Are We About To See The End Of Double-Ending?

TorontoRealtyBlog

So the government wants to put an end to "double-ending," eh?

And the public wants this too?

Apparently, this is one of the root causes of the red-hot real estate market, and it pushes bids higher?

There's a lot of misunderstanding, and misinformation about double-ending, so once and for all, let me pull the lid off this, and give you my honest thoughts about what goes on, and what we can do about it…

Upon closer inspection, that photo of two people shaking hands doesn't really fit.

I really should have used my Google-Fu to find a photo of one person shaking his or her own hand.

That would make a lot more sense, given the subject matter today…

I want to tell you guys a story, if you'll indulge me.

A couple of months ago, my wife and I made an offer on a house.

The property, as luck would have it, was listed for sale by Bosley Real Estate.

While the cynics might suggest this gave me an advantage, I assure you, it did not.

As luck would also have it – a different kind of luck, the listing agent, had his own offer on the property.

And while the cynics might further suggest this gave the listing agent an advantage, and put me at a disadvantage, I assure you, it did not.

On the night of offers, the listing agent met with his client at 6:00pm, and signed an offer.

That offer was sealed in an envelope, and handed to our brokerage General Manager.

There were six offers on the property that night, and the General Manager presented the listing agent's offer first.

That offer was presented by the General Manager, to the listing agent, in front of his seller clients, on behalf of his buyer clients.

Then five other offers were presented, including mine.

In the end, guess who won?

The listing agent.

His offer was the highest, "right out of the gate," as they say.

And he won fair and square.

This didn't stop the other agents from complaining, however.  They called "shenanigans," and our efforts to smooth things over fell on deaf ears.

So ask me: was I mad?

Not a chance.  The listing agent won, in a fair contest, and truth be told – the contest might not have been that fair at another brokerage.

You might ask if this is the way we do all our offers at Bosley, and I'll be honest and say, I don't know.

I also don't know what "rules" are in place to deal with multiple representation, as it depends who you ask, and on what day.

I don't know what goes on at other brokerages.

And I don't know what the average Realtor thinks about it.

I do know three things, however:

1. The public wants change.
2. Change is coming.
3. The transition will be seamless.

And that's that.

To understand "double-ending," you first need to understand where buyer agency came from.

Because worse than double-ending, is what used to happen before buyer agency was created – back when every real estate agent worked in the best interest of the seller.

So if you, the buyer, wanted to make an offer on a property, your agent, no matter who he or she was, would be expected to push the seller's agenda.

No word of a lie, folks.  It sounds insane, but this is how things used to work.

I wrote a blog about this back in November of 2016 called "How Buyer Agency Was Born: Knock Estate vs. Jon Picken"

Have a read through, if you've got time.

The blog post didn't exactly rack up a huge number of comments, or a good bounce rate, but the subject matter is important if you want to understand the origin of "double-ending."

After Knock'n'Picken, as it's referred to by legal minds, buyer agency was established, and order was restored to the industry.

But keep in mind that this was way before the Internet, and the MLS system.

So back in the 1980's, and 1990's, it was quite common for buyers to seek out real estate agents who either had a lot of listings under contract, or worked for a brokerage who had a lot of listings.

Back then, it seemed like an advantage for a buyer to walk into a brokerage and work with somebody who represented their own "in house" listings.

Properties didn't sell in mere hours like they do today, but without the Internet, there was still a serious lag between when the ink was dry on a listing, and when other agents throughout the city knew about it.

I know we're not in the 1990's anymore.  Times change, and the days of buyers wanting to work with the listing agent because of access to a listing, has changed to buyers wanting to work with the listing agent because they believe they're getting an advantage.

So let me tell you another story.

I had a listing last fall that was red-hot.  In the mid-$1M-range, over 80 showings in a week, and six offers on offer night.

On the morning of offers, I received a call from a young agent who said, "I want you to work with my client."

I didn't quite understand.

He told me that his client was his brother, and he wanted me to work with him to "guarantee" he got the property.

I asked him what he expected in return, and he said, "nothing."

He told me that he didn't care about the commission he would forego, so long as his brother got the property.

So here I was, looking at double the commission, served up to me on a silver platter.

And what did I do?

I told him I wasn't interested.

And the roar from the agents around me on the floor that day went wild.

"Are you nuts?" one agent asked me.

"What's wrong with you?" asked another.

And I sat them down, and explained to them, like father to child, that I have a great reputation in this business, and there's nothing I would ever do to jeopardize that.  I'm in this business for the long-term, not the short-term.  One extra "end" of a deal today means nothing if it damages your reputation among your peers, and makes them not want to work with you.  If cooperating agents don't want to work with you, then you get fewer offers, and your seller-clients suffer.

Had I told cooperating agents that evening that I had my own offer, several of them might have withdrew their offers, or not presented at all.

If my seller had received fewer offers, he undoubtedly would have received a lower price.

And that's not why he hired me.

Not only that, I knew then, as I know now, that it would have been impossible for me to represent both buyer and seller, in competition, at arm's length.

I don't like it.  It feels dirty.

And given the pretense to this situation – a real estate agent working with a buyer, who showed him the property, wants me to work with him to "guarantee" the victory, it felt even dirtier.

The agent in question did end up bringing an offer on behalf of his brother that night, and his offer was well behind the eventual victor.

Now at the risk of becoming repetitive, let me tell you a third story, and by the time this story is through, I believe we can use all three to draw some sort of conclusion.

Back in November of 2016, the CBC did a "hidden camera" story where they "exposed" real estate agents offering to somehow lie or manipulate the offer process, on behalf of a potential buyer, to ensure a successful double-end.

You can find that story HERE.

After that story broke, a slew of agents and brokerages got up on their soapboxes, and took the opportunity to talk about how bad the practice of double-ending is, how they don't like it, and what they're going to do about it.

One particular brokerage, Re/Max Hallmark, apparently changed their policy as a result, as noted in THIS article in the Globe & Mail, which gave us this quote:

"ReMax Hallmark Realty Ltd., which has 10 offices in Toronto and other parts of Southern Ontario, changed its policy this week to address the controversy. From now on, a listing agent may not also represent a buyer for that property in multiple offers."

I have no evidence that they did change their policy, aside from that quote in the Globe & Mail.

But I do have a conference table full of MLS listings that show double-enders since November 10th of 2016:

That's 44 double-enders, via 25 different agents, since the story in the Globe & Mail that said Re/Max Hallmark had changed their policy.

Either this policy at the brokerage level was implemented, and agents are ignoring it, or the brokerage decided not to implement the policy, as was explained to the Globe & Mail.

Either way, it's noteworthy, because it shows both that the issue of double-enders is being discussed at the brokerage level, as well as the fact that many agents have no problem with it.

So what do we do?

As an industry, is it incumbent upon us to offer up a solution, change, or policy internally, to satisfy the government's request, which is based on public disdain?

Or do we we wait until the government forces us to change?

Personally, I think change is coming.  No doubt about it.

So either the Ontario Real Estate Association puts together a proposal and offers to work with the Ontario government, or they're going to come up with ideas on their own, and cram it down our throats.

I would have absolutely no problem if either OREA, or the government, mandated that one individual Realtor can no longer represent both buyer and seller in a transaction.  To take that a step further, I might add, "In multiple offers," since I don't think it's fair to suggest that a listing agent, representing the sale of a farm in rural Ontario, cannot work with a potential buyer when that property has been languishing on the market for 165 days.

I think the exact rules, and the verbiage used, would need to be refined.

And what then of regulation, oversight, and discipline?

Reader "Steve" commented on Monday's blog that if agents would "find a way around it," as I suggested, then there is a serious concern here!

I agree.

There are massive fines, even jail time, for insider trading in the equities markets.  So what would happen if a listing agent handed off a buyer to a rookie in his or her brokerage, told that rookie what to offer after he or she had reviewed all the offers, and then that rookie agent happened to magically "win" on offer night?

If it could be proven that there was insider trading, what would the repercussions be?

Now one final thought, just to play devil's advocate.

If and when the Toronto market ever turns, and properties sit on the market for months at a time, would we then have an issue with "double-ending?"

If you were a seller, and your listing agent happened to have a buyer-client, or receive an inquiry from a buyer, that wanted to make an offer on your property, would you scream "bloody murder" at the rules that prevent your agent from working with that buyer?

The grass is always greener on the other side.

The problem is: we haven't seen the other side in 20 years.

I welcome your thoughts.

The post Are We About To See The End Of Double-Ending? appeared first on Toronto Real Estate Property Sales & Investments | Toronto Realty Blog by David Fleming.

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