In an effort to help strengthen consumer confidence, the Ontario government is updating rules governing the province’s real estate brokerages, brokers and salespersons.
The province aims to provide additional consumer protection, educate home buyers and sellers, and enhance professionalism.
“The new rules will give Ontarians more choice in the real estate trade process by allowing a brokerage to disclose the details of competing offers,” the province said in a news release. “They also include an updated code of ethics to strengthen professional obligations related to integrity, conflict of interest and the prevention of fraud.”
The new rules went into effect Dec. 1 and Wasim Jarrah, a Newmarket resident and local real estate broker who is also director for central Ontario with the Ontario Real Estate Association, isn’t certain the new rules will make a vast difference in the sector.
Jarrah said the provincial government has been looking for ways to make housing more affordable and there have been a lot of complaints about buyers overpaying for homes because realtors could indicate they had several offers without saying for how much.
“The idea was nobody was able to see the contents of the offer,” he said. “What ended up happening is that people were severely overpaying for a property in a very tight market.”
In some cases, the buyer may have paid $100,000 to $200,000 more than the next highest offer.
“Had they known they only had to put an extra few thousands dollars, they would have done that,” he said.
While Jarrah believes implementing these rules are a step in the right direction, he doesn’t believe they’ll help with the main issue in the market, which he says is the supply.
“This provides transparency and anything that provides transparency is great for the industry,” he said. “Applying it right now is going to be interesting.”
When a realtor takes on a listing, the seller will indicate whether it will be an open or closed offer process and the realtor then posts it on the listing, said Jarrah.
Then when the offers start coming in, it allows the realtor to share specific information — price, deposit, conditions, etc. — without disclosing personal information about the buyer.
“Here’s where it gets tricky, even though the seller has indicated that they’re going with an open offer process, they can also change their mind,” Jarrah said. “The buyer goes into it submitting an offer that’s open, then halfway through they find out it’s been changed to closed (by the seller). That’s where it gets complicated.”
However, Jarrah said that there are clauses that are being incorporated into the agreement of purchase and sale that should the seller change the way the offer is done, the buyer has the right to revoke their offer and remove it from the table.
Jarrah said another challenge is that agents will have the role in an open offer process of uploading the offer onto a portal that syncs with realtor.ca. Then, any person involved in the offer process can view other offers and see the contents of those offers in real time.
“The challenge is whether realtors will be putting in all the information all the time,” he said.
Ultimately, Jarrah says it's "a great thing that should bring about transparency," but he doesn’t believe it will make houses more affordable.
“There are places that use it right now, like Australia, and it has never shown that it brings down the average sale price,” he said.
The province says the new rules will allow real estate brokerages to disclose the details of competing offers if the seller directs them to do so; better protect and educate Ontarians through enhanced disclosure requirements; and require registrants to comply with an updated code of ethics.
The rules will also provide the Real Estate Council of Ontario (RECO) with new powers and tools to better hold registrants accountable for non-compliance with the rule; and allow brokerages to enter designated representation agreements so clients could be represented by a specific broker or salesperson at a brokerage who would actively promote their interests in a trade.
