OREA would like to see an improvement related to the disclosures required with respect to guaranteed sales.
This is in response to: “If we don’t sell it, we’ll buy it.”
Recommendation
“Enhanced Disclosures for Guaranteed Sales: Introduce new rules, including written disclosure for guaranteed sales, ensuring the terms and conditions are clearly outlined to the consumer.”
Explanation
“RECOMMENDATION #3: Curb bad behaviour while preserving consumer choice by introducing new rules, including written disclosures, for guaranteed sales.
Guaranteed sales are a marketing technique that some real estate agents use to sell a home. The agent will agree to purchase the home at a price agreeable to the seller if the listing does not sell in a certain timeframe. These details are confirmed before the listing agreement is signed. While most guaranteed sales agreements are done properly with clear disclosures and understanding by a home seller, there are situations which warrant new rules to enhance disclosure requirements to protect consumers.
REALTORS® believe that consumers should have the right to choose how they buy or sell a home. Life circumstances may dictate how a family transacts real estate and may warrant using a REALTOR® who offers a guaranteed sales program. Perhaps a growing family has purchased their next home and needs to sell theirs quickly, or there is a marriage breakup; situations like this occur in Ontario, and flexibility in TRESA is critical.
OREA recommends introducing new rules, including written disclosure, for guaranteed sales.
We want to ensure that the terms and conditions are clearly outlined to the consumer at the forefront of any listing agreement. We want to prevent bait-and-switch situations where sellers do not understand their obligations or the agreement’s specifics. For example, agreements may have parameters around the listing price being decreased throughout the selling process, or repairs and upgrades may be required before the sale.
Additional disclosures should also be required concerning the advertising of guaranteed sales programs. Guaranteed sales advertisements often do not include how the brokerage calculates the price. The implication is that the purchase price is based on the listing price or the property’s market value, but that is not always true. Sometimes, the legal fees, carrying costs, and commission of the resale are deducted from the purchase price, and that is not required to be disclosed.
Alberta has set clear rules about the requirements for offering and entering into a guaranteed sales agreement. First, only a brokerage may offer a written guaranteed sale agreement. There are rules around the contents of the agreement and what must be included. Ontario should look to Alberta as an example of what can be done with guaranteed sales programs to enhance consumer protection.”
COMMENT
The current rules are more than sufficient to prevent problems. Full disclosure of the contract and all the details is already required. That’s a fiduciary duty going back thousands of years. If something is “offside” then the agent should be sued and/or disciplined. That can take place now. There’s no need for any “extra steps” as OREA is now recommending.
However, there is one suggestion which I would propose and that is evidence that the agent has to money to back up the guarantee. They could: 1) post the money, 2) provide a performance bond, or 3) provide evidence of the availability of the necessary funds for this transaction.
Many agents will sign many such agreements, but at most they only have the financial ability to back up one deal, not 100 deals. Oversight in this regard is required of Banks and Insurance companies, so why not real estate agents?
Any additional disclosures as proposed by OREA would add nothing to the present obligations. More talk and no action!
Why don’t we say: PLEDGE the MONEY. That would work.
Brian Madigan LL.B., Broker