REAL ESTATE

Regulators set their sights on double ending

Critics argue that realtors cannot fairly represent both buyer and seller, a practice more common in smaller markets.

 

-Mary Mitchell, Broker
License# 01452479
805-550-7168
www.marymitchellrealestate.com

This 5.5-acre luxury property in Whistler, B.C., was listed at $19.9-million, but long-time real estate agent John Ryan found a buyer, and an offer, that suited the seller. Mr. Ryan often represents both buyer and seller, a practice known as limited dual agency, or double ending.

KERRY GOLD

SPECIAL TO THE GLOBE AND MAILLAST UPDATED: 

A 5.5-acre Whistler property with separate staff residence and infinity pool recently sold for $17.5-million, after sitting on the market for 150 days.

It had been listed at $19.9-million, but long-time real estate agent John Ryan found a buyer, and an offer, that suited the seller. Mr. Ryan says he received the one offer on the house from a friend.

“It’s a buddy who’s buying it, so I can go up there and drink his wine,” he joked.

The sellers had owned the house for years, he says, and did an $8-million renovation before deciding they wanted something bigger. They’ve purchased three properties that are also in the Stonebridge neighbourhood and are building a compound, according to the agent.

Mr. Ryan has sold about $80-million in real estate in the past couple of years in Stonebridge alone. Many of his clients come from referrals, built up over a long history of selling Whistler real estate. A luxury property can take more time to pair with the right buyer.

The sellers did an $8-million renovation before deciding they wanted something bigger.

Limited dual agency, in which an agent represents both buyer and seller, and collects the full commission, is a large part of his business, Mr. Ryan says. But critics argue that an agent cannot fairly represent both parties. Ontario is currently considering a ban on the practice as part of its 16-point housing plan. And, through a spokesman, B.C.’s new superintendent of real estate, Michael Noseworthy, says he’s “very close” to publicly disclosing potential new rule changes on the practice. If implemented, they could change the landscape for many of British Columbia’s 22,000 licensed real estate agents. As the government continues to clamp down on an industry that many have perceived as a “wild west,” the issue of double ending remains unresolved.

Regulators are aware that double ending is much more common in smaller markets outside of the Lower Mainland and an outright ban could have more of an impact on those regions.

“It’s something that we do a lot,” Mr. Ryan says. “I’ve been selling real estate for almost 30 years, and it is a big part of our business. If things change, we’ll deal with it. I don’t know what they are going to do.

“Obviously, I love it, because we put deals together.”

Mr. Ryan adds that the current rules are “very strict in what we are allowed to do and not to do” in the dual-agency arrangement. For example, if he knows the seller’s bottom line, he can’t disclose it to the buyer. And he can’t tell the seller how high the buyer is willing to go.

The sellers have purchased three properties that are also in the Stonebridge neighbourhood and are building a compound, according to the agent

“In a lot of ways, it’s no different than if it was another agent bringing in an offer, because it has to be played out.”

However, there is no way to enforce those rules. An agent could leak information without the other party knowing. Also, agents may be less inclined to market the property as widely as possible if there’s a chance that they could double end it instead.

Last year, when the province got tough on unscrupulous real estate practices, it created an advisory panel to come up with a list of recommendations based on public and industry feedback.

One of its top recommendations to the government and the Real Estate Council was to cease double ending, says lawyer Ron Usher, who was a member of the panel.

“The feedback we got was that this was a very big problem,” Mr. Usher says.

When I’m representing the seller, I’m the coach. When I represent the buyer and the seller, I’m the referee. That’s the difference.

IAN WATT, REALTOR

“Realtors felt that they could handle it, that they were ethical, and I get that they didn’t want to be tarnished. They believe they can act ethically and I think they can. I believe someone could do it ethically, but the problem is, they are saying, ‘I will offer you a narrower range of service and loyalty.’ Can you do that ethically? Yes. But does it mean something is being left out? That’s the question.”

Superintendent of real estate spokesman Mykle Ludvigsen said that Mr. Noseworthyhad met with industry members throughout British Columbia to discuss banning the practice. He wants more feedback for “smoother rule implementation.”

Mr. Usher says the problem they face is that the rest of the province is not like the Lower Mainland. In small communities with fewer realtors, everyone knows each other. Realtors often have repeat clients for decades who trust them to act as both buying and listing agent, in places such as Whistler.

“The law of unintended consequences is always at play,” Mr. Usher says. “They have to ask, ‘Are we clear we are not going to cause more harm than the problem we are trying to solve?’ That’s a challenge to every regulator. I cut them some slack on this one, because from the discussion we had in our group, everybody realized it was not a slam-dunk simple thing to do, even though it was very clear there were great problems associated with it.”

Peter Larsen purchased a property in a community that is small enough he did not want to disclose its name, for fear of repercussions. In hindsight, he feels that he was not shown as many listings in the area because the realtor steered him toward her own. He ended up buying one of her listings, so the realtor represented both him and the seller. As it turned out, the property had many deficiencies, including a faulty roof, chimney and well.

Regulators are aware that double ending is much more common in smaller markets outside of the Lower Mainland and an outright ban could have more of an impact on those regions.

“There were a lot of places [the realtor] didn’t bother showing because they were not her listing,” says Mr. Larsen, who believes double ending should be illegal. “I know that even the realtors know it’s wrong, but they are so greedy at this point.”

In a hot market, the practice of offering “exclusive listings” or “pocket listings” always goes up, Vancouver realtor Ian Watt says. An exclusive listing is one that is not on the Multiple Listing Service. The realtor offers the seller the option to sell without listing, so as to avoid the hassle of open houses. The seller might want to sell quickly, without neighbours traipsing through their home. And the agent might say they have the perfect buyer lined up, in which case the realtor would double end the deal. But Mr. Watt doesn’t see any benefit to the seller, even if the rules are followed.

He gives the example of someone living next to a loud party house. The realtor might not disclose that fact to the buyer in order to make the sale. That disclosure is not a requirement, so it comes down to trust.

“If you’re looking for someone to look out for your best interests, why the hell would you use [dual agency]?” he asks. “If you were getting divorced and you hadn’t agreed on the terms, you would never say, ‘Let’s just save money and go directly to one lawyer, he will be impartial and look out for both of us.’ “When I’m representing the seller, I’m the coach. When I represent the buyer and the seller, I’m the referee. That’s the difference. There is no way that somebody can be involved in a transaction on both sides and be 100 [per cent] fair. There is no way.”

North shore realtor Patricia Houlihan, who is also a lawyer, agrees that exclusive listings make no sense for the seller.

Agents may be less inclined to market the property as widely as possible if there’s a chance that they could double end it instead.

“That makes me crazy,” she says. “How can your seller possibly get the most when it’s not even exposed to the market? I don’t think that it should happen other than in very rare situations.”

If it does happen, she says it should say at the top of the agreement in bold letters: “You are choosing not to put your property on MLS, and it will not get the exposure it would otherwise get.”

Ms. Houlihan says she’d happily be part of a committee on the industry’s problems.

She also thinks the screening process for realtors should be tougher.

“You need to go into it because you want to learn, you want to represent people to the best of your ability, because the little old lady and the 25-year-old are all relying on you to do the best you can with their money. It’s important. And we have so many realtors.”

Critics argue that an agent cannot fairly represent both buyer and seller.

 

Mr. Watt thinks managing brokers should take charge of any double-ending deals that come up.

“The managing broker is not going to lose his licence over a commission, so let the boss take it over [from the agent]. And if that doesn’t work, then just [ban it] completely.”

The upside is that the public is far more aware of how the industry operates since it came under media scrutiny last year, Mr. Usher says. People are using more caution. And with the support of the Real Estate Council of British Columbia, fines for bad agent dealings are as high as $250,000, which has changed the landscape.

“Ultimately, the mark of a true professional leaves aside remuneration and asks, ‘Am I a salesman or an agent?’ ” Mr. Usher says.

“We’ve come a long way in the last year – but there are lots of details yet.”