New rules and guidelines came into effect on July 1 that are meant to add a higher level of transparency to the offer process Ontario real estate brokerages and sales representatives follow. Introduced in the Ontario Legislature through a revision to the Real Estate and Business Brokers Act (REBBA 2002), these new regulations (Bill 55) are aimed at providing consumers further protections. These new rules make changes to how an agreement of purchase and sale must be handled by brokerages, and should contribute a much-needed and sought-after method of tracking the actual number of bona fide, signed, registered offers on a property, particularly in a multiple offer scenario.
Although ethically these rules and guidelines are not new, the improved “Best Practices for Handling Offers” includes an authorized ‘Offer Summary Document’ that should be signed by the buyer and submitted by the buyer’s brokerage or sales representative with the buyer’s agreement of purchase and sale to the listing brokerage. This acknowledges that the offer is real and has been received by the seller’s listing sales representative, and the offer has been presented to the seller.
In reality, these improved rules have been instituted to curb the suspected use of non-existent offers, more commonly referred to as ‘phantom offers’ – a method a listing agent might use to ignite a bidding war or prop up the sale price.
I write “suspected” because there doesn’t seem to be hard and fast documentation on whether or not this fraudulent practice is actually pervasive in the industry. But the old adage “where’s there’s smoke, there’s fire” can be used here. The vast majority of sales representatives in Ontario gladly endorse these new (long overdue) rules and guidelines.
This new offer summary document will inadvertently shed light on another practice employed by some brokerages and a minority of their sales representatives. As part of this new document, details like the dates and times an offer is signed by a buyer and presented to a seller, and by which agent, are now recorded. This information will need to be stored by listing brokerages. Important to note is that this information is to be made available to a regulatory authority if there is an official complaint launched by a member of the public or another brokerage or sales representative.
This new transparency may help curtail practices by some sales representatives (under the watchful eye of their brokerage of course) that take advantage of the Multiple Listing Service regarding a property’s exposure to the open market, which is the very foundation of the MLS, and to which realtors owe their very livelihood. Public trust is open to being taken advantage of if the MLS system is not transparent and used correctly by its membership.
Of particular interest here is the practice where a sales representative enters a “new” listing into the MLS system that is already sold firm or conditionally. Or the new listing appears on the MLS and within minutes or a couple of hours, the new listing is reported as “sold firm.”
In these cases, it bears asking whether or not the seller has actually been given the services their agreement with the listing brokerage intended. According to MLS rules, if the Seller has signed an MLS listing, then the listing must be entered into the system within two Toronto Real Estate Board business days. Further to this, if the listing does appear on MLS, another rule states that entry will not be accepted as a listing if it excludes any members from showing the property or from acting as a cooperative brokerage.
Clearly any listing that appears on the MLS system that is already sold contravenes these rules. A question could also be raised as to why a competent seller would want their property on the MLS system if the property is already sold. Usually a higher commission rate is charged for exposure on the MLS system, rather than a non-MLS ‘exclusive listing.’ A seller may not be aware their listing hasn’t been put onto the MLS system as contracted, and is not receiving the full effect the MLS marketing platform provides – but they may still be paying for it.
The new offer summary document will allow regulatory authorities to peer into the mechanics of a particular transaction, and clearly show whether or not a property that appears on the MLS system was fully exposed to the open market as the MLS listing agreement intended. This document should be able to prove that a property was already sold before being entered onto the MLS, and show when the brokerage or sales representative contravened MLS rules.
In any event, these new rules should give consumers greater protections against inappropriate and fraudulent activities by a very small minority of real estate agents.
Thomas Neal is a well-known and respected Beach agent
firstname.lastname@example.org ~ 416-690-5100