Ethics Corner – Are you guaranteeing a sale?  Be careful how you advertise!

Jan 11, 2017 | Member Services | 0 comments

This article has been reproduced with permission from the Ontario Real Estate Association. The full decision can be viewed on the website of the Real Estate Council of Ontario (RECO) at www.reco.on.ca.

The following decision from RECO Discipline and Appeal Hearings has been condensed. All individual and corporate names have been changed.

THE FACTS

Chris and Pat wanted to sell their property. They were working with Sam, a real estate salesperson with Green Grass Realty, who listed their property for sale at a list price of $409,980. The listing agreement featured two handwritten notations.

The first notation stated that if Green Grass Realty purchases the property, the deposit will be a certified cheque of $20,000. As well, it stated that if Green Grass purchases the property or if Sam finds a buyer, the total commission will be two per cent. The other handwritten note indicated that if the property is not sold in 30 days, Green Grass Realty would buy the property at the highest price offered by the market.

Each of these notes was initialed by Sam and the sellers. No other terms or conditions regarding the promise to buy the property were documented in the listing agreement, which was for a period of three months.

Just over a month later, Chris and Pat complained to RECO. They alleged that they listed with Sam because of the promise that if their house did not sell in 30 days, Sam or Green Grass Realty would purchase it. The sellers said that after the 30 days had passed, they asked Sam when they’d receive a deposit from him. After several inquiries, Sam offered to purchase the house for $350,000. Chris and Pat did not think this was a fair price, believing the market price to be between $405,000 and $429,000.

Chris and Pat provided RECO with copies of Sam’s printed ads, which stated, “if your property is not sold in 30 days, we will buy it!” This text was accompanied by an asterisk which indicated that certain conditions may apply, but no conditions were listed.

In Sam’s response to RECO, he said that he had explained to Chris and Pat that the market price would be agreed upon between himself and the sellers and set by offers received within the first 30 days of listing the property. Sam said that the house would continue to be listed on MLS® until the closing date, which was a total of three months. Sam said that if a more attractive offer came along, Chris and Pat would have the option of accepting it. In the event that a lower offer was accepted, Sam would compensate the difference between that offer and the amount he guaranteed, ensuring no loss for the sellers.

Sam said two offers were received on the house. Just over a month-and-a-half after listing the house, the first offer was signed back but rejected by the buyers. About a week later a second offer was received and was also signed back. However, before the second offer was finalized, the first buyers returned with a new offer of $409,000 which was accepted by Chris and Pat.

Sam acknowledged that he had failed to document the details of the guarantee in writing and failed to get Chris and Pat’s acknowledgement. Green Grass Realty adjusted its portion on the commission to a $1,000 flat fee.

THE FINDINGS

The RECO panel determined that Sam acted unprofessionally by failing to offer to purchase Chris and Pat’s house as indicated on the listing agreement and in Sam’s advertising. Sam also failed to put in writing, the terms, conditions and limitations of the guaranteed sale arrangements and failed to get the sellers’ acknowledgement in writing.

The panel ruled that Sam breached the following sections of the REBBA 2002 Code of Ethics: (3) Fairness, honesty, etc.; (4) Best interests; (5) Conscientious and competent service, etc.; (27 (1) (b) Written and legible agreements; (38) Error, misrepresentation, fraud etc.; and (39) Unprofessional conduct, etc.

THE PENALTY

Sam was fined $10,000 payable to RECO. The full decision can be viewed on the RECO web site at www.reco.on.ca   Look under “Complaints and Enforcement” and then under “Regulatory activities and decisions” and scroll down to “Discipline and appeals decisions.” Scroll down and click on “Search by year.” Select 2014 then “Search.” The case is dated 2014/11/27.