TorontoRealtyBlog

Something interesting happened last week that made for water-cooler conversation in the real estate industry.

No, I’m not talking about TREB.  That’s more than just water-cooler talk.  That’s an Armageddon on the horizon.

I’m talking about one of those day-to-day occurrences that’s worth talking about, until suddenly, it isn’t.

I’d hate to say it, but those shady practices, or unfair dealings, or borderline illegal or unethical experiences only sting for a day or two, and then market participants in this industry simply move on.

So let me know what you think about this one…

A Listing Agent double-ended her east-side listing for a really hot, possibly “best of the fall market” property in this particular area.

You might have an issue with multiple representation, and/or “double-ending,” but that’s not my problem here.

The problem was: this was a bully offer.

Can you bully your own listing?

Suddenly, I’m reminded of one of my favourite movies of all time:

So let’s go through the logic and reasoning here; how in the world does one bully his or her own listing?

You’re the listing agent, and you bring a property onto the market at $1,199,000, setting an Offer date for Thursday, September 20th.

You have your own clients for the property, and you show it to them.

This is where I start to feel uneasy.

For the record, if this is me – I immediately hand this off to a colleague.  I would never represent both buyer and seller in competition.  If there was no multiple offer situation, I would still represent both sides.  That’s something that many of you won’t like, but it’s also a topic for another day.  But in competition, how in the world are you supposed to be at arm’s length?

Many agents feel the same way, and it’s not just because of how tough it is to remain unbiased.

It’s because of how it looks to your industry colleagues.

Imagine 123 Smith Street goes up for sale, offers are on Friday, and there are nine bidders.

You check the listing after the price has been posted, and there you see the double-ender:

LISTING BROKERAGE: David Fleming, Bosley Real Estate
COOPERATING BROKERAGE: David Fleming, Bosley Real Estate

Nine bidders?

And this guy magically happened to have the winning bid?

“What an asshole,” says the entire industry, all at once, under their breath.

I don’t like it, and I wouldn’t want my name on it.

But there are agents out there that have massive egos, and strive for this!  It’s a badge of honour!

To me, it just makes me weary of dealing with them.  Your reputation is so incredibly important in this industry.  For you folks reading this, I can’t possibly explain how important reputation is, and how agents run into each other over, and over, and over, and how previous interactions shape future dealings.

So if double-ending in a multiple-offer situation is bad enough, then what do we make of scenario where an agent bullies his or her own listing?

It’s shady.

And it’s not well-received by other agents who are looking on.

But it’s also not illegal in any way, so long as it’s handled properly.

When does this come back to bite the listing agent?

When the agent decides or she isn’t going to tell anybody about the bully!

Here’s a recent ruling from RECO in exactly this situation.  Have a read:

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Legal corner: Mishandling of offer process results in major fine

FOR THE RECORD

For listing representatives, fair handling of the offer presentation process is essential. Providing interested buyers a fair chance to put in an offer, or improve their offer in a multiple offer situation, is key to providing the best service to the seller client.

Mishandling the offer process can have serious consequences, and a recent fine of $10,000 provides a good example.

Here is the sequence of events that resulted in disciplinary action:

• • A registrant (referred to as Representative A) listed the property, with a note indicating a delayed offer presentation—meaning that the representative would hold all offers and present them to the seller at a specific date and time. [A delayed offer presentation requires written direction from the seller.]
  • The listing indicated that all offers had to be registered by February 24 at 5 p.m. [To register an offer means that the buyer or their representative has confirmed with the listing brokerage that they have an offer to submit.]
  • The note said that the seller reserved the right to consider a pre-emptive offer (also known as a bully offer) at any time.
  • Representative A showed the property to his own buyer client and prepared an offer for the seller’s consideration.
  • A buyer’s representative (referred to as Representative B) contacted Representative A and set up a viewing appointment for February 19. In total, there were five viewing appointments scheduled for February 19. Representative A did not advise Representative B that an offer had already been received from his own buyer client.
  • Representative B made a follow-up call to Representative A for more information about the property, and left a voicemail. Representative A did not return the call.
  • Representative B later received a message that the property had been sold, and that the appointment for February 19 had been cancelled.

RECO’s discipline panel found that Representative A violated the Code of Ethics by:

• • Failing to notify all buyers who expressed an interest in the property that an offer was registered on the property, and that the offer was from his own buyer client;
  • Failing to respond to Representative B’s voicemail within a reasonable time;
  • Failing to notify Representative B that a written offer had been registered or received for the property at the time they were making an appointment to view the property the following morning; and
  • Failing to obtain written instructions from his client to review offers earlier than the date on the listing.

What you need to know

One element of that is promoting the property in such a way as to generate interest from multiple buyers, who can then submit offers for the seller’s consideration.

If the seller is considering a delayed offer presentation, it is a reasonable expectation that the representative would explain that the approach could prompt some buyers to submit pre-emptive offers (also known as bully offers). The written direction must explicitly outline how to handle pre-emptive offers.

In addition, if the seller changes their mind and decides to review offers before the previously-agreed time, a new written direction is required to do so. The listing is then updated to reflect the change, and any interested buyers should receive notice so they are aware of the revised approach (via their representative, if they have one). This is in the seller’s interest as it reduces the risk that the buyer is not aware of the change and fails to meet the revised timeline for offers.

With the timing of such events happening very quickly, it’s also essential to respond to inquiries from interested parties in a timely manner.Outcome

Representative A agreed to pay a fine of $10,000. The decision is published on RECO’s website and the disciplinary decision appears whenever a member of the public uses RECO’s search tool to check on his registration status.

The panel concluded that the following sections of the Code of Ethics were breached:

Fairness, honesty, etc.

3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

Best interests

4. A registrant shall promote and protect the best interests of the registrant’s clients.

Error, misrepresentation, fraud, etc.

38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.

More information

For more information about written direction for delayed offer presentation, see our Registrar’s Bulletin.

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Now this agent is either stupid, or greedy, or both.

I think it’s more of the former; I think you’d have to be absolutely clueless to do something like this.

And the point that rarely gets made here is that the “Multiple Listing Service,” or MLS, is supposed to be used for cooperating with other agents.  Before MLS, and before cooperating brokerages, agents simply tried to sell their own listings to their own clients, because it’s the only way they got paid.

Along came MLS, and cooperation, and an agent was able to advertise his or her listing on the MLS system to gain more exposure.

If you want to sign an exclusive listing, refuse to cooperate with other brokerages, that’s fine!  There’s a checkbox on the top of the damn listing to do so!

But what you don’t do is sign and MLS listing, put the listing on MLS, and then sell to your own client, exclusively, without cooperating with other agents.

That completely defeats the purpose of MLS.

However, I’ll tell you what’s really going on here.

What really happens in these situations where agents “bully” their own listings.

An agent gets a “cold call” from a potential buyer, who has no agent, and wants to see the house.  That buyer then says, “I want to buy this house, and I’ll do it through you.  I want to buy it now.”

That agent is faced with a decision;

1) Tell the buyer, “Sorry, I can’t very well submit a bully offer on my own listing!  That would be so shady, and every agent out there would grow to distrust me.”  Then the agent would see if the buyer would agree to submit an offer on the scheduled “offer night,” or walk away, costing that agent a potential sale.

2) Sign an offer, register this offer with his/her own listing brokerage, phone and email every agent who has “expressed interest” in the property to notify them of a bully offer, and then hope like hell that offer isn’t beat, and, be willing to take the hit to his or her reputation.

I wonder which is the path less travelled…

Happy Monday!

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