Tuesday, December 14, 2021

Double Dipping should be Illegal and Broker Fees Capped at 5%

For those that don't know, Double Dipping refers to a real estate broker practice where they end up representing both the home owner selling a property, and the home buyer who is seeking to purchase the same property. Normally they only get 5% of the sale value, but double dipping on the commission gives them 10%.

It really should be illegal.

And it is super unethical.


#1. Because it ends up favouring the home owner and unfairly raising the price of the property (and consequently contributing to housing bubbles).

#2. Because the broker ends up wanting a higher price so they can collect 10% of the total value (instead of the usual 5%), they're going to be biased towards hiding anything wrong with the property.

Eg. Hiding whether the property is on a flood plain, has a history of mold problems, and the roof is leaking. The double dipping broker, who wants the house to sell for more, isn't going to want to mention anything that is wrong with the house that the home buyers really should be aware of before making a purchase.

#3. Normally what you are supposed to do is have one broker representing the buyer and one broker representing the seller, and they're meant to be separate and each of them have a fiduciary duty to represent their client's interests, but when the broker represents both they are invariably biased towards the homeowner and will ignore the seller's best interests in order to get a higher sale price.

So in the example cited above, let's say someone owns a house that is on a flood plain (thanks to clay stratification), and the roof is leaking and the house has a history of mold problems... If the real estate broker is unethical and double dipping, they're not going to want to mention these three problems to any potential home buyers.

#4. Real estate brokers who are double dipping actively encourage bidding wars, knowing that if a property goes for a lot more they get 10% of that. This in turn adds to the real estate bubble, and ultimately hurts the buyer.

In Ontario double dipping is currently legal and unregulated.

If any politicians are reading this and they want to get more votes for their political party, listen well.

Make double dipping illegal and cap individual broker fees at 5%.

Then... Make it retroactive for the last 5 years and force real estate brokers who sold any houses using double dipping to issue a refund for 5% of the value of all properties they sold during that time period, giving the money back to the home buyers who got ripped off.

Politically this will lead to lots of votes for the political party who hammers this home. All the home buyers will definitely think about voting for the party that gives them an extra $50,000 or more if the house was worth $1,000,000 or more. And even if the property was $500,000, they're not going to complain about getting an extra $25,000.

That amount of money getting pumped back towards home owners will boost the economy, punish the unethical brokers, and help to soften Ontario's real estate bubble which could burst if too many things happen that hurts the market.

Who will complain?

Only the rotten real estate brokers who were doing something unethical and something that really should have been illegal in the first place. The ethical brokers won't complain. Only unethical ones will complain.

This is really something that should have been made illegal a long time ago.

Having separate brokers for the seller and buyer is a necessity, just like having separate lawyers in a divorce. Without that separation the middle man will always favour the person which is going to end up giving them more money, and that bias will lead to them hiding things.

Moral of the Story:

Buyer Beware. Double Dipping Real Estate Brokers are way worse than used car dealers. They're absolute snakes.

They make politicians look decent in comparison.

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