Sometimes I get wound up about things that just aren’t fair, so it helps me to let off a little online steam here. I hope you don’t mind if I express my opinion.
In our province of Ontario, we have had a crazy real estate housing market over the last few years. I can’t speak to the rest of the world, but I understand things are crazy everywhere.
While I cannot complain about our own fortunes with the local market over the past few years, I can state quite clearly that the mechanisms just aren’t right in this province. Things just aren’t fair.
With the sale of our country house in 2018, the recent sale of my late mother’s house and our recent thoughts of putting our current century home up for sale – I find myself very frustrated.
There are laws and regulations that have evolved over centuries, so you think we would have it right by now, and there are real estate associations, rules for membership and codes of ethics. I would think that these rules and licensing associations would be there to protect the buyers and sellers and make sure reasonable transactions take place.
False Adverrising and Multiple Offers
Every realtor that we have met recommended that we underprice our properties by $100,000-$200,000 or more to draw in more potential buyers. We are to advertise our properties for less than we would accept, and hold offers off for one week or so, and then accept multiple offers, thereby driving up the price while buyers blind bid with escalating anxiety that they will miss out on their dream home.
The buyers, whom we would think should be protected by the licensing of the real estate agents are manipulated by their desperation to purchase their dream home. The sellers are pressured to be dishonest to draw in more buyers with lower prices. Once the potential buyers have gotten excited about our house, they can be encouraged to bid higher prices than the advertised price in the hopes of “WINNING” their future home. The real estate agents cannot share with the bidders what the other bids are, so they can only bid as high as they can to win the prize – even if the bid is higher than necessary.
In a hot market with escalating home prices this works for the seller, in a slow market it goes over like a lead balloon – Or the sound of crickets, while waiting for the multiple offers that never come……..
But a slow market is a whole other issue. If the multiple bids don’t arrive on offer day, then the seller is stuck with an underpriced property for sale. That’s no fun at all either.
Going back to a hot market with a bidding process – my issue is not that it works for the sellers, but that it is just not MORALLY correct. We advertise a house for sale for a false price that we wouldn’t accept? How is that OK? Isn’t it like false advertising? It’s not exactly bait and switch, but it seems like it to me.
Wikipedia, the source of all my knowledge, tells me that False advertising is “the crime or misconduct of publishing, transmitting, or otherwise publicly circulating an advertisement containing a false, misleading, or deceptive statement, made intentionally or recklessly to promote the sale of property, goods, or services to the public.” Doesn’t that fit the situation?
Now I am a comparison shopper, so in the past 3 years I met with 9 realtors to choose the correct one for each of our transactions. I would expect to see different approaches – but NO – this is the way that 100% of the licensed realtors have suggested we do business. How can the Canadian and Ontario governments and real estate associations allow this process to be commonplace for “licensed” real estate agents? Isn’t the licensing process supposed to enforce honesty and ethical behaviour and protect the buyers and sellers?
Waiving Home Inspections
Another issue I have is that buyers, in the rush to make an offer for a home are encouraged to make condition-free offers. If there are multiple offers their cannot be home inspections and conditions. We are told to buyer-beware, and yet it is more like buyer-unaware…..
On a standard Ontario real estate offer it seems that buyers are required to sign a condition that they understand that they should have a home inspection but that they are choosing to waive their inspection. WHAT?
Ontario real estate agents are not supposed to advise clients against getting an inspection, however clients are encouraged to make a quick offer and sign a standard waiver in their house offer which is something like this:
“OREA form 101 –
16. INSPECTION: Buyer acknowledges having had the opportunity to inspect the Property and understands that upon acceptance of this offer there shall be a binding agreement of purchase and sale between Buyer and Seller. The Buyer acknowledges having the opportunity to include a requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the Property.“
So the buyer is rushed to make a decision, discouraged from carrying out an inspection, but signs a waiver that they understand they should have done one but chose not to. That seems fair doesn’t it?
Next up on my rant is the deposit system. As I understand it, when buyers make an offer on a house they provide a deposit at the time of the bid, which is held in trust. The issue is that if the buyer backs our of the transaction (which does happen), the seller doesn’t necessarily get the deposit to keep. They may have bought another property, counting on the sale of their home, and be stuck! The money stays in trust, and the seller (as I understand it) has to sue for damages – but doesn’t automatically get the deposit.
It may even go back to the defaulting buyer sometimes.
When is a deposit not a deposit? Right there! One definition of a deposit – which applies here – is as a “pledge for a contract”. Doesn’t that fit the situation? If we fail to fulfill the contract shouldn’t we forfeit the pledge +++++?
I understand that if the buyer defaults then we can take legal action to get damages or the deposit – but shouldn’t the deposit just automatically go to the seller to begin to compensate the seller?
These are just a few of the things that don’t seem right to me, even though I have enjoyed meeting many hardworking and kind realtors. It just appears that the process has gotten out of control. I think it’s a positive thing to have a healthy real estate market, but it seems that buyers and sellers are not being protected in these transactions, even though there are organizations and government institutions that should be able to monitor these practices.