As the real estate market continues to thrive, some real estate agents are engaging in unlawful practices that deceive buyers and steer them away from low-commission homes. In a recent investigation by CBC Marketplace, hidden cameras captured agents engaging in anti-competitive behavior, prioritizing their own profits over the interests of their clients.
Uncovering Unethical Practices
The investigation revealed a disheartening truth: the real estate industry often favors the agents themselves rather than the buyers and sellers they represent. Michael Walsh, a broker and real estate agent, expressed his concerns about the existing system: "There's a huge inertia, and maintaining the status quo, it absolutely benefits existing realtors 100 percent."
The Canadian Real Estate Association (CREA) and the Real Estate Council of Ontario (RECO) were reluctant to comment on the investigation. However, after learning about the findings, RECO issued a notice to over 93,000 real estate agents, brokers, and brokerages under its purview, stating that such behavior violates the code of ethics and undermines consumer protection and confidence.
The Issue of Steering
In various provinces across Canada, real estate laws and codes of ethics require agents to act with honesty and promote the interests of the individuals they represent. Provincial laws, such as the Real Estate and Business Brokers Act (REBBA) in Ontario, explicitly state that agents must inform buyers of properties that match their criteria, regardless of the amount of remuneration the brokerage might receive. Failure to do so is known as steering, which is a breach of the law.
However, critics argue that regulatory bodies like RECO are not doing enough to protect consumers and create a fair and abuse-free industry.
Experiences of Homeowners
Joanne Petit and her husband, Frank, decided to sell their house without the help of a real estate agent to avoid the high commission fees. Typically, agents in Vaughan, Ontario charge sellers a five percent commission, which could have amounted to over $73,000 in Joanne's case. Despite listing their house on the Multiple Listing Service (MLS) through a discount brokerage, they received no calls from agents with interested buyers.
Agents often prioritize their own commissions, leading to a situation where buyers are steered away from low-commission homes. Joanne expressed her frustration, stating, "It's not fair, and I think more people have to know about it."
Hidden Camera Investigation
To validate Joanne's experience and test the prevalence of steering, Marketplace producers posed as homebuyers and contacted local agents. The hidden camera investigation found that two out of three agents steered the potential buyers away from Joanne's home. Tactics such as claiming the house was overpriced or suggesting the presence of tenants were used to discourage buyers from considering the property.
While steering is against the law, agents often prioritize the commissions they receive, pushing buyers toward other homes that offer higher benefits for the realtors.
A Need for Change
Experts, including Lisa Laredo, a real estate lawyer, agree that the existing framework for real estate sales enables steering and must be changed. Currently, sellers incentivize agents to bring buyers by offering commissions, perpetuating a system that prioritizes the agents' interests over those of the clients.
Stephen Brobeck, a senior fellow at the Consumer Federation of America, suggests that "decoupling" realtor commissions could lower the standard rate and save consumers billions of dollars annually. However, comprehensive changes must be implemented at the provincial level to address this issue.
Shining a Light on Unethical Practices
The investigation conducted by CBC Marketplace shed light on the unethical practices within the real estate industry. By exposing the prevalence of steering and prioritizing commissions, consumers can better understand the challenges they may face when buying or selling a home.
It is essential for buyers and sellers to be aware of their rights and work with ethical agents who prioritize their interests. Engaging in open dialogue and negotiating commissions can lead to a fairer and more transparent real estate market.
Joanne Petit put her house up for sale without a real estate agent to save on commissions that would have amounted to over $73,000.