In real estate, a double-ended deal occurs when an agent represents both the buyer and the seller in the same transaction. This practice has long been under scrutiny as it creates an impossible scenario where an agent has a duty to negotiate the lowest price for the buyer, and also achieve the highest price for the seller. Due to a bevy of complaints and an undercover investigation by CBC Marketplace, the Real Estate Council of Ontario changed the rules in October, making it much more difficult for agents to do a double-ended deal, and also increased the fines for any unethical behaviour.
Even though these transactions will be rare going forward, it’s worth taking a closer look at why they existed in the first place, and to consider what it means about how buyers are searching for properties in the market today. A double-ended deal can only occur when the buyer comes directly to the listing agent, and is not working with their own agent. This means the buyer found the property online themselves, took the initiative to connect directly with the seller or their agent, and arranged a showing. This is the secret that agents don’t want you to know – if a buyer finds the right house, they can connect directly with the seller, eliminating the need for expensive real estate agents.
In the CBC Marketplace investigation, they interviewed agents who double-ended almost 40% of their sales. This means that most of these sellers could have easily sold their homes privately without paying any commission. Buyers are more educated and informed than ever before, which makes them comfortable approaching home sellers directly. With selling prices in Toronto likely becoming publicly available soon, this trend will only increase, and the role of the buyer’s agent will diminish.
To be fair, there are definitely some cases where the listing agent was already working with the buyer, and actually did connect the two parties. However, with over 50,000 agents now practicing in the GTA, the chances of one agent representing both the buyer and the seller are very small.
In a world where technology has impacted almost every industry, real estate has been slow to change from the traditional 5% commission model. There are many signs such as these double-ended deals that indicate that the behaviour of home buyers is changing. This is great news for home owners, as it will spark innovation and create better options that offer more value at a lower cost.
Nathan is the PropertyGuys.com franchise owner for Toronto.