A Federal Court judge on Sept. 25 allowed a class-action lawsuit alleging home sellers in the Toronto area have been forced to pay artificially inflated commissions for years. The lawsuit alleges major brokers and real estate organizations in Toronto implemented rules that essentially stifled competition for buyer brokerage services, leading to higher prices. But what exactly is buyer brokerage and what is its role in the potentially landmark lawsuit? The Financial Post’s Shantaé Campbell explains.
A British Columbia real estate agent has been fined $20,000 after being caught on camera drinking milk straight out of the jug at a home he was showing.
A consent order released by the BC Financial Services Authority last week says Mike Rose was alone in the home in Kamloops, B.C., in July last year as he waited for his clients, who were interested in buying the property.
Rose went to the refrigerator to find water, but instead swigged some milk straight from the container, which he then put back in the refrigerator.
Open House: How to win in multiple offer situations
The consent order, agreed by both the superintendent of real estate and Rose, says the owners of the home saw him drinking the milk when they reviewed footage from a surveillance camera, then confronted him about it two days later.
Rose, who apologized for his actions, was told he wasn’t welcome in the home and his clients replaced him in their purchase of the property.
He says in the order that his behaviour was out of character, and he was “unusually dehydrated” at the time because of a new medication, as well as being under “considerable stress.”
Rose, who is now working at a different brokerage, agreed to pay a disciplinary penalty of $20,000 to the authority for conduct unbecoming, and $2,500 in enforcement expenses.
More on Lifestyle
© 2023 The Canadian Press
Donald Trump's real estate fraud trial begins in New York: What you missed. – USA TODAY
- Deliver and maintain Google services
- Track outages and protect against spam, fraud, and abuse
- Measure audience engagement and site statistics to understand how our services are used and enhance the quality of those services
- Develop and improve new services
- Deliver and measure the effectiveness of ads
- Show personalized content, depending on your settings
- Show personalized ads, depending on your settings
Select “More options” to see additional information, including details about managing your privacy settings. You can also visit g.co/privacytools at any time.
Hong Kong shares drop 3%, dragged down by real estate and energy
Hong Kong’s Hang Seng Index dropped more than 3% Tuesday, dragged by its real estate and energy sectors.
The benchmark index’s loss of over 500 points is a significant decline, Everbright Securities’ Kenny Ng told CNBC via e-mail.
“On one hand, this was driven by profit-taking following a 400-point rise last Friday,” the securities strategist explained. “Additionally, the US dollar index has remained relatively strong, exerting downward pressure on the Hong Kong stock market.”
The index was last trading down 3.16% after coming back from a holiday on Monday.
Ng highlighted how property stocks were among the largest decliners Tuesday, given the high-interest environment.
Hong Kong listed property stocks were firmly in the red. Country Garden Holdings plunged 7.67%, leading losses in the sector, while Longfor Group Holdings lost 4.82%. New World Development shed 6.69%, and Henderson Land Development traded 6.15% lower.
“Coupled with the relatively sluggish mainland Chinese real estate market, it is expected that this sector will continue to face downward pressure in the short term,” Ng added.
China’s property market has struggled with faltering consumer confidence, as property giants Evergrande and Country Garden were mired in debt problems.
Separately, beleaguered Chinese property giant Evergrande resumed trading in Hong Kong. Shares have been volatile since resuming trade in late August following a 17-month suspension. The stock rose 22% in early trade. The firm’s EV unit also halted trading Tuesday.
Toronto real estate class-action could affect billions of dollars in commissions
What does ‘buyer brokerage’ mean?
This transformation prompted the creation of specific legislations and regulations by provincial governments and real estate regulatory bodies in Canada, such as the Real Estate Council of Ontario (RECO), the Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB).
These rules and protocols serve to formalize and oversee buyer brokerage relationships by instituting a framework governing duties, responsibilities, disclosure, consent and confidentiality.
Where do commissions come in?
Nationwide, commission structures for real estate agents and brokerages typically involve a percentage-based commission derived from a home’s sale price, but the rates vary.
For example, if a home sells for $1 million with a commission of five per cent, the total commission amounts to $50,000. This sum, paid by the seller, is generally shared equally between the seller’s and buyer’s agents, each receiving $25,000. However, the precise division can fluctuate, being contingent on the agreement established between the seller and their agent.
Why are commissions split this way?
According to CREA, the organization does not mandate a specific commission split or dictate how commission should be allocated between the listing and buyers’ realtors.
Rule 188.8.131.52 in CREA’s by-laws and rules states: “The listing realtor member agrees to pay to the co-operating (i.e. buyer’s) realtor member compensation for the cooperative selling of the property. An offer of compensation of zero is not acceptable.”
In an email, RECO said commission rates are not fixed. “Commission rates are not set or approved by the Real Estate Council of Ontario, government authorities, real estate associations or real estate boards,” it said.
The splitting of commission between the buyer’s and seller’s agents is nonetheless a well-established practice in real estate designed to promote cooperation, balance and fairness within the industry. The idea is that a shared commission incentivizes buyer agents to introduce more potential buyers to the home, leading to a faster and possibly more profitable sale.
Furthermore, the commission model serves to reduce potential conflicts of interest by eliminating the buyer’s direct financial obligation to their agent, preventing undue pressure on buyers and ensuring accessibility to agent services.
Why is this a problem?
The lawsuit lodged by plaintiff Mark Sunderland against defendants TRREB, CREA and various real estate brokerages contends that an arrangement known as the ‘buyer brokerage commission rule’ has been in effect since at least March 2010.
Sunderland’s lawsuit posits that this arrangement has impeded market competition, compelling sellers to incur costs they would not otherwise bear in the absence of such an agreement. Furthermore, it contends that this setup precludes the negotiation of price and quality of the service.
Barwick says that even without formal policies mandating uniform rates, brokers, reliant on peer co-operation to draw buyers to properties, can help uphold a standard commission rate locally, especially for buyers’ brokers.
Michael G. Osborne, an attorney who specializes in antitrust and competition law at Cozen O’Connor in Toronto, says that from a competition point of view, there is a potential issue pertaining to the mechanism wherein brokerages must become members of CREA and TRREB to operate. Essentially, though Broker A and Broker B have no direct written agreement between them, by aligning with an association’s rules they can be seen by the Competition Bureau to be operating under an indirect “hub and spoke” agreement.
How much is at stake in the lawsuit?
Kalloghlian Myers LLP is seeking compensation for anyone who has sold a home since 2010, though they have not yet put an overall dollar value on what they are seeking.
If every transaction covered by TRREB is affected, the sums involved could be substantial.
According to annual sales and average price figures on TRREB’s website, more than $880 billion in residential real estate changed hands between 2010 and 2022. Five per cent commission on those sales would amount to $44 billion, with as much as half going to buyer brokerages.
Can home sellers participate in the lawsuit?
In a class-action lawsuit, individuals who are similarly affected are generally automatically included, meaning there’s usually no need to actively “get in on” the lawsuit. If the ruling is in favour of the class, affected individuals will be notified about their entitlements. The duration of such lawsuits can vary widely, depending on the complexities involved and the legal pathways taken.
Should compensation be awarded, the distribution could take several years.
Donald Trump's real estate fraud trial begins in New York: What you missed. – USA TODAY
India asks Canada to recall several dozen diplomats – Hindustan Times
Canada secures second place in 2023 Best Country Rankings
Silver investment demand jumped 12% in 2019
Search for life on Mars accelerates as new bodies of water found below planet’s surface
Iran anticipates renewed protests amid social media shutdown
Business23 hours ago
Metro Vancouver workers poised to strike as soon as Monday, union says
Business20 hours ago
Alleged mortgage fraud victims still not off the hook for payments after criminal charges laid
Business22 hours ago
Ontario’s minimum wage increase impact upon workers
Art19 hours ago
One family’s battle to be reunited with art looted by the Nazis – CNN
Economy14 hours ago
Bill Ackman says the economy is starting to slow and the Fed is likely done hiking
Media13 hours ago
Sources – James Harden, seeking trade, not at 76ers media day
Economy13 hours ago
China’s Precarious Economic Recovery Signals More Support Needed
Media17 hours ago
James Harden Won’t Attend Media Day