Saskatoon Real Estate Resource Centre Blog : The ethics of “bidding” for Saskatoon real estate

Navigation

* Featured Homes *

* Saskatoon Real Estate *

Canadian RE Alliance

US Real Estate Blogs

Archives

The ethics of “bidding” for Saskatoon real estate

I came across an interesting “Letter to the Editor” in yesterday’s Star Phoenix which I wanted to touch on. The letter was submitted by Maureen Shebelski, a Saskatoon resident and mother.

Maureen’s decrial of the current state of the Saskatoon real estate market is a testimonial to her social conscience and it’s obvious that her concerns are sincere at every level. She points to the challenges and consequences which are inevitable in a market that experiences such rapid and significant change. Rising property taxes and insurance rates, increasing levels of debt, and uncertainty about the future are all things which are on Maureen’s mind right now.

I share many of the concerns which she expressed. I am also a parent, and coincidentally I have one daughter and one son, both young adults, so I’ve spent lots of time considering how this “new Saskatoon” will affect them. I’m also keenly aware that there are many residents in this fine city who will face challenges which will dwarf those that my own kids might experience as a result of this “boom.”

Maureen also takes the opportunity to place a little blame for what’s going on, starting with Premier Lorne Calvert and wrapping up with the real estate industry. She says, “I also blame the real estate industry and its new method of taking bids on houses, instead of taking offers. When my father was in real estate, there were some ethics involved. I don’t see that now.”

This attempt to “blame the real estate industry” and suggest that there is something unethical about “the new method of taking bids” would be easy enough for most to agree with, particularly those who are facing the challenge of buying a home in this market. Ultimately, it demonstrates a lack of understanding as to the role of a “seller’s agent” in the real estate transaction.

Since it is “ethics” which are questioned here, let’s take a look at some of the ethical guidelines which may apply from the Canadian Real Estate Association’s Code of Ethics which all REALTORS® are sworn to uphold.

Article 3 – Primary Duty to Client – A REALTOR® shall protect and promote the interests of his or her client. This primary obligation does not relieve the REALTOR® of the responsibility of dealing fairly with all parties to a transaction (Also appears in provincial statutory legislation in the Saskatchewan Real Estate Commission Bylaws, section 702).

Article 12 – A REALTOR® shall render a skilled and conscientious service, in conformity with the standards of competence which are reasonable expected in the specific real estate disciplines in which the REALTOR® engages.

Article 18 – The business of a REALTOR® shall be conducted in strict accordance with all statutory and regulatory requirements.

Ethics and statutory regulation aside, we have volumes of agency law decisions which define an agent’s obligations to his or her client. Agency law provides a history of expectations which are considered reasonable and holds an agent accountable and liable for damages which result from a failure to act as a fiduciary to the person or persons who have hired them. In its simplest form, the agency relationship is founded on obedience, confidentiality, competence, disclosure, accountability, trust and loyalty.

Finally, the listing agreement used in Saskatchewan binds a seller’s agent to the following promises to his or her client;

obey the seller’s instructions on the Exclusive Seller’s Brokerage Contract and all lawful instructions of the seller;
represent the seller’s best interests;
fully disclose known facts which might influence the seller’s decision;
maintain confidentiality of personal and financial information discussed with the seller even after the Exclusive Seller’s Brokerage Contract expires;
safeguard the seller’s documents and money; and
exercise reasonable care and diligence.

I expect that most people do understand that multiple offers on a property most likely places the seller in the best possible position to negotiate a favorable price and terms. Given that are bound by a Code of Ethics, statutory law, agency law and our promise in writing to act with complete loyalty to the seller, how is it that we are viewed as “unethical” for making as many prospective buyers as possible aware that a client’s home is for sale? I would suggest that failing to make every effort to deliver the best result for a client would be unethical and unlawful.

Discussions which I’ve had with Al Jacobsen, Registrar of the Saskatchewan Real Estate Commission and with Randy Katzman, a local real estate lawyer suggest that agents who fail to provide adequate exposure for a client’s property could be subject to both prosecution and civil litigation with potential consequences including large fines, license suspension or cancellation, and damages which might result from that negligence. Personally, I’m not much into any of that.

Every time that a seller’s home is sold without a reasonable level of exposure to the market, a betrayal is committed. Every time an agent brings a seller’s property to the market and provides buyers with reasonable access, a promise is fulfilled. Seller’s benefit and so does the community of Saskatoon real estate buyers.

Please don’t call the Saskatoon real estate community unethical for doing right by its sellers. They pay us a hefty chunk of change for representation and they deserve to get exactly what they’ve paid for; obedience, confidentiality, competence, disclosure, accountability, trust and loyalty. Acting as one’s agent is an honour and a privilege that should be taken seriously.

Norm Fisher

Royal LePage Saskatoon Real Estate

Posted: Saturday, June 02, 2007 7:24 PM by Norm Fisher

Filed under: real estate, saskatoon, prices, multiple offers, professionalism, seller tips, ethics, marketing, trends, buyer tips

Comments

Penny Duncan said:

The question of ethics has intrigued me. Scenario that we just encountered: We had made an offer on a home in Saskatoon and the seller made us a counter offer. Within 5 minutes (and that is stretching the time frame) of being alerted to the counter offer, we received a call from our real estate agent stating the seller has pulled their counter offer and another offer was being presented. Apparently the sellers agent had another client that wanted to offer on this home and that is why the seller pulled their counter offer. In the end we decided not to get into a bidding war and apparently the house sold to a client that the sellers agents also represented. This scenario made us very suspicious as the sellers broker had price information that we feel was shared with his other client. Note: The house sold for slightly less than asking price in the end. Unethical conduct?

# January 29, 2008 12:42 PM

Norm Fisher said:

Penny,

Thanks for the comment. What an excellent question.

There aren’t any easy answers to this one, and I’m certainly not in a position to decide if unethical conduct occurred here. That said, I’ll give you a little feedback on some of the things you’ve touched on.

It’s important to note that the agent’s behavior must first be governed by “the law” and then by the Code of Ethics. Where the law is silent, our Code of Ethics applies. Where the law is clear, the Code of Ethics is secondary.

It’s well established in common law that no contract exists until both parties to a contract have agreed in writing to the terms and conditions of the contract. Accordingly, a seller does have a right to withdraw a counter-offer prior to acceptance, and a buyer has the same right to withdraw their offer. Some buyers and seller are directed by their own “code of ethics” and occasionally you’ll find a client who will not withdraw, even when faced with a better offer. That too is their right.

You feel that the “sellers broker had price information that was shared with his other client.” There’s no doubt that he or she had that information. Sharing it with the other prospective buyer would have been a mistake both ethically and legally, at least as I see it. The highest bit of law is statute law. In this province, that’s the Real Estate Act and its associated policies and bylaws. They state that a registrant has a responsibility to treat all parties to a transaction fairly. This kind of conduct would seem unfair to me, and most likely illegal.

We will never know for sure what kind of communication occurred between the seller’s agent and the other buyer. Even if nothing overtly underhanded went on, we can see that the agent has left themselves open to questions which can’t be very good for them. However, what’s good for the agent is rarely the primary concern when it comes to agency and the law. We do have to keep in mind that the agent has some duties and responsibilities to the seller as well. As you describe the chain of events, it seems possible that this second buyer may have appeared from nowhere at the last possible moment. After all, the seller clearly had intentions of dealing with your offer as evidenced by the fact that they wrote and signed a counter-offer.

If I were to find myself in a similar situation, I would make every effort to have buyer #2 make their offer through another agent even if I had introduced them to the property at some earlier time. Once we know what we know, it’s difficult not to be influenced by that to some degree. Even if we are strong enough not to, the questions always linger after the fact. Fact is, the agent probably wouldn’t even need to make an explicit statement of “offer #1 is this much.” He or she could use gentler guidance like, “I don’t think this home will sell for that” or “are you sure you don’t want to go a little higher.” Almost any direction that was given to buyer #2 would be using your offer against you. There are many agents who have enough integrity to get through this situation without divulging information which would have favoured buyer #2. However, even if an agent comes out of this situation with a clear conscience, he or she runs the risk of a damaged reputation and there’s no amount of compensation which can cover that expense.

I admire you for removing yourself from that situation. There will be other homes.

# January 29, 2008 9:26 PM

Saskatoon Real Estate Resource Centre Blog

Recent Posts

Tags