April 5th - 2010

RECO Decision: Disclose terms when offer is presented

The following RECO Discipline Hearing decision has been condensed and can be viewed in its entirety on the RECO website at www.reco.on.ca.

The following RECO Discipline Hearing decision has been condensed and can be viewed in its entirety on the RECO website at www.reco.on.ca.

This case involves violations of the Code of Ethics under REBBA Sections 3, 25(1), and 39.

When Sales Representative B contacted Broker A, to arrange a showing of a property listed with Brokerage A, he was informed by Broker A that he had “nothing going” on the property and that the sellers were motivated as they had already purchased another property. Sales Representative B showed the property and called Broker A to advise that he had a signed offer to present.

Broker A called Sales Representative B to inform him that he also had obtained an offer and would also be presenting his buyer’s offer that evening. Sales Representative B presented his buyer’s offer, being $125,000 with a $1,000 deposit and a 5% down payment. However, earlier, Broker A presented his buyer’s offer, which was for $124,000 with a $5,000 deposit and a 30% down payment.

After Sales Representative B’s presentation, Broker A discussed the offers with the sellers. At the request of the sellers, Broker A reminded the sellers that as per their existing commission agreement, his commission would be reduced if they went with his offer. Sales Representative B was advised that the sellers had accepted Broker A’s offer and that both offers were very close in price. He said the sellers liked Broker A’s offer better overall, being a few hundred dollars better and with a $30,000 dollar down payment.

Later, Sales Representative B became aware that the property sold for $1,000.00 dollars less than his clients had offered and called Broker A requesting that he explain how his offer was better. Among other reasons, Broker A advised Sales Representative B that he reduced his commission and accordingly the sellers “netted more” with his offer.

The RECO panel determined that Broker A acted unprofessionally, by failing to disclose the existence of terms relating to his commission agreement that may affect whether an offer to buy may be accepted, at his earliest practicable opportunity, and before any offer is accepted. He also failed to treat Sales Representative B fairly, honestly and with integrity.

He therefore breached the following sections of the Code of Ethics under REBBA:

Fairness, honesty, etc.
3. A registrant shall treat everyone the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

Agreement relating to commission
25(1). If a brokerage has a seller as a client and an agreement between the brokerage and the seller contains terms that relate to a commission or other remuneration and that may affect whether an offer to buy is accepted, the brokerage shall disclose the existence of and the details of those terms to any person who makes a written offer to buy, at the earliest practicable opportunity and before any offer is accepted.

Unprofessional conduct, etc.
39. A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.

Broker A was ordered to pay a penalty of six thousand dollars ($6,000.00).

For more information, members can view the OREApedia topic Commission – REBBA 2002 Obligations and Restrictions. Section 3 talks about disclosure and refers to the Code of Ethics Section 25 collateral agreement disclosure requirement.

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