Double-ended real estate deals come with risks: Haté
It’s essential to ensure that the person representing you in a home purchase has your “best interest at heart,” says Toronto civil litigator Rohan Haté, who helped one couple recover money lost in such a deal.
“If you are going to hire a real estate agent — or any agent for any deal — make sure they are representing your best interest,” he says. “You need someone on your side, in your corner."
Haté references his recent “egregious” case of a couple who lost their life savings of $30,000 after making an offer to purchase a condominium in a practice sometimes referred to as double-ending — where the same agent represents both the seller and the buyer.
“It happens and according to the Real Estate Council of Ontario (RECO) at that time, there there's nothing wrong with agents double-ending deals,” he says.
However, Haté says, in this case, his clients were new to the country and didn’t have a complete understanding of what they were getting themselves into when they signed a deal to buy the condo.
The agent handling the sale allegedly told the couple he could also represent them as buyers and suggested that to ensure a successful bid, they should offer $71,500 over the $469,000 asking price for the Mississauga condo, he says.
Haté says the agent allegedly advised the couple to waive all conditions, including the status certificate, which is crucial because it provides the buyer with the financial status of the condo corporation, along with any pending lawsuits that could jeopardize financing for the deal.
The couple agreed to pay a $30,000, non-refundable deposit, and their offer was accepted, he says. However, when the Canada Mortgage and Housing Corporation (CMHC) did its investigation to finalize financing, they discovered the condominium corporation reserve was underfunded, and there were pending legal issues against the developer.
With the CMHC unable to insure the mortgage, financing fell through, and the couple lost their deposit, Haté says.
The couple was distraught over their dealings with the real estate agent and the husband tells the CBC that "we kind of lost our hope a bit because this guy was lying to us, basically."
"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," he says.
Haté, who was hired after the deal fell through, alleges the agent ought to have known the couple's financing would have crumbled and the deposit would be lost, the CBC reports.
"The allegations were that they knew or should have known or ought to have known of the condition of the status certificate," Haté tells the CBC.
After threatening to sue the seller, the real estate agent and his brokerage, Haté was able to negotiate an out-of-court settlement.
He says it’s a lesson to be careful when double-ending real estate deals.
“I understand why real estate agents do it, but from an ethical standpoint, it’s wrong in my opinion,” Haté says. “Generally speaking, it may not be adversarial when you are closing the sale of a home, but the interests are still adverse. The seller wants to get as much as possible, and the buyer wants to pay as little as possible.”
He says it's incumbent to ensure you are well-represented when it comes to decisions such as buying a home.
“If you are not sophisticated in buying and selling property, I think you are better off having your own agent," Haté says. "If you have been through the process before then there’s no harm in having your agent double-end the deal because you are well aware of what you’re getting into.”