Rules Amended For Conditional Sales

Sellers can now decide whether or not to have their properties advertised as C/S or pending when they accept a conditional offer. This is due to a rule change just implemented by CREB stating that the Seller can give written instruction not to report the conditional sale until conditions are waived in writing.

What this means for sellers

Previously, once you had accepted an offer, the status of your property was changed to “pending” in our DB and the listing was withdrawn from MLS.   This amendment  now potentially keeps buyers coming to view the home and increases the chance of a “back-up” offer.

What this means for buyers

The home you’re interested in viewing or writing an offer on might already be conditionally sold.   The first sign that the home might already be pending could be during the counter-offer stage when you get your Offer back with a Seller’s condition stating that it’s subject to a previous offer falling through or something to that effect.

Of course Buyer Agents will be asking the Seller’s Rep if the property they want to show or write an offer on is already C/S.  Unfortunately, the Seller’s Rep doesn’t have to disclose the home’s status

What this means for those following the daily statistics

Without sellers having to disclose whether their property is pending or not, there isn’t any point in tracking pending sales any longer.   Therefore, pending sales figures will no longer be posted on my daily stats page as it won’t be an accurate snapshot of the marketplace.

I don’t like this amendment. CREB gave the following reasons as to why this adjustment was made.

REASON FOR CHANGE
The market has changed and many of our Members and their clients have been in contravention of the existing rules by not reporting pending/conditional sales.

Now there’s a good reason to change the rule! Too many people are getting speeding tickets so let’s get rid of those too. (A bit of a straw man, but you get the point)  The phrase “and their clients” makes me wonder whether there were too many unrepresented sellers not following the rules and their Listing Agents didn’t want to be held liable for them…

We sought a legal opinion on this issue and were told that we may be in breach of our fiduciary duties by forcing our clients to disclose confidential information.

“May be in breach.” A definitive answer would have been nice before changes were implemented. Also, while I’m not a lawyer, the listing contract states under Section 15 Use And Distribution of Seller’s Information that the Seller consents to the collection, use, and disclosure for the purpose of…retaining and disclosing any listing and sales information including price…and disclosing such information to other persons.

Doesn’t this consent encompass simply disclosing whether a home was conditionally sold or not?   If not, it makes me wonder about other stats that “may be in breach”, such as divulging Days on Market.

Edmonton and other jurisdictions do not report conditional sales at all. CREB® has taken the position that the Seller may instruct our members not to report a conditional/pending sale by completing a CREB® approved form to provide the necessary written instruction and acknowledgement of both parties to the listing contract.

I believe CREB is on the leading edge of real estate boards in Canada in terms of technology & vision, so to compare what other boards are doing is self-defeating.

The Real Estate Act, Section 58 regarding Buyers:

58(a) use best efforts in locating a property in the specified market area that meets the material requirements identified by the buyer and generally to promote the interests of the buyer;

e) fulfill its fiduciary duties of loyalty, confidentiality and of full disclosure of all conflicts of interest that may arise between the buyer’s interests and those of the industry member, sellers or competing buyers;

(n) disclose to the buyer the existence and terms of any competing offers known to the industry member for a property in which the buyer is interested;

It’s impossible to fulfill any of those fiduciary duties because the relevant information in the transaction is not being disclosed in this lop-sided amendment.

Regardless of what I think, these are the new rules and I wanted my readers to be aware of them.

10 responses to “Rules Amended For Conditional Sales

  1. A couple of great informative videos on the topic by other Calgary agents:

  2. “the market has changed”; way to change the rules when the market has become a buyers market, to again favour the sellers, who now don’t have to disclose this information. Typical CREB bias, changing the rules as they please to increase housing activity. Why can’t there be an independent government body regulating the rules to prevent discrimination towards the buyers or sellers.

  3. This will be just swell for people who haul their families across the country for a rapid weekend of house hunting only to find that they’ve wasted hours considering homes that are essentially sold.

    The breach of duty argument is ridiculous. The listing contract simply needs to have the seller agree that their listing will be handled in accordance with board rules. We have rules to make the system work as fairly as possible for everyone.

    Saskatoon adopted the same silly approach a couple of years ago. Even if you’re able to learn of a conditional sale when arranging showings buyers resent having spent the time considering the listings you’ve sent that are already under contract. Buyer agents appear ignorant and uninformed.

    Rules like these reflect the dinosaur thinking that came from sub- agency. For some, the seller deserves all of the benefits of our systems.

  4. I don’t mind this rule too much. If I’m selling a house it’s good to have the opportunity to still recieve offers until the sale is finalized. Some buyers may back out due to financing falling through or they get picky on some minor detail during the inspection and wants to renegotiate price. If this happens and a second offer has been placed, sellers can play more hard ball.

    Also as a buyer, not too much is lost if the house they bid on is already sold…Sellers have more to lose in the old system than buyers in the new system.

  5. If I was I buyer in that situation I would be pretty irritated with the seller, using my offer as a backup or leverage to jack up the price of the property. Its wasting my time to raise someone else’s value, or give them a sense of security. As a buyer you don’t own anything to the seller, including your time, until you sign on the dotted line. Its not about who has more to lose the buyer or seller, its about being transparent, fair, and disclosing relevant information. Keeping things in the dark and not disclosing information is the just the type of thing that gives real estate a bad name.

  6. Thanks for your comments and viewpoints! The Calgary Herald had an article about it today – below is an excerpt:

    David Finch, assistant professor of marketing at the Bissett School of Business at Mount Royal University, said there is some merit in the change for sellers wanting to have a backup in case a conditional sale falls apart.

    “However, I’m not a real estate agent, but as a marketer, transparency is absolute paramount as you build that relationship in any sales cycle. People want full disclosure,” he said. “If I spend the time and the energy researching, potentially going through a property, and if it’s not disclosed to me that this is conditionally sold, that’s only going to have a negative impact on possibly my interest in the property but also my perception of the parties selling the property, both the agent as well as individuals.

    “I suspect the first question going in when your realtor is going to look at a house will now be ‘is there any conditions or has been conditionally sold?’ before you even go any further down that sales cycle.”

    Read more: http://www.calgaryherald.com/homes/Calgary+home+sellers+report+conditional+sales/5972246/story.html#ixzz1j6qp8Hdj

  7. Pingback: January 1-28, 2012 Calgary Real Estate Update | Calgary Real Estate Review

  8. Pingback: Metro-Calgary SFH Pending Sales Down 33% | Calgary Real Estate Review

  9. Pingback: June 1-28, 2012 – Calgary Real Estate Update | Calgary Real Estate Review

  10. Pingback: Non-Reporting Of Conditional Sales Rule Remains In Force | Calgary Real Estate Review

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