Real Estate Regulation in the Wild (North)West
Two things have happened to me in the last 24 hours that have left me scratching my head in puzzlement. First, I was making inquiries on behalf of clients for a potential recreational property purchase in B.C., and when I received the information package, it contained a document that blew my mind – a material latent defect disclosure form. In this document, the vendor was disclosing, to any and all potential buyers, the fact that a section of wood flooring beneath the living room area rug was not properly sanded. The intent of the form is to make it more or less impossible for buyers to be caught off guard, or for vendors to be let off the hook, when defects in a home which are known to the vendor or their Realtor are concealed.
We have nothing like that here in the NWT. Yes, just like in the rest of Canada, a purchaser in the NWT could sue a vendor or their Realtor and would likely win if they could prove that a defect was knowingly hidden, but taking someone to court is an atomic response, and most purchasers end up just shrugging their shoulders and suffering the financial consequences. Knowing this, regulators in the provinces put rules in place, they incorporate them into real estate licensing courses, they create standard forms, and then they enforce the rules. And it works. It protects people.
But we don’t really do that kind of thing here. And this is just one small example of a smart rule that we don’t have, and of an area where home buyers and sellers in the NWT are vulnerable to being taken advantage of – mostly by Realtors. Here are some others.
- A Realtor in the NWT is not required to disclose to a potential buyer that they are not working for them (because they already represent the seller). This may seem like it should be obvious, especially when you are viewing a home with someone who is not the listing agent, but it’s not obvious at all. You can be viewing a home with someone who works for a completely different brokerage than the listing agent, and you may think they are representing you, but in fact they represent the seller. It’s confusing and ridiculous, and it is a practice that must be regulated.
- A Realtor is not required to seek permission from a seller before double-ending (assisting the buyer with the preparation of an offer). In these situations the seller will never truly know if they had the undivided loyalty of the salesperson, or if the salesperson perhaps worked both sides a bit in order to earn a commission. Only the Realtor will ever know for sure. This is a bad practice for Realtors as well as sellers and buyers, and it needs to stop. Our regulators need to care about it.
- A Realtor assisting a buyer with an offer on a home is not required to disclose the fact that they are assisting other buyers with offers on that same home, at the same time. We’ve seen this happen multiple times this summer. You can have five buyers submitting offers on a home and three of them worked with the same Realtor. Who amongst those three potential buyers do you suppose got the best advice on pricing and conditions? Only the Realtor will ever know.
- As a broker, if my brokerage takes a good faith deposit on a purchase, and then things go sideways and the deal falls through, I can return the deposit to the purchaser without the seller’s consent, even if the purchaser acted in bad faith. No rules. Good luck to the seller in going after the deposit. Talk to your lawyer. Nothing I can do about it.
- If a Realtor is found guilty by the Superintendent of Real Estate of violating one of the few rules that do exist in the NWT, they will likely receive nothing but a warning. No fine, no suspension. And nobody but the Realtor who broke the rules, and their broker, will ever know if there was in fact a penalty applied, or what the penalty was.
- Realtors in the NWT are not required to adhere to a Code of Ethics.
Any Realtors reading this post may question that last point. After all, I’m using the term “Realtor”, which means we are members of CREA, and CREA requires that all of its members adhere to the “Realtor Code of Ethics.” But the problem is that, in the NWT, it’s unenforceable. We are just too small a real estate board to adjudicate code of ethics disputes without accusations of bias, so we have been relying purely on the honour system – and on the ethical compass of brokers – for almost a decade. I’ve tried a half dozen different tricks to come up with a way to make a code of ethics more enforceable, for the benefit of buyers, sellers and Realtors, but nothing has worked.
My latest attempt was to work with my MLA to try to raise concerns with the Superintendent of Real Estate’s Office. Our regulations are ancient, and anemic, and people are being taken advantage of because of it. And the response both my MLA and I received today was the second thing that made me scratch my head today. The response was that the Superintendent’s office will not impose stricter rules on Realtors unless the Realtors are generally in agreement that they need stricter rules imposed on them.
If you look up “head scratcher” in the dictionary, this should be right there in the list of useful examples. It would be like asking vehicle manufacturers if they feel that safety standards should be beefed up. Maybe some of them would say yes, but a whole lot of them would say that they don’t need more paperwork, more time-sucking hoops to jump through, more energy-consuming rules to follow. They would argue that they can be trusted to look out for their customers’ safety, or the environment’s safety, or their workers’ safety, without regulations. Except, history has shown that they can’t. This is why we have regulators.
The Superintendent of Real Estate’s office is going to canvas Realtors about the issues I’ve raised to them this coming fall. I’m trying to make sure that this consultation includes a public component. So if you’ve ever tried to make a complaint to the real estate board but couldn’t find their website (which doesn’t exist), or if you’ve found yourself wondering why you paid so much for your home a few years ago and now realize you were double-ended but didn’t even know that was a problem, or if you’ve wondered how your Realtor could act in a way that you feel was unethical without any fear of repercussions, please stay tuned to this blog and I’ll try to give you an opportunity to do something about it.