$14,000 fine for mismanaging delayed offer process

Case summary

A delayed offer presentation process typically means that the seller will not view or consider offers until a specified date and time. Clear and careful communication with all parties is an important element of this process.

Agents are expected to have candid conversations with their seller clients about the benefits and risks of a delayed offer strategy, as well as the options for navigating any pre-emptive offers (commonly referred to as bully offers) that may be received. It is important that any instructions from the seller client be clearly documented and specific. For their part, buyer agents need to help their clients understand the process of delayed offers, the risks and benefits of waiting, and the risks and benefits of submitting a pre-emptive offer.

In a recent case, sellers of a property provided their agent with written direction to delay all offers received to a future date. Subsequently, the seller’s agent received an offer from their own buyer client and unilaterally shortened the date for the offer presentation without obtaining updated direction from the sellers to do so and failed to notify other potential buyers that the schedule to review offers had changed. Ultimately, that buyer’s offer was accepted.

In this situation, the seller’s agent:

• failed to obtain direction or instruction from the seller clients before changing the offer date,
• failed to notify all interested parties of the change to the offer presentation date,
• failed to reflect the date change in the listing service information, and
• failed to notify interested parties that they were also representing the buyer submitting an offer.

Discipline

RECO’s Discipline Committee found that the seller’s agent failed to conduct a fair offer process by denying other buyers an opportunity to submit offers on the property while favouring their own buyer’s offer under multiple representation. The panel found the agent breached s.3 (fairness, honesty, etc.), s. 17 (nature of relationship) and s.38 (error, misrepresentation, fraud, etc.) of the Code of Ethics under the Real Estate and Business Brokers Act, 2002 (REBBA) -- which was the legislation in force at the time the misconduct occurred -- and ordered a fine of $14,000 and completion of an education course.

Learning opportunity 

There are two key points to take away from this case.

First, it is vital that agents put their clients’ interests first. The agent in this case reconfigured the offer process without seeking written direction or instruction to do so, which placed their own interests in selling the property to their own buyer client (also known as “double-ending”) ahead of the interests of their seller client. This created an unfair process for other buyers and harmed the seller's ability to perhaps obtain a more favourable offer for their home. This is known as multiple representation and is prohibited under the Trust in Real Estate Services Act, 2002 (TRESA) unless:

• the brokerage makes the mandatory written disclosure,
• the brokerage makes best efforts to obtain an acknowledgement that the required disclosure was received, and
• after receiving the disclosure, if each of the existing or prospective clients agree, the clients provide written consent to the brokerage or designated representative continuing to represent them in respect of the trade.

It’s important to remember that multiple representation requires an objectivity and impartiality that may not be possible given the financial benefit for the agent that might result from representing both the seller and buyer in a transaction, as was demonstrated in this instance.

Second, it is important that direction regarding delayed offers be discussed with the seller so that they can make an informed decision. Any subsequent changes to that direction, if applicable, should be communicated to all other prospective buyers through their agents. Keep in mind that the purpose of a delayed offer process is to seek multiple buyers. In this case, when the seller agent’s own buyer made an offer and the agent didn’t inform other buyers, it eliminated the chance of the delayed offer strategy working as intended.

In this case, the agent clearly put their own interests ahead of those of their client.

For practice guidance on how to manage a delayed offer process and pre-emptive offers, please be sure to review the following RECO Bulletins:

4.2 Managing a delayed offer presentation process
4.3 Managing a pre-emptive offer