Corruption – An easy word to throw around in any department or industry nowadays. Even Canada’s real estate industry isn’t behind experiencing it. The unlawful practices, illegal transactions, money laundering are at an alarming rate. The recent unlawful practice that Real Estate council of Ontario (RECO) has its eyes on is the entry fee scam running in Canada’s real estate industry. It is being suspected that some of the registrants are charging ‘entry fees’ to potential buyers of pre-construction homes.
Buyers paying this entry fee to get access to buy the property before it goes out for listing. They simply get an upper hand over the general public. This way, only the rich get their hands on every property and the general public keeps on suffering. This was also highlighted in the media stating that registrants have asked for payments in cash without the receipts. There also have been allegations that the submitted payment is even shared with the developer’s staff.
The regulations under which registrants accept funds from consumers are:
- Trust Accounts: The submitted money must be held in the brokerage’s trusted account until it is to be disbursed properly.
- Full Disclosure: Any fund collected, it has to be documented and presented to potential buyers. The document must include the information;
What those submitted funds are for?
How the submitted funds are to be handled?
How the submitted funds will be distributed?
Terms and Conditions in case of a return
If the entry fee is received, but the client doesn’t buy the property, then the fee will be returned to the depositor. This can be achieved when the customer gets the receipt of his payments he submitted.
Ethically, every realtor, real estate agent, real estate agency is obliged to treat and deal every client and the trade fairly, with integrity and honestly. The code of ethics must be protected and these malpractices must be put on hold.
- Seller Permission – Without the seller’s explicit consent of the property, ‘entry fees’ can neither be requested nor accepted from the registrant.
A suitable amount of the entry fee can be accepted if the registrant complies with the rules and regulations listed above. Many of the registrants are breaching these rules. If you come across any registrant failing to comply with these rules, then please file a complaint with RECO.
If the rules are being bent from the developer’s side i.e. if any builder’s employees fail to comply with these regulations, you should inform the supervisor of home builders in the province – Tarion.
Every consumer has the right to know what he/she is paying for, and where their money is going. A fair business demands transparency and proper documentation for the proceedings. At Galaxy Gate Omega Reality Brokerage, we take pride in working ethically and proceed under rules and regulations with each client and each transaction. Galaxy Gate also received an email from RECO stating the issue and that they are aware of the con running in the Canadian real estate industry. These are isolated events which we think are conducted by agents due to the fact the real estate market is becoming very competitive and some registrants might feel binding rules outlines in REBBA 2002 is acceptable.
This certainly is not the right business practice. Please take our word on the fact that 90% of the real estate professionals and brokerages are hard working and always look after their client’s best interest. However, be careful and good luck in your real estate transaction.