But in this case, I mean in the Real Estate industry!
CBC’s Marketplace aired a story on November 4th (which made the US elections process look pristine) where they shared the results of their undercover investigation into real estate practices, relating to rigged bidding wars.
What’s a rigged bidding war? It’s when the listing agent (who WORKS FOR the Seller) manipulates a bidding war so that a Buyer, whom the same listing agent also represents, (this representation is called “double ending”)wins the bidding war and doubles their commission in the process!. In their investigation, 6 of the 10 agents they spoke to at open houses offered to rig the bidding war for Marketplace’s undercover ‘Buyer’ if this ‘Buyer’ made an offer with them. Here’s a link to the show if you were lucky enough to have missed it: Try watching this video on www.youtube.com,
Do some agents rig bidding wars in Toronto? I’m afraid so.
Does anyone really care? Yes! We, who love our business and attempt every day to serve at the highest professional level DO CARE!
Why This Story Matters
When agents manipulate a bidding war, nobody wins, except for the agent.
- The Seller likely got less money for their house than they would have had a true blind bidding war occurred. When the goal of the sale pivots from representing the best interests of the Seller to making more commission for the agent, that’s NOT OK. The Seller paid to be represented, not to be manipulated. BTW… STATS TELL US SELLERS GET ON AVERAGE 1.4% LESS FOR THEIR HOMES when their agent represents the buyer of their home.
- The other legitimate Buyers who didn’t win the bidding war invested their time, money and emotions into a house they were never going to get. Unbeknownst to them, the Buyer had already been pre-determined.
- The Buyer who won the house didn’t have proper representation either, so while they GOT the house, they didn’t have anyone protecting their best interests (like ensuring they paid a fair price, that the house would appraise, that it was properly inspected and safe etc etc)
- This kind of behaviour casts a negative halo on the entire Real Estate business in an industry that already struggles to be seen as ethical.
So 60% of Agents Are Corrupt? NO! That is NOT the takeaway from this report…much as Marketplace left you with that ‘impression’….But you know the press too…”If it bleeds, it leads”!!
It’s important to note that the CBC Marketplace hidden-camera investigation was NOT random and nor was their sampling! They didn’t enter just any open houses and find six agents violating the rules. The goal of the CBC Marketplace investigation was to target agents who regularly represent both the Buyer and the Seller in a sale and those who are rumoured to manipulate bidding wars. The goal was to catch them red-handed (if not red-faced! But who could tell? their faces were blurred!!)
So how many agents would pass the ‘smell test? Marketplace concentrated their investigation on “top agents” who were double-ending more than 20% of their listings (the average is apparently 10%). Most agents in Toronto sell fewer than five homes a year, and the bulk of the sales are actually done by 5 or 10% of agents. It’s the same 90/10 rule in our industry too. And because the Real Estate Council of Ontario (RECO) currently operates on a complaints-only basis (vs. doing random mystery shopping themselves), it’s impossible to know.
Can Double Ending or representing both sides of a transaction be conducted safely and ethically? Yes.
But, when the rules and regs are broken…the penalties are like a “slap on the wrist”! It’s like when you see the penalty on a highway for speeding and you say to yourself, hmmmn I can afford that! and the pedal meets the metal as a result.
RECO whose mandate to protect the consumer needs to review their current ways of doing things and STEP UP to meet the challenges of today’s problems with unethical practicians in the industry.
Brokerages know who these people are too. They need to take FIRING action with known offenders…despite the fact that they reap the benefits of these “top producers”!
And in this digital age do we need an overhaul of REBBA, our bible on best practises? Do we need a REBBA 2.0??
My view is that Market Place has shone a light on some WORST PRACTICES….and if the Real Estate industry wants to continue to be self regulating, then we’d better come up with some positive plans for change. OPTICS MATTER FOLKS. PERCEPTION IS REALITY. So let’s DRAIN THIS SWAMP !
I’d love to hear YOUR ideas for a positive path forward. What do YOU think? How would YOU like to be represented in one of the biggest deals of your financial life? Let me know please! and be careful out there!
If you (or someone you know), are looking for a Realtor who cares MORE about focusing on you, your concerns, goals and the successful purchase or sale of YOUR unique home, than they care about their volume of transactions and awards, please let me know the best way for me to connect, as I would love to offer my highly personal service. Contrary to that old expression, not only IS this business, but it IS personal! And, please, I encourage you to ask me any questions you may have about this post. I value your input and appreciate the time you took to read it.