Guidance on real estate auctions
To trade in real estate in Ontario, one must be registered with RECO and offer services through a brokerage. There are, however, several exemptions that permit trading without being registered.
There are ten classes of people and institutions* that do not require registration to trade in real estate. The exemption for auctioneers has existed for many decades and, until recently, has primarily been used in the sale of farms (both structures and land). We are now seeing some auctioneers engaging in the auctioning of residential properties.
This trend has raised questions among some registrants about whether the conduct of some auctioneers goes beyond what is permitted by the exemption under the law. The exemption is very broad and, from what we have seen, the conduct largely aligns with how auctioneers typically conduct their business. However, if there is evidence of trading beyond the exemption, RECO will investigate and address the conduct.
Auctioneer exemption and REBBA reforms
The Ontario government did not make changes to the existing exemption for auctioneers in phase 2 of its legislative reform initiative, but it has committed that it will continue to consider the matter in phase 3, which is expected to begin later this year. Phase 3 will also include proposals for the development of an administrative penalty regime and consideration of a specialty certification program.
Supporting buyers and sellers in auctions
In the meantime, some brokerages have sought more information about how they can support buyers and sellers who wish to engage in an auction for the purchase or sale of property. We have begun pulling together information about how brokerages can do this legally, and we expect the associations and boards will support their members by providing business advice, which is more suitable to come from them.
*See section 5 of the Real Estate and Business Brokers Act, 2002 (REBBA)
Are auctioneers allowed to trade in real estate in Ontario?
Yes, auctioneers are permitted to trade in real estate under the exemption in the law if the trade is made in the course of and as part of the auctioneer’s duties as auctioneer.
Is the government going to change the law to prevent auctioneers from trading in real estate?
The exemption for auctioneers has been in place for several decades. The government has said it will consider the exemption and its scope during phase 3 of REBBA reforms.
Can an agent or brokerage help a buyer to buy through an auction or help a seller to auction their property?
A brokerage can assist a buyer or seller to engage in an auction in a few ways.
Supporting a seller
Helping a seller engage an auctioneer would be similar to helping them hire a third-party home stager, contractor or virtual tour provider. It is important to make roles and payment obligations clear. Alternatively, a brokerage could also engage the services of an auctioneer directly where properties are posted for auction and buyers, or their agents (see below) upload their offers. However, the seller’s brokerage is currently prohibited under the law from posting or disclosing offer contents themselves.
Supporting a buyer
A brokerage could support a buyer by providing advice, as it would for any other buyer making an offer through a more conventional sale. The buyer agreement is to be clear about the services the brokerage will provide and how the buyer’s brokerage will be paid for the services provided. If a buyer can post their offer amount directly to an auctioneer, the buyer’s brokerage could assist the buyer to understand the auction process and rules, provided they have the knowledge to do so. Again, the scope of the services must be clear between the buyer and the buyer’s brokerage. If the brokerage is going to support a buyer by posting their offer to the auction, they are required to have the written consent of the buyer.