that the property had been taken off the market.
Interesting…
Fast-forward to January, and the property comes back out at $599,000.
My alarm bell went off and I said, “Hold the phone – they can’t do that, it’s anti-competitive; it’s false advertising.”
Technically, I’m right. The seller looked at offers and clearly decided that the money wasn’t good enough and it wasn’t the right time of year, so they rejected all the offers and took the house off the market.
But this is where we get into a serious grey area.
The reason this action is deemed to be “anti-competitive” is because you can’t offer a product or service to one person and not another at the same price, terms, and conditions.
But what if the seller were to say, “The December offers were conditional on financing, and the offer we accepted in January wasn’t.”? Well according to the Competition Act, this would NOT be deemed anti-competitive. The product/service (in this case, the offer) has to be exactly the same in both cases.
The house that was listed at $599,000 ended up selling for a ridiculous $852,000, and I was made to feel like a loser for “only” bringing $681,000 – a mere 114% of the list price.
But did we bring such a “low” offer because the house was listed so artificially low in the first place? That’s a topic for another day.
But I was miffed because I know that the seller and the agent reviewed offers in December and turned them all down, and then had the gall to bring the property back out at the same price in January!
The unfortunate reality is that the anti-competitive actions are almost impossible to enforce.
How are you (in this case the Competition Bureau under instruction from an anonymous complainant) going to prove what offers and terms were presented and rejected back in December? How do you can access to that information?
I don’t think you can. And if you could serve the listing agent with a court order to provide a copy of all the offers that were reviewed, and then get sworn affidavits from the cooperating agents, would you really want to waste the resources?
I don’t believe there is much enforcement to this “rule,” but I could be wrong.
I always hold out hope that there will be more accountability among Realtors as we move forward, but when I see actions like this, in addition to about ninety-nine other things that piss me off on a daily basis, it makes me realize that about 25,000 of the 28,000 Realtors in the GTA simply don’t care about the “rules”…
Mortgage-Guru
at 10:27 am
Dave, let’s be honest, the OREA/CREA and realtors in general are viewed by many folks as being no better than car salesman or snakes oil salesman (justified or not and no offense). Everyone knows the cheating, deceit, lies that goes on in this business. Until someone steps up and cleans up the mess, the image will always be a negative one. Note: There are a lot of great realtors out there like yourself but it is the handful (say 10%) that ultimately creates a bad image for everyone. As they always say, it only takes one person to destroy the image of a group.
Danny
at 9:29 am
That is why I will never use a realtor to sell my house. They are thieves. Comfree is a better deal.
DEW
at 11:11 am
David thanks for being one of ‘the good guys.’ You seem to always tell the truth and part of me wonders why your colleagues arent ready to lynch you but I enjoy the insiders look at real estate for sure
Michael
at 11:26 am
I proposed this the last time TREB and RECO offered us a survey/suggestions on multiple offers.. I said there should be a central registry that will receive copies of all offers and create a registration number for each offer.
Then we as Realtors would know when an offer is “actually” registered and only offers that receive a registration number could be reviewed by the Seller.
David Fleming
at 11:42 am
@ Michael
I totally agree. But I also think that an office broker/manager should be present to oversee all multiple offer situations. In my brokerage, we do this in every case of multiple representation, which I know few other brokerages do. But we should extend this to ALL multiple offer situations. Of course, this is assuming that all broker/owners are honest and ethical…
Solange
at 6:48 pm
Dear Mr. Fleming,
I came upon this blog a few months ago quite by accident. Since then Bosley Real Estate is on my favourites list and I check for new postings daily. You are very good writer, to my way of thinking, a lovely combination of Stephen Leacock/Robertson Davies with Pierre Berton/Peter C. Newman. I am firmly convinced that your blog should be required reading to anyone wishing to purchase real estate in Toronto. Please keep up the great work. Also, would you not consider writing a book? Your writing is every bit as good as the authors I mentioned above.
Sincerely,
Solange
Adam
at 7:32 pm
Would you say the buyer’s agent was as much to blame here for letting them pay so much? Or was the house actually worth that much?
David Fleming
at 8:57 pm
@ Solange
I haven’t been this flattered since my cub scout leader said that he only wanted ME to accompany him to his secluded wood cabin!
But seriously, thanks for the comparison to some of Canada’s literary greats.
At first I was a bit miffed because I confused “Peter C. Newman” with “Alfred E. Newman,” but eventually I came to my senses and said, “What, me worry?”
David Fleming
at 9:00 pm
@ Adam
A house is worth “whatever somebody is willing to pay for it.”
But in this area, no house has ever sold for anything close to that much. The buyer had better recognize that he is setting a new record in the area, and be completely satisfied in doing so.
Some agents are asked by their clients, “What do I have to pay to get this house?” Perhaps this was the case.
Other agents identify with their buyers’ financial situation and become more than just a salesman.
I “won” in multiple offers tonight with an offer of $318,104 (property was $309,900 and there were two other offers) and my buyers were approved for $325,000 and willing to go that high. I was about 70% certain our offer would be the highest, so we went with it. There was a calculated risk, but we saved $7,000 in the process which can be a lot to a first-time-buyer.
It’s really only worth as much as somebody is going to pay for it, so had my clients paid $325,000, I’d say it would have been “worth it.”
Solange
at 10:24 pm
Dear Mr. Fleming,
A wicked wit and wildly hilarious…my good laugh of the day! A cub scout leader lol. But sigh, as I reread my post I realized my sons are right when they say, “Oh mom, you sound so old-fashioned and weird”
Solange
earth mother
at 12:46 pm
Remember this deal in ‘Pretty Woman’?….. Julia Roberts names her price, Richard Gere says “I would’ve paid more”, and Julia Roberts says, “I would’ve taken less”….
Hmmm….
James
at 7:32 am
re: it makes me realize that about 25,000 of the 28,000 Realtors in the GTA simply don’t care about the “rules”…
I think you do your fellow realtors a great disservice by making such a sweeping generalization and I wonder if this is, in fact, covered in the rules and regulations that govern the behaviour of those in your trade. There are bad apples in every business, and no matter what regulations exist they will find ways to work outside of the rules to make a quick profit. Just this morning I read about a woman who was fast-talked into buying a Mazda6 (demo) from a car dealer for $66 000. She paid about $25 000 more than it was worth and she’s on a fixed income with no way of being able to make the payments. The financing application was altered as well to ensure that she was approved.
I do agree that there should be more transparency in your industry – ALL OFFERS BY FAX comes to mind, as we have no idea if the seller received ANY offers. I offered on a house last year, offers by fax, and the agent wanted me to improve my offer with no way of knowing if I was even in competition. However, I take issue with such sweeping generalizations as the one you made, referenced above. I think it’s great that you work hard for your clients and try to be an honorable and trustworthy person, but I’ve met a great many in your profession who strive for the same each and every day. Certainly more than the handful that you allude to!
First Time Buyer
at 3:39 pm
PUT SOLDS ON YOUR YOUTUBES WHEN THEY ARE IN FACT SOLD!!!!!!!!!!!!
hate callin on homes and get the “oh its sold would you like me to find you another”.. no dumbass I called for the one you shammed me into believing is for sale!!
usually some housewife / wannabe realtor.. one that doesnt care if she leaves the industry tomorrow and the huge smear against realtors she left behind.
SMARTEN UP!