August 9th - 2013

Misleading advertising and how to avoid it

Advertising matters in real estate -- it can be a powerful tool to attract clients.

Honesty in advertising

Honesty in advertisingAdvertising matters in real estate -- it can be a powerful tool to attract clients.

If it is misused, however, advertising can frustrate and confuse the public, hurt your bottom line and tarnish your professional reputation. “The best way to avoid false or misleading advertising is to say what you mean and mean what you say,” advises Bruce Matthews, deputy registrar, regulatory compliance, at the Real Estate Council of Ontario (RECO).

Only 27 per cent of ads complied with RECO advertising guidelines according to a study done in 2010, says Matthews. As a result, new guidelines and a communications campaign were introduced in 2011 and compliance has greatly improved to 64 per cent, but “we still have a way to go,” he says.

Registrants are advised to read and become familiar with RECO’s advertising guidelines. Before finalizing an ad, you can also ask your office manager or broker of record to review the text and visuals to ensure that your advertisement is not false, misleading or deceptive -- and that it conveys the meaning and tone you intended.

Print and web ads generate the most complaints, says Matthews. The majority of issues relate to identification of the brokerage and sales representative, he says. The name of the brokerage and sales rep, as registered with RECO, must be clear and prominent. “For websites, we advise that the brokerage name be on the home page and all other pages.”

Advertising must comply with laws and regulations of the Real Estate and Business Brokers Act (REBBA), 2002, including the code of ethics, the advertising guidelines of RECO, and other laws such as the false and misleading advertising prohibitions in the Competition Act. (See links at end of article.)

When registrants make comparative claims regarding brokerages, sales records, commission savings or amounts, they must be clear about the basis for comparison, says Matthews.

When an ad mentions an award, it must be specific and qualify the terms of the award. “Chairman Club winner” is too general. It’s better to write, “Chairman’s Club 2012*” and then qualify that in smaller text with “*Award given for earnings in excess of $50,000 in 2012.” If it’s a team award, that should also be evident.

Think about the average consumer and how he or she would perceive a statement, suggests Matthews. If a reasonable person would likely interpret a different meaning, you should change the ad to address any potential confusion.

Several REALTORS® interviewed for the EDGE newsletter noted that misleading advertising can hurt the reputation of the industry as a whole and that care should be taken with all ads and listings.

Woman with bullhornMaking exaggerated or false claims in order to attract clients will eventually backfire, according to several professionals. “Someone inexperienced may not realize that if you take that approach, clients and other salespeople will start to question your integrity, and that only hurts your business in the long run,” says Toronto REALTOR® Marc Atkins. 

Ads claiming that “I’m Number 1” should be questioned, says Atkins, a broker of record for seven years. Such claims must be qualified and backed up, he says.

According to RECO, these types of ads must state where, and over what period, and by what standard. “An ad that says something like ‘Number 1 sales representative for units sold’ should specify the town or area and a qualifying statement such as ‘*based on 2012 MLS® statistics for a particular area’,” says Matthews.

Effie Panagiotopoulos, a Toronto salesperson in the business 25 years, encourages consumers to ask questions about the services they will actually receive after they see an ad. “People should make sure they understand what is and is not covered” in their representation agreement, she says. For instance, CREA’s “Misleading Advertising Guidelines” state that if an ad claims that a brokerage will list a home for a particular fee but that number doesn’t include a mandatory administrative charge or the cost of advertising or open houses, it could be considered false or misleading if other charges apply and because a significant part of the fee is not disclosed.

The size of a home described in an ad is an issue that Panagiotopoulos has encountered. She recalls bringing buyer clients to a site advertised as a 5,000-square foot home, only to discover that 1,500 feet of that space was the basement (which should not be included in those calculations). She says her clients were upset and felt that their time had been wasted.  

Panagiotopoulos has also seen the terms “new” and “renovated” misused. “I’ve seen an ad claiming that the furnace was new but found out it was three years old. That’s not new. The word ‘new’ should be reserved for brand-new features.”

A better approach is to cite the date that the furnace was installed, Matthews notes. “Furnace replaced in June 2012”, for instance, specifies its age and avoids confusion, he says.

Ads sometimes claim that a kitchen is “renovated,” says Panagiotopoulos. “Newer appliances and new drawer pulls do not mean that a kitchen has been totally renovated.”

If you believe that a consumer may be misled by the wording in your ad or listing, take the time to revise it, says Matthews. “You can say that a renovation took place and go on to describe the details. It’s a question of being honest and forthright and saying exactly what you mean.”

The value of upgrades can be an issue, says Atkins. He recently viewed a property advertised as having $200,000 worth of upgrades. “That was a blatant exaggeration,” he says. He has also seen a listing that featured a “two-car garage” but “it was actually a one-and-a-half car garage.”

An ad boasting a new roof may be misleading, says Lydia Ingles, a Newmarket REALTOR® for 26 years.  “I’ve seen a property advertised as having a new roof. The shingles were new, but the roof -- the support structure -- was not.”

Listing a house as having a basement apartment may also be a misrepresentation depending on the circumstances, says Ingles. A house may contain a downstairs kitchen and bathroom but that may not make it a legal basement apartment, she says. Rentals must conform to bylaws and significant work is often required to bring the space up to code, she says.

An ad claiming “your home sold guaranteed or I’ll buy it,” may also be a cause for concern, says Ingles. “People may be attracted to that ad, but they don’t understand the terms.” The various terms and conditions such as selling price and commission need to be clarified upfront, agrees Matthews. “There should be some wording in there specifying that there are terms and conditions and what they are,” he says. “That way, consumers have the information they need before entering into a listing agreement, and then those terms and conditions must be written into the agreement.”

An ad claiming that “I’ll net or save you more,” is problematic and crosses the line, says Matthews. “The wording invites questions: ‘More’ than what? ‘More’ than anyone else will? With a claim like that, you haven’t given enough information to back it up. You can cite your past successes and say that ‘Our listings have sold for 95 per cent of the asking price’ over a particular period, but saying ‘I’ll guarantee to get you more’ than anyone else in the future is an impossible claim and amounts to misleading advertising.”

For more information, see the Advertising: False or Misleading and Advertising: Other REBBA 2002 Requirements topics in OREApedia. See also Advertising Guidelines on the RECO website, and CREA’s Misleading Advertising Guide on the REALTOR® Link website.

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