by Scott Simmons
Yesterday I took the prescribed BCREA legal update course 2016. I do enjoy getting the info and I always find the instructor Daniel Mildenberger to be an excellent presenter. This year one of the topics that came up was LDA (Limited Dual Agency). I do think that 99% of the agents do understand it and use it properly when the time comes up. I have used LDA myself and make sure I walk my seller and the buyers through all the steps.
With the new changes of Designated agency in 2012 it seems simpler and easier. So what can be wrong with agents using this simple system once in a while to help both their seller and their buyer buy a home? The problem is the abuse of the system. Yes, some firms are abusing the system and are using it in ways that it was not designed for and they have turned it into a con game, similar to the street game, Three Card Monte.
Here is how some firms are abusing the system. First off they go out and sign up a lot of high-end listings that are way, way, overpriced. They basically promise home sale prices that are about 20 – 30% higher than the market price. As far as I know there are no rules about overpricing. Overpricing is not against any board and or council rules that I know about and it would be hard to prove a home listed at $1.7 million should have been listed at $1.3 million. Let’s face it: The market price is subjective and there is no way to quantify what a home should be listing at.
So now the firm has a large number of high end homes listed at 20-30% over what they should be listed at. The next step is for the firm to go out and sign up 30% more listings but not put them on the MLS® but make them exclusive listings. An exclusive listing is just that -- totally exclusive to the firm. No other agents from other companies can show the homes. This will bring in buyers who might be dealing with other agents.
Now all that has to be done is to sit back and wait for the buyers to inquire about the homes. Then when the buyers want to go out and see some homes in their targeted price range the firm will only show their own homes. If you show enough overpriced homes eventually they all start to look good.
This is the key only to show their own listed home and only sell their own listings. If one shows enough overpriced homes, it makes them all look so good after a while. They can even offer the buyers a discount on price and advise the buyers on the fact they should offer a little less than asking. Please note; there is an old fable that in LDA the agents can not advise the buyers on price; Daniel categorically stated this is false, yes agents can advise buyers on price while in LDA.
The other thing these firm can do is block most showing by other agent by coming up with the standard excuses such as the sellers are sick, they are in the middle of putting on a party, etc... The goal is not to sell the overpriced homes to other agents and their clients but to keep them listed to attract buyers and double-end the commissions. If a small firm can sell 20 or so double-ending deals per year at $1.5 million or so they can make a cool mil-per-year. Imagine what a firm with 100 or so double-ending deals per year is making.
The key thing is these firms are not putting their clients’ needs first. They are basically operating like it's pre-1994 and they are working in the sellers favour. Are the buyers getting real representation? Is this the way of the future of organized real estate in B.C.? I do not know why the B.C. Real Estate Council seem to be doing nothing to curb this wide-spread practice that makes organized real estate look like nothing more than the con game. This is not the way organized real estate business is supposed to work in B.C. It's time the regulators actually act and do something to curb the abuse of LDA and doing something is not giving an agent seven day suspension. Not acting is putting the rest of the industry in the same boat as these street hustlers.
Scott Simmons is a B.C.-based real estate agent with One Percent Realty.
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