Real estate regulators need to be more proactive

If you happened to view CBC Marketplace’s recent investigative report about the practice of “double ending” real estate deals, you were given hidden camera access to conversations between a seemingly potential buyer of a house and several targeted listing agents who represented the properties for sale on the Toronto Real Estate Board’s Multiple Listing Service (MLS). The intent of this investigative report by the producers of Marketplace was to uncover seemingly unethical behaviour that would allow for the listing sales representative to make the entire amount of commission initially agreed upon by the seller and the listing brokerage in the initial listing contract, and that other offers for the same property by buyers represented by their own sales representative may not be treated as fairly as Ontario’s current real estate procedures and practices are meant to ensure. Were you shocked? You shouldn’t have been.

The real estate industry as a whole in Canada has seen many changes through the last couple of decades. It has become increasingly de-regulated as much as it has become self-regulated. British Columbia’s real estate sector has come under the microscope lately with its new tax on foreign buyers and the practice of “shadow flipping”. That province has reacted to these revelations by tightening the reins on self-regulation and giving the Real Estate Council of British Columbia much more authority to enforce its regulations.

Here in Ontario, we also see increased scrutiny on the real estate profession as a whole, through tougher penalties levied by the Real Estate Council of Ontario, or RECO. Yet, will increased fines and tougher penalties help the situation? It will certainly help, but the real focus needs to be on RECO’s ability to become more proactive rather than reactive in terms of how it deals with the real estate profession.

RECO is a complaint-driven organization more than an enforcement body. Its mandate is set to handle complaints from the public regarding unprofessionalism in the real estate industry. However, it needs to be able to get into the trenches of the business itself. For instance, RECO’s advertising guidelines are clearly set out, yet I am sure RECO officials see daily abuses by real estate sales representatives in signage and appearance on their way to work. To my knowledge, without a complaint from the public or another real estate brokerage, these abuses are not acted upon. Similarly, the Toronto Real Estate Board (TREB) has a mandate to provide and regulate the Multiple Listing Service (MLS) on behalf of its membership, the local real estate brokers and their sales representatives. Although TREB does its best to keep abuse of the system to a minimum, it’s still behind in enforcing its own rules and regulations. Brokerages and their sales representatives are gaming the MLS system to varying degrees on a daily basis.

TREB can’t catch everything, and simply doesn’t realize abuses (minor and major) on and to the MLS that occur, so it’s left to the membership to lodge a complaint against another TREB member. But the process of making a complaint can be onerous and time consuming, and in most cases a complaint against another brokerage and its sales representative needs to be launched by the brokerage and not the individual sales representative. Further, brokers are encouraged to settle the problem amicably on their own in many cases, rather than going through the formalities of the complaint system, meaning it cannot be determined whether or not a sales representative is reprimanded by their own brokerage for unethical practices. If the sales representative is the defacto brokerage, as is the case with smaller boutique brokerages, that sales representative can sneak around the gray areas of unethical behaviour without reprimand by any management whatsoever.

In my opinion, it is these small abuses to the MLS system that are most disturbing because the MLS system is the lifeblood and heart of the business of real estate professionals. The public, and indeed most sales representatives, rarely see the gray area abuses to the MLS system, but they are impacted by them.

That’s what the report by Marketplace actually caught on camera.

If RECO is committed to providing transparency in the real estate industry, then that body needs to streamline its enforcement process and act like a “policeman” to the industry more than the “fireman” the official from RECO implied they are in the Marketplace report. It needs its officials to get into the trenches and learn how the industry actually does the business of buying and selling real estate in the current marketplace. TREB and the Canadian Real Estate Association (CREA) need to both take a closer look at how their members use the MLS system, and tighten, enforce, and update many antiquated rules. Technology has changed the way our real estate business is conducted, making the process quicker and easier in most cases. But with that, modern technology has made abuse of the system quicker and easier as well.

If you have any questions regarding this article, or questions regarding Beach real estate in general , please feel free to email me at tneal@trebnet.com, or call through my brokerage at 416-690-5100.

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