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Ontario real estate regulator ineffective at protecting homebuyers, sellers, audit finds

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The agency that regulates the real estate industry in Canada’s most populated province is failing to adequately protect consumers during one of the biggest purchases of their lives, a recent report from Ontario’s auditor general concluded.

Bonnie Lysyk’s value-for-money audit examined the effectiveness of the Real Estate Council of Ontario (RECO) and the Ministry of Public and Business Service Delivery, which oversees Ontario’s multibillion-dollar real estate industry.

The critical report, which was released last week, cited concerns around RECO’s ranging from a failure to systematically track and analyze complaints, a lack of regular brokerage inspections, and the absence of any process to monitor if investigations are completed and whether appropriate action was taken, or any action at all.

Many of the issues flagged in the report have been ongoing points of frustration for Ontario homebuyers and sellers, who’ve expressed concern over RECO’s handling of complaints and lack of regulatory rigour for years.

“It seems RECO is just of the realtors, by the realtors, for the realtors, working only to protect themselves,” Swati Dhawale said in response to the report.

Swati Dhawale, right, and Amol Walunj filed a complaint with RECO in February 2022 after losing $40,000 in a real estate transaction in the Greater Toronto Area. RECO closed the complaint several months later, saying simply that allegations of misconduct against their real estate agent ‘could not be substantiated.’ (Swati Dhawale and Amol Walunj)

After losing tens of thousands of dollars in a questionable real estate transaction in the Greater Toronto Area involving an agent from the brokerage HomeLife Miracle Realty Ltd., Dhawale and her husband, Amol Walunj, filed a complaint with RECO last February.

Chris and Bibi Harding, of Brampton, Ont., had also submitted a complaint to RECO about two months later, in April, over their own dealings with the same brokerage.

Both couples spoke out as part of a recent Marketplace investigation into real estate agents engaging in mortgage fraud, to the detriment of unwitting buyers.

After submitting their complaints, each couple waited months to receive a response from RECO. When an investigator did call, the Hardings said he seemed to suggest they were at fault and not the real estate agent in question.

In April 2022, Chris and Bibi Harding filed a complaint with RECO in relation to a questionable real estate transaction. They have not yet been updated on the status of their case. (CBC)

For Dhawale and Walunj, it was seven months before they were emailed a notice from RECO saying their complaint file was being closed, as the allegations of misconduct against their real estate agent “could not be substantiated.”

When Marketplace investigated that same brokerage as part of its hidden-camera investigation, it found a pattern of questionable behaviour by some real estate agents working for that same brokerage, HomeLife Miracle Realty Ltd.

 

 

Mortgage Fraud

We go undercover to investigate mortgage brokers and real estate agents perpetrating mortgage fraud for a fee, securing commissions by submitting fake documents for approval.

At the time, Ajay Shah, the broker of record for HomeLife Miracle Realty Ltd., said he does not condone the behaviour Marketplace told him it captured on hidden camera; he said the agents documented represent just a fraction of the brokerage’s sales and the 3,000 agents working under his supervision.

How RECO handles and investigates complaints was one of the issues highlighted in the auditor general’s report. In the past five years, RECO received approximately 11,700 complaints against real estate agents and brokers, it said, but Lysyk found that RECO has no system in place for identifying systemic trends and issues it should address.

She also found that RECO had not categorized or recorded any description for 55 per cent of the complaints received.

“Seriously?” exclaimed Dhawahle in response to those findings.

“We cannot believe that in this day and age, when companies use data to analyze all aspects about the most trivial things, RECO is not even bothered about categorizing the complaints involving hundreds of thousands and even millions of dollars.”

When Marketplace reached Shah for comment following the release of the auditor general’s report, he said he would like to see RECO categorize complaints based on the seriousness of the charge, so the regulator can apply the appropriate time and resources based on the level of wrongdoing.

“A complaint about a real estate agent sharing a lockbox code with a client should not be treated the same as accusations of fraud,” he said.

RECO told Marketplace that Shah is co-operating fully with their own investigation, launched after Marketplace‘s report.

Lack of on-site inspections

A lack of on-site inspections for brokerages was also found to be an issue in the regulator’s operations, according to the audit, which found RECO has never conducted a routine on-site inspection at 27 per cent of registered brokerages. A further 35 per cent have not had one in more than five years.

The auditor general also found that RECO rarely follows up on violations found during inspections, recommending that a framework be created to inspect brokerages based on risk level.

This week, CBC News asked RECO for the date of the last regular inspection of HomeLife Miracle Ltd., and was told this information is not a matter of public record.

The real estate brokerage HomeLife Miracle Realty Ltd., has five branches across the Greater Toronto Area and Cambridge, Ont. Three real estate agents connected to the brokerage were caught on camera by Marketplace offering to facilitate mortgage fraud for a fee. (CBC)

RECO’s registrar, Joseph Richer, said that many of the recommendations in the auditor general’s report align with their own strategy, including those that relate to the inspection program.

“We are considering these as we develop a new brokerage inspection program, which will launch in 2023,” he said in an email.

‘Not delivering on its mandate’

RECO was created in 1997 to administer and enforce Ontario’s Real Estate and Business Brokers Act. Its stated mission is “to promote a fair, safe and informed real estate market for consumers in Ontario through effective, innovative regulation of those who trade in real estate.”

By law, every real estate agent, broker and brokerage must be registered with RECO, whose operations are funded primarily through the registration fees it collects. In 2021, RECO’s operating revenues totalled $33.6 million.

However, despite its mandate to protect consumers, the auditor general’s report called attention to the fact that RECO’s board of directors is almost exclusively comprised of industry representatives.

The board is required to have a process for input on issues of importance to consumers, but for most of RECO’s existence, Lysyk said, this has not been in place.

In RECO’s overall response to the report, it said it is committed to delivering on its mandate and to sharing its progress in a transparent manner. The Ministry of Public and Business Service Delivery added that some legislative updates around the regulation of real estate professionals are already planned and will come into force on April 1, 2023.

But those planned changes don’t address the issues highlighted by Ontario’s auditor general, said Murtaza Haider, a professor of data science and real estate management at Toronto Metropolitan University.

“It is a serious document, and they have to really reinvent themselves, the way I read this report,” he said. “And it is not that they are without resources; they are bringing in millions of dollars of revenue.”

The audit ultimately outlines 25 recommendations for the RECO, and the Ministry of Public and Business Service Delivery, to ensure it can ultimately fulfil its mandate.

Fines as ‘the cost of doing business’

The auditor general’s findings add to the frustration Jeanhie Park feels over her dealings with RECO.

Park submitted a complaint in May 2021 over a real estate agent she believes provided her with misleading information about competing offers, on a property she purchased for $200,000 over asking.

“We felt duped and manipulated,” Park said. “The fact that there were zero registered offers, that we were misled with false information in order for us to put in our top price.”

More than 18 months later, Park says there is still  no resolution from RECO.

Jeanhie Park filed a complaint with RECO in May 2021. She said her real estate agent misled her into believing she was competing against multiple offers when there were none. (Tina MacKenzie/CBC)

“After following up with RECO every month last year, I finally received a call from one of RECO’s senior investigators back in May,” Park told CBC News.

Park said the investigator told her the video evidence she submitted with her complaint was “damning” and that disciplinary action against her agent — if taken — would likely be in the form of an educational course. She said she’s heard nothing since.

“It’s just nothing but a slap on the wrist,” Park said of the potential disciplinary actions.

Between 2017 and 2021, the average fine issued by RECO for violations of the Real Estate and Business Brokers Act was $8,273, and 78 per cent of fines came in under $10,000.

Based on the average home price in Ontario of $835,090, a typical commission earned by real estate is $20,879.

In her audit, Lysyk expressed concern that registrants may see such fines as “the cost of doing business.”

Ontario lagging in consumer protection laws

The auditor general also found Ontario is lagging behind when it comes to implementing consumer protection laws in real estate.

In July, the B.C. government introduced a mandatory three-day cooling-off period on real estate transactions, giving buyers time to conduct home inspections or confirm financing.

There is no legislated cooling-off period in Ontario.

Murtaza Haider is a professor of data science and real estate management at Toronto Metropolitan University. (Doug Husby/CBC)

Furthermore, in Ontario, real estate agents or brokers are allowed to represent both a buyer and seller in a single real estate transaction — a practice commonly referred to as double-ending, which has long been criticized for its inherent conflict of interest. It has been banned in some other provinces, including Quebec and B.C. In Alberta, agents cannot negotiate for both sides.

As for Haider, the industry expert, he believes outside oversight of RECO is needed to ensure the auditor general’s recommendations are addressed quickly. He suggests a task force made up of representatives from real estate, academic and consumer groups.

“Without such oversight, it would take years for these things to materialize.”


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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

The Canadian Press. All rights reserved.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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