In this case, the Listing agent doesn’t present a competing Offer. That’s bad enough if you are the other Buyer, but what about if you are the Seller? Are you losing out? Do you really know what’s going on?
On June 10, 2019, the Seller executed an exclusive listing agreement for his property setting out that the Seller agrees to pay a commission of 5% of the sale price of the Property with 3% payable to the listing brokerage and 2% payable to the buyer’s brokerage.
The 10 June 2019 Listing Agreement expires 31October 2019 priced at $5,500,000. On 10 October, the price is reduced to $4,700,000.
The listing was subsequently amended multiple times to extend the listing expiry date and various reductions to the list price.
2 November 2, 2019
Another agent brought a Buyer forward for $5,000,000 (“Offer 1”). Offer 1 was irrevocable by the Buyer until November 6, 2019 at 6:00 p.m.
3November 3, 2019
The Listing agent scheduled a meeting with the Buyer’s agent for the following day, November 4, 2019.
4 November 4, 2019
The meeting takes place and one of the topics discussed were commission arrangements for the subject property and whether Representative B could be paid directly by his own Buyer.
The Listing agent did not have any instructions from Owner with respect to whether the Buyer would pay his own agent’s commission directly or how it may impact negotiations.
5 November 2019
The Buyer’s agent emailed the Listing agent and indicated that they should expect to receive an offer that afternoon.
Later the same day, the Buyer’s agent emailed and indicated that he had redrafted the offer and was waiting for a signature.
6 November 2019
The Buyer’s agent emailed and indicated that he should have a revised signed deal to present the next day.
8 November 2019
Offer 1 expired on November 8, 2019.
At no time was Owner informed by the Listing agent of the existence of Offer 1.
The Buyer’s agent submitted another offer on behalf of the Buyer A for $4,300,000 (“Offer 2”), which was conveyed to the Owner on that date.
The Confirmation of Co-operation and Representation submitted by Representative B for both Offer 1 and Offer 2 indicated that the Listing Brokerage would pay the co-operating brokerage the commission of 2% plus HST to be paid from the amount paid by the Seller to the Listing Brokerage.
On November 8, 2019, another party, represented by The Listing agent acting as their broker, submitted an offer to purchase the Property for $4,500,000.
15 November 2019
The second Buyer’s Offer was accepted following some negotiations
Date: 2 June 2022
Order: Breach of 3, 5, 24(1), and 38 of Code of Ethics
Penalty: $16,000.00 plus two Courses
Time to pay: 10 November 2022
Time to take Courses: 10 November 2022
The Listing agent failed to inform the Seller of the existence of Offer 1, frustrated the delivery of and never conveyed Offer 1, contrary to sections 3, 5, 24(1), and 38 of the Code of Ethics.
Relevant Code Provisions
Fairness, honesty, etc.
3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.
Conscientious and competent service, etc.
5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services.
24. (1) A registrant shall convey any written offer received by the registrant to the registrant’s client at the earliest practicable opportunity.
(2) A broker or salesperson shall establish a method of ensuring that,
(c) written offers are received by someone on behalf of the broker or salesperson, if the broker or salesperson is not available at the time an offer is submitted; and
(d) written offers are conveyed to the client of the broker or salesperson at the earliest practicable opportunity, even if the broker or salesperson is not available at the time an offer is submitted.
(3) Without limiting the generality of subsections (1) and (2), those subsections apply regardless of the identity of the person making the offer, the contents of the offer or the nature of any arrangements for commission or other remuneration.
(4) Subsections (1) to (3) are subject to any written directions given by a client.
(5) Subsections (1) to (4) also apply, with necessary modifications, to,
(c) written amendments to written offers and any other written document directly related to a written offer; and
(d) written assignments of agreements that relate to interests in real estate, written waivers of conditions in agreements that relate to interests in real estate, and any other written document directly related to a written agreement that relates to an interest in real estate.
(6) Subsections (1) to (5) apply, with necessary modifications, if a brokerage and a customer have an agreement that provides for the brokerage to receive written offers.
(7) Subsections (1) to (5) apply, with necessary modifications, to brokers and salespersons employed by a brokerage, if the brokerage and a customer have an agreement that provides for the brokerage to receive written offers.
Error, misrepresentation, fraud, etc.
38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.
I think that I might have my own Buyer. OK, so someone else comes in $300,000.00 over list. Let’s just stop this right now! We will have a meeting with their agent directly and just “talk nonsense”. Great, that Offer will not go ahead and we can delay a little further until my guy is ready. That $5 million Offer is now down to $4.3 million. That’s perfect, this is the right time for my own Buyer to swoop in and take the property for $4.5 million.
Just hope the Seller never hears about that $5 million Offer! That wouldn’t be good!
Brian Madigan LL.B., Broker