As the Toronto real estate market crawls through a slow patch, there is growing anecdotal evidence that some agents are bending and sometimes breaking the rules to drum up business.
Andre Kutyan, a sales representative with Harvey Kalles Real Estate Brokerage Ltd., has seen a lot in his 14 years in the business, but in recent months he knows of at least five instances where agents outside his brokerage have attempted to solicit his clients while they were still under contract to him – a violation of industry regulations. At first he laughed it off, but now he’s taking it more seriously.
“The reality is there’s a lot of hungry agents who are going to cold call and door knock. But if you’re actually doing door knocking and there’s my sign on the front lawn, it’s pretty obvious they are under contract,” Mr. Kutyan said. There was even an incident in which Mr. Kutyan was in the house meeting with his clients, and another agent came to the door. He and his clients were discussing tactics on a recently terminated listing they were planning to relist after the holidays.
“It’s become a dog-eat-dog world out there. If it’s the first time, I’ll reach out to the agent and say, ‘hey, I’m giving you the benefit of the doubt.’ If it happens more than once, I’ll contact their broker. If it happens multiple times, I’m going straight to RECO [the Real Estate Council of Ontario]. Enough is enough."
In fact, RECO recommends agents come to them the first time.
“In Ontario, there are specific rules that brokers and salespeople must follow when dealing with a client that is represented by a different brokerage," said Joseph Richer, RECO’s registrar. "In particular, a broker or salesperson cannot solicit the business of a consumer who is already under a representation agreement with a different brokerage, either by communicating information or suggesting superior service delivery. RECO encourages anyone who is aware of a broker or salesperson engaging in this behaviour to file a complaint with us so that we may investigate the matter.”
“If there’s a reasonable possibility that a consumer is under a representation agreement, a broker or salesperson should specifically inquire with the consumer to find out if they are represented. This should happen before they engage in any solicitation of their services.”
For realtors, it’s a rough market. There were 7,187 home sales in the market area of the Toronto Real Estate Board in March, 2019 – the lowest March sales total since the sub-prime mortgage crisis period of 2009, although average prices have increased. Jason Mercer, the Toronto Real Estate Board’s chief market analyst, said there’s another bit of bad news for realtors: “The supply of listings has also receded." So, with fewer sales to go around, what little business there is can be hotly contested.
There are currently more than 53,000 licensed real estate brokers and salespersons in and around the Greater Toronto Area.
“In a world of however-thousand agents chasing a limited amount of work, I’m not surprised some are not necessarily following the rules,” said Paul Johnston, leader of the Unique Urban Homes sales team and a salesperson at Right at Home Realty Inc. He said he has not had his own clients approached inappropriately very often, although he’s seen other shenanigans, but he says that’s just real estate. “I’m not supposed to get phone calls claiming ‘I’m the CRA and you owe me money’ – all kind of things happen that are off-colour. It’s easy to imagine the real estate business is like the TV shows; for a lot of people it’s a struggle to make ends meet and no doubt there are agents who become a little bit desperate. That doesn’t defend the activity, but it helps explain it.”
One tactic Mr. Johnston has seen in recent months has been in the presale condo market, which accounts for about 60 per cent of his business. Sometimes buyers will come in and ask to speak to an agent who doesn’t work with his team, and as it turns out, that agent has been advertising themselves online – illegitimately – as the exclusive representative for the developer. “It’s not an inconsequential problem, it creates confusion, frustration and downright anger [for the buyer]," Mr. Johnston says.
Another tactic Mr. Kutyan has seen is rival agents approaching one of his clients with an active listing, asking the clients to break their representation agreement with Mr. Kutyan and list with them instead. “They’ll say, ‘I have a buyer for your house, but I’m not going to bring you an offer unless you list with me.’” They sweeten the deal with an offer to represent both buyer and seller on the deal, taking only a 3 per cent commission. This is more than the 2.5 per cent they would normally get if they just brought a buyer to Mr. Kutyan, but it lowers the total transaction fee for the seller, which in Toronto ranges between 3 per cent and 5 per cent.
“Are we really this hungry for the business to do these underhanded things for an extra half a point on a $2-million or $5-million sale?” Mr. Kutyan asked. The difference is not insignificant in dollar terms: on a $5-million sale, 2.5-per-cent share would net the agent $125,000, compared with $150,000 at 3 per cent, whereas grabbing the extra half a per cent of a $2-million sale would earn $60,000, compared with $50,000 at 2.5 per cent.
RECO has recently called for amendments to the Real Estate and Business Brokers Act that would ban one agent from representing both a buyer and a seller in a single home sale, a practice called double-ending in the industry. “We believe that’s a conflict of interest – that you can’t serve two masters in that situation,” Mr. Richer has said.
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