Are We About To See The End Of Double-Ending?

Business

8 minute read

April 26, 2017

So the government wants to put an end to “double-ending,” eh?

And the public wants this too?

Apparently, this is one of the root causes of the red-hot real estate market, and it pushes bids higher?

There’s a lot of misunderstanding, and misinformation about double-ending, so once and for all, let me pull the lid off this, and give you my honest thoughts about what goes on, and what we can do about it…

Handshake

Upon closer inspection, that photo of two people shaking hands doesn’t really fit.

I really should have used my Google-Fu to find a photo of one person shaking his or her own hand.

That would make a lot more sense, given the subject matter today…

I want to tell you guys a story, if you’ll indulge me.

A couple of months ago, my wife and I made an offer on a house.

The property, as luck would have it, was listed for sale by Bosley Real Estate.

While the cynics might suggest this gave me an advantage, I assure you, it did not.

As luck would also have it – a different kind of luck, the listing agent, had his own offer on the property.

And while the cynics might further suggest this gave the listing agent an advantage, and put me at a disadvantage, I assure you, it did not.

On the night of offers, the listing agent met with his client at 6:00pm, and signed an offer.

That offer was sealed in an envelope, and handed to our brokerage General Manager.

There were six offers on the property that night, and the General Manager presented the listing agent’s offer first.

That offer was presented by the General Manager, to the listing agent, in front of his seller clients, on behalf of his buyer clients.

Then five other offers were presented, including mine.

In the end, guess who won?

The listing agent.

His offer was the highest, “right out of the gate,” as they say.

And he won fair and square.

This didn’t stop the other agents from complaining, however.  They called “shenanigans,” and our efforts to smooth things over fell on deaf ears.

So ask me: was I mad?

Not a chance.  The listing agent won, in a fair contest, and truth be told – the contest might not have been that fair at another brokerage.

You might ask if this is the way we do all our offers at Bosley, and I’ll be honest and say, I don’t know.

I also don’t know what “rules” are in place to deal with multiple representation, as it depends who you ask, and on what day.

I don’t know what goes on at other brokerages.

And I don’t know what the average Realtor thinks about it.

do know three things, however:

  1. The public wants change.
  2. Change is coming.
  3. The transition will be seamless.

And that’s that.

To understand “double-ending,” you first need to understand where buyer agency came from.

Because worse than double-ending, is what used to happen before buyer agency was created – back when every real estate agent worked in the best interest of the seller.

So if you, the buyer, wanted to make an offer on a property, your agent, no matter who he or she was, would be expected to push the seller’s agenda.

No word of a lie, folks.  It sounds insane, but this is how things used to work.

I wrote a blog about this back in November of 2016 called “How Buyer Agency Was Born: Knock Estate vs. Jon Picken”

Have a read through, if you’ve got time.

The blog post didn’t exactly rack up a huge number of comments, or a good bounce rate, but the subject matter is important if you want to understand the origin of “double-ending.”

After Knock’n’Picken, as it’s referred to by legal minds, buyer agency was established, and order was restored to the industry.

But keep in mind that this was way before the Internet, and the MLS system.

So back in the 1980’s, and 1990’s, it was quite common for buyers to seek out real estate agents who either had a lot of listings under contract, or worked for a brokerage who had a lot of listings.

Back then, it seemed like an advantage for a buyer to walk into a brokerage and work with somebody who represented their own “in house” listings.

Properties didn’t sell in mere hours like they do today, but without the Internet, there was still a serious lag between when the ink was dry on a listing, and when other agents throughout the city knew about it.

I know we’re not in the 1990’s anymore.  Times change, and the days of buyers wanting to work with the listing agent because of access to a listing, has changed to buyers wanting to work with the listing agent because they believe they’re getting an advantage.

So let me tell you another story.

I had a listing last fall that was red-hot.  In the mid-$1M-range, over 80 showings in a week, and six offers on offer night.

On the morning of offers, I received a call from a young agent who said, “I want you to work with my client.”

I didn’t quite understand.

He told me that his client was his brother, and he wanted me to work with him to “guarantee” he got the property.

I asked him what he expected in return, and he said, “nothing.”

He told me that he didn’t care about the commission he would forego, so long as his brother got the property.

So here I was, looking at double the commission, served up to me on a silver platter.

And what did I do?

I told him I wasn’t interested.

And the roar from the agents around me on the floor that day went wild.

“Are you nuts?” one agent asked me.

“What’s wrong with you?” asked another.

And I sat them down, and explained to them, like father to child, that I have a great reputation in this business, and there’s nothing I would ever do to jeopardize that.  I’m in this business for the long-term, not the short-term.  One extra “end” of a deal today means nothing if it damages your reputation among your peers, and makes them not want to work with you.  If cooperating agents don’t want to work with you, then you get fewer offers, and your seller-clients suffer.

Had I told cooperating agents that evening that I had my own offer, several of them might have withdrew their offers, or not presented at all.

If my seller had received fewer offers, he undoubtedly would have received a lower price.

And that’s not why he hired me.

Not only that, I knew then, as I know now, that it would have been impossible for me to represent both buyer and seller, in competition, at arm’s length.

I don’t like it.  It feels dirty.

And given the pretense to this situation – a real estate agent working with a buyer, who showed him the property, wants me to work with him to “guarantee” the victory, it felt even dirtier.

The agent in question did end up bringing an offer on behalf of his brother that night, and his offer was well behind the eventual victor.

Now at the risk of becoming repetitive, let me tell you a third story, and by the time this story is through, I believe we can use all three to draw some sort of conclusion.

Back in November of 2016, the CBC did a “hidden camera” story where they “exposed” real estate agents offering to somehow lie or manipulate the offer process, on behalf of a potential buyer, to ensure a successful double-end.

You can find that story HERE.

After that story broke, a slew of agents and brokerages got up on their soapboxes, and took the opportunity to talk about how bad the practice of double-ending is, how they don’t like it, and what they’re going to do about it.

One particular brokerage, Re/Max Hallmark, apparently changed their policy as a result, as noted in THIS article in the Globe & Mail, which gave us this quote:

“ReMax Hallmark Realty Ltd., which has 10 offices in Toronto and other parts of Southern Ontario, changed its policy this week to address the controversy. From now on, a listing agent may not also represent a buyer for that property in multiple offers.”

I have no evidence that they did change their policy, aside from that quote in the Globe & Mail.

But I do have a conference table full of MLS listings that show double-enders since November 10th of 2016:

Double-EndersReMax

That’s 44 double-enders, via 25 different agents, since the story in the Globe & Mail that said Re/Max Hallmark had changed their policy.

Either this policy at the brokerage level was implemented, and agents are ignoring it, or the brokerage decided not to implement the policy, as was explained to the Globe & Mail.

Either way, it’s noteworthy, because it shows both that the issue of double-enders is being discussed at the brokerage level, as well as the fact that many agents have no problem with it.

So what do we do?

As an industry, is it incumbent upon us to offer up a solution, change, or policy internally, to satisfy the government’s request, which is based on public disdain?

Or do we we wait until the government forces us to change?

Personally, I think change is coming.  No doubt about it.

So either the Ontario Real Estate Association puts together a proposal and offers to work with the Ontario government, or they’re going to come up with ideas on their own, and cram it down our throats.

I would have absolutely no problem if either OREA, or the government, mandated that one individual Realtor can no longer represent both buyer and seller in a transaction.  To take that a step further, I might add, “In multiple offers,” since I don’t think it’s fair to suggest that a listing agent, representing the sale of a farm in rural Ontario, cannot work with a potential buyer when that property has been languishing on the market for 165 days.

I think the exact rules, and the verbiage used, would need to be refined.

And what then of regulation, oversight, and discipline?

Reader “Steve” commented on Monday’s blog that if agents would “find a way around it,” as I suggested, then there is a serious concern here!

I agree.

There are massive fines, even jail time, for insider trading in the equities markets.  So what would happen if a listing agent handed off a buyer to a rookie in his or her brokerage, told that rookie what to offer after he or she had reviewed all the offers, and then that rookie agent happened to magically “win” on offer night?

If it could be proven that there was insider trading, what would the repercussions be?

Now one final thought, just to play devil’s advocate.

If and when the Toronto market ever turns, and properties sit on the market for months at a time, would we then have an issue with “double-ending?”

If you were a seller, and your listing agent happened to have a buyer-client, or receive an inquiry from a buyer, that wanted to make an offer on your property, would you scream “bloody murder” at the rules that prevent your agent from working with that buyer?

The grass is always greener on the other side.

The problem is: we haven’t seen the other side in 20 years.

I welcome your thoughts.

 


Addendum:

The point about Re/Max Hallmark might not have been exceptionally well-received.

My intent was not to disparage the brokerage, at which I have many friends and colleagues.  But rather to start discussion about the issue, and highlight that this is the ONLY brokerage that came out publicly with a policy on double-ending, and thus the results of the experiment can provide crucial data on how to best to move forward in the industry.

A colleague of mine said, “What did you expect?  You have a photo of all those listings!”

That wasn’t intended to be a “gotcha” but rather to simply show my work.  Too many people in society today make unsubstantiated statements (Trump?), and it’s getting tiring.

I had a conversation this morning with a broker/owner at Re/Max Hallmark who clarified the policy.

The brokerage, in fact, did implement a policy last fall that their agents cannot represent both buyer and seller at the proverbial table.

Regardless of how a “double-ender” shows on MLS, with the same agent representing both buyer and seller, that agent cannot be involved in the bidding process on behalf of both.

A colleague must present the buyer’s offer to provide arm’s length separation.

There’s also a third-party company called “Red Rover” who will work on behalf of the buyer to provide the same transparency.

There are brokerages out there – trust me, there are many, who absolutely, positively, do not care about double-ending.  In fact, they make it part of their business model to let the public know, “If you want to buy our listings, you’d best do it through us.”

Brokerages like Re/Max Hallmark, and as per my story at the onset of this blog – Bosley Real Estate, are taking the public’s feedback to heart, and getting out ahead of the issue.

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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23 Comments

  1. Francesca

    at 7:33 am

    Back in the day when the market was cooling in 2008-2009, right after the TO land transfer tax was implemented too, we would spend weekends going to open houses without a realtor and we approached several selling realtors at the time and would ask them if they represented us so to the buyers and we would give them the listing to our house in return. We did this to reduce our selling commission more than to get the in on the sale since houses weren’t selling in bidding wars at that time. We didn’t have one agent refuse our request. In those days I’m sure buyers were just eager to get a sale and there weren’t multiple sellers who would have been upset at this double ending practice. The market is for sure totality different now and I’m sure most buyers don’t have the luxury to just casually scouring open houses without a buyer agent proactively sending them daily listings or booking showings for them. I also remember back in 1998 when my parents were finally buying their first home how many detached houses were in the market at the time and how many houses we saw before my parents mulled over putting in an offer. The market was in a cool down phase that time too.

  2. Joe Q.

    at 9:15 am

    The double-ending issue (i.e., the public’s frustration with it) boils down to transparency, IMO. Not everyone in the industry conducts their business as transparently as David and his brokerage seem to.

    A quick back-of-the-envelope based on TREB reports on its membership, GTA population, household size and home-ownership suggests that the GTA has one Realtor for every ~35 home-owning families. An industry oversupplied to that extent will almost certainly be home to a wide range of behaviours — from the highly transparent / ethical, to the somewhat sketchy, to the downright criminal.

  3. Jack

    at 10:17 am

    I have a hard time understanding how an agent can negotiate to get a highest possible price for the seller and at the same time the lowest possible price for the buyer. But if the sellers freely agree to that, why stop them? So it’s really a question of consent from sellers.

    For the bidding process itself, more transparency would help. Such as the sealed offers that David describes. There are some rules about this already, the problem is with enforcement. So more robust enforcement is needed. Perhaps a third-party referee every time that the seller’s agent brings in a buyer’s offer.

    1. Jennifer

      at 9:39 pm

      One reason to stop double ending is to protect uninformed sellers from unscrupulous agents who are able to mislead and lie to clients in a poorly regulated environment with little oversight and almost zero accountability.

  4. Condodweller

    at 11:08 am

    David, you are an absolute saint.

    1. RPG

      at 11:50 am

      My sarcasm detector is broken.

      1. Condodweller

        at 12:32 pm

        Whenever I pay a compliment half the people say I’m a brown noser, the other half say I’m sarcastic. It’s a lose lose situation. Something is broken in the world.

  5. Juan

    at 12:56 pm

    Can’t a seller just outright ban their own agent from double ending on a sale? Don’t sign the consent form. It’s pretty simple.

    1. Jack

      at 4:17 pm

      When a dishonest double-ending agent puts in a buy offer after seeing the other offers, it obviously hurts the other buyers. But does it hurt the seller? I can imagine scenarios going either way.

  6. Condodweller

    at 1:09 pm

    Ok, to get back on topic, here is a thought experiment if Rlaph allows me to steal his line.

    My first thought when I read that David never double ends was that he could turn this into a huge positive for his seller client, and as a side effect will probably secure the property for the buyer. If he were to do this, I guarantee he will have sellers lining up at his door.

    What I am proposing will however put every other buyer at a disadvantage. But that’s ok since as far as I know there are no rules against it, and if any regulator were to outlaw it would look like the Grinch who stole Christmas. After all he would be greatly benefiting his seller client while at the same time it will not cost him anything.

    Drum roll please…….

    If he really does not care of the “extra end” and can handle the transaction at arm’s length he can accept to represent the buyer however waive the 2.5% buyer’s commission. Imagine the amount of positive PR this would generate. You have the power to save a client anywhere from $10,000 to $50,000+. It’s a win-win-win situation. Now that is something even a cynic like myself would go for.

    I can hear other buyers crying foul because this essentially would give his buyer a 2.5% advantage over the others which should secure him/her the house. But what regulator would have anything bad to say about serving his seller the best way possible?

    Imagine David, with all the extra business this would generate you might even be able to hire a PR guy.

    Damn, I gotta stop giving away free advice.

  7. Vishal

    at 1:49 pm

    Hi. I was showing your blog to a friend agent of mine that works at Hallmark and he said based on his search, even Bosley had a large number of double endings. So it happens everywhere I guess. But its good that the offices are putting a stop on it.

    1. David Fleming

      at 4:03 pm

      @ Vishal

      No doubt about it – Bosley double-ends too.

      The point I was making is that Hallmark was the first brokerage to publicly state in the media that they were incorporating an internal policy that would no longer allow a buyer and a seller to be represented at the table by the same agent.

      There are some folks at Hallmark that have been around longer than 99.9% of the people in organized real estate. If there are changes on the precipice, they’ll help spearhead it.

  8. jeff316

    at 9:05 pm

    From the perspective of a consumer, I’d be a bit disappointed to see the end of double-ending as, like Francesca, I’ve known people that have saved a good amount of money on commissions thanks to the practice.

    From the perspective of a government or regulator, however, I’d have banned it yesterday. Easy to do, painless to implement and completely in line with public perception. Zero downside.

  9. kelsey

    at 9:10 pm

    Quick question experts:

    My agent is not really telling me anything about impact of ‘Fair housing plan’ announcements. As a buyer, what can i do to track the indicators that show whether i should wait for sometime before i buy a $1M+ house? David, when can we expect some kind of feedback from you or are there any other blogs or data points that we should be tracking to decide if i need to wait for sometime to save some $$$ ?

    Thanks for the feedback!

    1. Joel

      at 8:19 am

      It is too early to tell right now. You will have to follow the TREB data that is released monthly and from there you will see what the trends are doing.
      I am a mortgage broker and haven’t seen any decline in pricing, but it has only been a week, so I think it’s too early to tell.

  10. Tim

    at 9:53 pm

    Twelve years ago, my wife and I put a solid offer on a home in North York. No other bids, no competition. The selling agent informed our agent that the buyers had just changed their minds and decided to take the home off the market. Few weeks later the home sold, and the selling agent got both ends of the deal. Sad.

  11. Joel

    at 8:33 am

    What if they said that agents could double end, but then they would only receive a maximum of 2.5% commission. This would help both buyer and seller and the agent would be able to build the relationships with clients.

    This eliminates much of the conflict of interest and the agent doesn’t have to give away their client. I think everyone wins.

    1. Jennifer

      at 9:28 pm

      How does it eliminate the conflict of interest because the commission is lower? The conflict still exists and some agents will put their own interests ahead of their clients.

  12. Real estate millennial

    at 11:21 am

    The real estate sales industry is a joke and the problems we face in it all stem from the entrance process. It is the only industry where you DO NOT HAVE TO GRADUATE HIGH-SCHOOL (posted on the OREA website) to be considered an “expert” in the field. You can become an agent/realtor in 3 months and supposedly now you’re qualified to market/sell assets worth millions of dollars in some cases. The barrier to entrance and the punishment is so low, that unethical behaviour is worth the risk. Most other highly paid professionals spend tens of thousands of dollars on education (not $3500) and years of their life acquiring the education and skills needed to become the doctor, engineer, architect, real estate appraiser accountants etc. With the amount of time and money spent on education, the risk-reward for unscrupulous practices in those industries, for most of the participants are not worth taking.

    The problem of double-ending is a symptom to the larger illness (barrier to entrance) and to cure the symptoms we must treat the illness in my opinion. I whole heartedly believe that to sell real estate which for most people, is one of the most significant things they’ll ever do. You must have at minimum a degree in business (BBA/B.comm) or a BA in economics along with the completion of a new standardized real estate certificate program. When the cost of time and money outweigh the risk-ward of unethical behaviour we’ll finally start to see change in the industry.

    1. Condodweller

      at 9:08 am

      You are absolutely right on the low barrier to entry. Unfortunately other professionals have high barriers to entry because of the sheer amount of knowledge they have to acquire, and once acquired the amount of time required to prove that they have acquired the skills through internships. All this takes time and money which constitutes the high barrier to entry.

      In the case of a real estate agent all one needs is some rudimentary skills to be able to complete forms and after that some marketing skills to stay in business but at the end of the day all they really are is a salesman whose compensation happens to be disproportionate to the amount of work required to sell a house.

  13. O

    at 3:00 pm

    Here is my experience with double ending. When I sold my first home, we were in an area that one realtor dominated. He would call once a year to tell us of all the buyers he had interested in my property. So we made the mistake of giving him the listing at a reduced commission, but he had to bring us a buyer…we thought this would be quicker with less headaches.

    Well be careful what you wish for. It was clear very early on that he was not working for us, but rather for the buyers he had prior relationships with. He kept telling us our price was too high, it would never sell, go lower, my buyers will kill me if I raise the area too high etc etc. I told him get me my price or I will get another agent.

    He found me a buyer…a wealthy lawyer who caused all kinds of problems for us that I wont get into. We sold, but we felt we that had no one looking out for our interests. As a result, I will never do a double end deal or sell anything to a lawyer ever again.

    1. Dan

      at 10:32 pm

      When they see double comission…they also can ..how shall I say this….message the price lower…for example if the condo is 500k…double end comission is 25k….if its 400k…comission is 20k…you loose big…they still have turned a 10 k comission into a 20k comission..they loose 5k..you loose 100k…

  14. Dan

    at 10:27 pm

    Always go to the sellers agent and tell them you have no agent…it’s like a miracle how this strategey magically works over and over again…The magic is in the agents comission which doubles…they slip you the wonning number you get the house …the buyer gets the highest price and the agent doubles their comission…and to boot which party in this transaction would complain….lol

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