Toronto-area couple loses $30K deposit after bad advice from double-ending real estate agent, lawyer says
Regulatory body responsible for agents in Ontario hopes story will shed light on problems of double-ending
A Toronto area couple is speaking out after they say they received bad advice from a double-ending real estate agent and lost a $30,000 deposit, along with the home of their dreams.
"We went through a period we never experienced before, like a really depressing time and really like a time that we were under a lot of stress, because this money was my hard work," said the husband.
The Real Estate Council of Ontario (RECO) hopes their story adds pressure to eliminate double-ending — the practice of realtors representing both a buyer and a seller in a transaction, as the government looks to "modernize" rules governing agents in the province.
CBC Toronto is not revealing the couple's identity, because they signed an out-of-court confidentiality agreement to get the $30,000 deposit back.
Couple allege insider information given and status certificate waived
The situation started back on April 7 when the couple went to view a condo in Mississauga listed at $469,000.
The real estate agent representing the seller offered to represent the couple as well — something that is not illegal in Ontario, but came under scrutiny after a CBC Marketplace investigation found some top real estate agents in the Greater Toronto Area breached ethical and legal rules aimed at protecting consumers.
In this latest transaction, the couple said the agent told them the bid they should make to be successful: $71,500 over asking.
"He gave me [the other] offer and he's like, 'You have to put your offer better than this one,'" said the 36-year-old husband. "'This is how much my highest offer [is]. So you have to improve it over this.'"
Along with that inside information, the couple alleges the agent advised them to waive all conditions, including financing and the status certificate, which is critical in a condo transaction because it provides the buyer with the financial status of the condo corporation, along with any pending lawsuits that could jeopardize financing for the transaction.
The couple says they waived the status certificate and also took the agent's advice to sweeten the deal further with a $30,000 non-refundable deposit.
The couple tabled their offer, it was accepted, they had won the home — or so they thought.
Hope, and deposit, was lost after deal collapsed
Once the Canada Mortgage and Housing Corporation (CMHC) got involved to finalize financing, the corporation did a search that found the condominium corporation reserve was underfunded and there were three pending legal issues against the condo's developer.
The CMHC would no longer insure the mortgage, so the financing fell through and the seller kept the $30,000 deposit.
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"That was the time we kind of lost our hope a bit because this guy was lying to us, basically," the husband said.
The couple had no legal representation at the time of the failed transaction, and their lawyer now, Rohan Haté, said the agent didn't properly inform the couple.
"The allegations were that they knew or should have known or ought to have known of the condition of the status certificate," he said.
The lawyer also alleges the agent ought to have known the couple's financing would have crumbled and the deposit would be lost.
On May 23, Haté threatened to sue the seller, along with the real estate agent and its brokerage, plus damages in Ontario Superior Court.
The seller agreed to settle out of court, so long as the couple signed an agreement not to name any of the parties.
CBC Toronto obtained the statement of claim, along with the signed mutual release confidentiality agreement.
Double-ending should be 'outlawed,' lawyer says
Lawyer Harry Herskowitz said in 35 years practising Condominium Act law he's never heard of an agent advising a client to waive a status certificate because it provides the buyer with critical information about the financial health of a condominium corporation, including pending legal action, and is easy to obtain.
"I think it's like rolling the dice. It's a very risky proposition and I think that any waiver if it's informed is ok. But the issue is whether they were fully informed," Herskowitz said. "I honestly think it would be a welcome initiative for double-ending to be outlawed because we have rules that prohibit lawyers from acting for both sides of the transaction for exactly the same reasons."
When Premier Kathleen Wynne announced the Fair Housing Plan April 20, she announced the government would look at double-ending as it moved to "modernize" rules governing the real estate profession.
In a statement to CBC Toronto, Ontario's Minister of Government and Consumer Services Tracy MacCharles said the consultation process would start "in the coming weeks," but nothing would be in place for more than a year.
Agent involved won't be investigated
RECO Registrar Joe Richer said this failed transaction demonstrates how dangerous double-ending can be for buyers or sellers.
"It sounds to me like they were not looking after the best interest of their buyer, and in that case that could lead to allegations that could be a breach of our code of ethics and lead to disciplinary action," he said.
Under current rules, agents found to be breaking the rules are subject to fines up to $25,000, but RECO's position is clear; the council wants the practice of double-ending eradicated, Richer said.
"Some say stiffer fines is the best way to go. The fact is the harm has already happened and the consumer is left in a lurch," he said.
The couple in this case won't file a complaint with RECO because they signed a confidentiality agreement, so the agent they allege did this will not be investigated.
"It's very troubling," Richer said. "We encourage people to file complaints, but this is precisely the type of behaviour that we are talking about around multiple representation and that it's not possible to present the best interest of both the buyer and the seller simultaneously."
Meantime, the couple now has their $30,000 deposit back, but for two months they were without the money needed for any down payment. They say the hunt for their dream home continues.
"The first taste wasn't very good ... but I'm still on the hunt, I'm not going to give up," the husband said. "I know it was a really bad and tough experience that happened to me, but I'm sure there are a lot of good agents out there."
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