Ethics Guy®: It’s bad all around – Let me count the ways

If you’ve taken the Board’s PDP course Ethics: Unlocking the REALTOR® Code[RW1]  or the BC Financial Services Authority’s course Ethics, Building Trust, you may recall a scenario in which a frustrated buyer instructs their agent to write offers on more than one property, when their intention is to buy only one of them.

The past 10 or so years have been great for pretty much anyone who has sold real estate in Metro Vancouver and other parts of BC. No so much for buyers. Their attempts to buy property during the last decade have been, to put it mildly, challenging. From ever-increasing prices and affordability concerns to unrelenting competition from other buyers for the few properties on the market, it’s been no picnic. So, it’s no surprise that the occasional buyer might want to take countermeasures they’d never dream of taking in a balanced market.

I offer one scenario below, followed by some of my thoughts. If you come up against a situation like the one below, as always, you’ll want to talk to your managing broker. You should also talk to a BCFSA professional standards advisor if a situation is in the regulator’s realm.

Consider consulting a lawyer, too, which I am not. My comments are only intended to help you (very conservatively) manage your risk. In my experience, when a member phones to ask me for a legal opinion (which I can’t give), I find it’s usually the client who needs the advice. So, I also suggest you advise your client to get legal advice and then ask them to instruct you regarding what they want you to do. Always document the conversation.

Here’s the scenario:

A buyer made a conditional offer through their agent on a strata unit, sight unseen. The alert seller’s agent warned their seller that a subject offer made on a property not yet seen could be a red flag that the buyer was making offers on more than one property, intending to buy only one of them. Consequently, the sellers chose to work with another offer. The seller’s agent advised the buyer agent their client’s offer hadn’t been accepted. The buyer agent then disclosed that their client already had an accepted conditional offer on another unit in the same building. If they’d been successful in getting the subject property, they wouldn’t have removed subjects on the other deal. The buyer’s agent also disclosed the accepted price offered on the other unit.

Where do I start? This is bad all around. Let me count the ways:

1. The buyer’s agent has accepted a perhaps legal, but unethical, instruction if the buyer doesn’t intend to buy both units. Why? Because the buyer agent becomes a party to a lie.
2. The buyer could be in harm’s way, legally, should the seller take the position that the buyer didn’t act in good faith. Why? Because the seller could argue that the buyer hadn’t even tried to satisfy the subject clause when they had a good-faith obligation to do so. This might lead to a messy legal situation if the seller has the finances and tenacity to go to court. Who would want to be a part of this? As an aside, a seller could lessen the likelihood of this happening by demanding a hefty deposit from the buyer on acceptance of the offer. Then the seller would have something concrete against which to make their claim if they thought the buyer hadn’t acted in good faith. The hill is much steeper when there’s no deposit.
3. The buyer agent has put themselves in harm’s way by being a party to an offer on an unseen property if they haven’t explained to the buyer that buying a strata unseen isn’t a good idea. The risk would be less if their offer’s condition included an inspection clause. The buyer agent should also document the buyer’s instruction and the conversation that led to it.
4. If a complaint were made to the Board and BCFSA, there’s some potential agent exposure to regulator and board risk if there’s a suspicion the agent was a party to a scenario like this. Consider REALTOR® Code[RW1] , Article 3 and Rules of Cooperation, Rule 6.08; BCFSA Rule 30 (a) “acting in the best interests of the client,” the Real Estate Services Act, 35 (1) and (2), specifically, “Conduct Unbecoming.” Who needs the grief?
5. The buyer agent’s reputation could also be harmed. And the fallout from a complaint would reflect not only on the truthfulness of the agent, but also our profession. Another hit to our profession.
6. The buyer agent has loose lips. They’ve likely breached their agency duty of confidentiality by revealing the accepted price and by disclosing their buyer has an accepted offer on another unit in the building.

There are probably other potential ramifications to the scenario as well, most of which wouldn’t bring a smile to anyone’s face. But, since I only have so much space in this column, we’ll leave it at that.

P.S. We’ve brought this scenario to the attention of the government. This may be why the government is considering adding a cost to a buyer’s rescission of a sales contract during the impending cooling-off period when the requirement has been implemented. At least, we like to think so.