Canada's Condominium Magazine

Should realtors worry? Ontario law firm sets up own, fee-flexible brokerage

You do not need a real estate agent to buy or sell a home, but you do need a lawyer. Many people sell their homes privately, but a lawyer must be involved for the closing, which basically means the transfer of clear title from the vendor to the purchaser, and taking care of certain bookkeeping tasks like outstanding taxes and utility bills. The lawyer will also be expected to review the agreement of purchase and sale, and, in the case of a condominium transaction, the condo declaration. This being so, it’s a little bit curious that more home purchasers don’t choose to skip the intermediary—the realtor—and deal directly with the lawyer from start to finish.

A few years ago, when the Canadian Real Estate Association (CREA) and the Federal Competition Bureau agreed that the MLS.ca website should be open to the public, whether they were represented by a real estate agent or not, BC lawyer Brett Horton thought the move would be a “significant catalyst of change” to the way people bought and sold real estate. It didn’t happen, though, and in 2011, one year after the MLS ruling, more people than ever were still using real estate agents.

Undaunted, Horton wrote in “A New Role for Lawyers in Real Estate” that he still believed major change was coming in the way we do real estate deals. For one thing, it could provide lawyers with an opportunity to do more residential real estate transactions, and thus get paid more. He also supposed that more real estate vendors particularly would become “discontent” with realtors and their fees and decide to list their homes themselves. Real estate lawyers and notaries, he predicted, should prepare for a decrease in the number of people using full service real estate agents to buy and sell their homes.

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He goes on to give lawyers some practical advice on how to handle the expected stampede of “independent” buyers and sellers. For example, he advises that any lawyer should be “very cautious” about acting for both sides in a transaction, which is, in any case, not permitted in most instances. Without a real estate agent involved, and only a single lawyer, there would be no one else to mediate disputes. As well, a single lawyer acting for both sides could be more easily “duped” by fraudsters.

Now, five years later, we learn from Toronto real estate lawyer and columnist Bob Aaron that a law firm in Picton, Ontario has established its own in-house real estate agency. The lawyer-owners of the firm are not registered real estate agents, but they have a broker of record on staff as well as salaried, licensed sales reps. The firm itself is licensed with the Real Estate Council of Ontario (RECO) and the Ontario and Canadian Real Estate Associations. The lawyers told Aaron that they started the brokerage to give clients “greater choice, service and value” when they buy and sell real estate.

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With brokers’ commissions more than ten times greater than lawyers’ fees, it’s surprising that more law offices don’t offer full realty services.

This is smart, given that independent buyers and sellers are usually independent because they want to save money. It would be self-defeating for lawyers hoping to profit from this type of business not to offer their services for less than a conventional realtor would charge. According to Aaron, the Picton firm offers flexible fee arrangements, from the standard 5 per cent commission to pricing based on services needed, flat-fee or hourly rate. Clients tell them what they want and the lawyers accommodate them.

Needless to say, local realtors are not thrilled with this additional competition. Still, the lawyer-realtors said they had a “really busy” summer, selling cottages, vacant land and new-built homes. Asked whether such a firm could make it in Toronto, they answered, “absolutely.”

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