Officials hint that new rules and tougher penalties could help in the drive to cool the market.
Mayor John Tory and Ontario Finance Minister Charles Sousa have hinted that changes to real estate industry practices could be part of the solution to cooling — without killing — the over-heated Toronto housing market.
While he wouldn’t provide specifics, Tory said there needs to be more transparency in real estate transactions.
Asking prices for homes rarely reflect their true value and desperate consumers are subject to bidding wars often with little to no information on the number or the nature of competing offers, he said.
“How could that do anything but contribute to the frothiness of the real estate market and the frenzied increase in prices,” Tory told the Toronto Star on Wednesday.
He also said he is concerned that home buyers are being pushed to waive conditions such as home inspections, on their offers.
Some Toronto realtors say it’s common for the successful purchaser in competitive bidding wars to far exceed all the other offers on the table. Buyers can’t know what the competition is offering. Only the seller sees all the offers and realtors aren’t permitted to disclose that information.
Ontario Real Estate Association (OREA) CEO Tim Hudak is calling for an overhaul of the 2002 provincial rules and code of ethics that govern real estate practices.
He says the majority of realtors are honest and ethical. But there are problematic practices including double-ending sales, says Hudak.
Double-ended sales, where one agent represents both the buyer and the seller, means more commission for the realtor and can potentially shut out competing offers.
Hudak called for tougher regulations and penalties for agents who break the rules. In a hot market, penalties meted out by industry regulator the Real Estate Council of Ontario (RECO) can be just the cost of doing business, he said.
RECO registrar Joseph Richer said “If there is a call for greater fine level, certainly we can look at that.”
But in any market situation where there is more demand than supply, some people will take advantage, said Richer.
“When you have 10 or 20 people knocking on your door to buy your house, I’m not sure what the individual (realtors) could be doing to drive prices higher,” said Richer.
RECO fines range from about $5,000 to $25,000.
Toronto realtor David Fleming has called for more severe RECO penalties for some rule breaches. But on Wednesday, he accused the mayor of politicking.
Fleming said, the “easiest, slam-dunk policy change” to cool the Toronto market is a non-resident foreign buyers tax that Premier Kathleen Wynne was expected to announce as early as Thursday.
Foreign buyers “are getting rich off our backs and the hard-working, tax-paying Canadians that live here can’t afford real estate,” said Fleming.
The Toronto Real Estate Board referred questions about unethical or improper business practices to RECO.
“TREB members adhere to a strict code of ethics as set out by RECO, and TREB not only welcomes a review of the Real Estate and Business Brokers Act but has officially asked for it,” said the board’s CEO John DiMichele in an emailed statement..
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