News of corruption on our news channels flash every now and then. We are not surprised if we see another one. If it is in any public serving department, corruption affects the general public. Illegal practices, unlawful transactions, bribe, and money laundering are all part of corruption. Recently, Canada’s real estate industry has been under the radar for false practices of some realtors. (RECO) Real Estate Council of Ontario has been noticing an entry fees scam under which some registrants are taking ‘entry fees’ to purchasers of pre-construction homes.
To get an early access to the property and an upper hand in the real estate deal, the purchasers pay this entry fees without thinking twice. These are the people who have laundered money and they are ready to invest their undocumented money anytime and convert it into documented money. Due to this practice, the general public keeps on suffering. News and other media have also highlighted that registrants have taken payments in cash without any receipts. The allegations of the submitted payment being used by developer’s staff are also there.
There are certain regulations under which registrants accept such funds and those regulations are:
- Trust Accounts
- Full Disclosures
- Seller Permission
Let’s discuss each in detail
- Trust Accounts: The deposited money must be kept in the brokerage’s trusted account until the distributed under documented conditions properly.
- Full Disclosure: Any money deposited has to be documented and presented to the purchasers. And the prepared document must include information about the submitted funds:
What are those for?
How will these be distributed?
How will these be handled?
- Seller Permission
With the permission of the seller, ‘entry fees’ cannot be requested and not even accepted from the registrant.
In case that after receiving the entry fees, the client doesn’t buy the property, then the fee will be returned to the submitter. This can be done when a record is kept and receipt is issued during the time of submission.
Every real estate agent, real estate agency, the realtor is obliged to do fair business with his clients. It is their duty to protect the code of ethics in the business transactions.
A certain amount of money as an ‘entry fee’ can be accepted if the registrant complies with the regulations mentioned above. If any fails to comply with the rules then RECO must take a strong action against them. And, if you encounter someone who is not doing business under the regulations, then please bring the matter to RECO.
If any developer bends the rules, then a complaint must be raised with the supervisor of home builders in the province – Tarion.
On the behalf of every customer, we all have the right to know where our money will go. A fair business transaction is what everyone deserves. At Galaxy Gate Omega Realty Brokerage, we proudly represent our ethical working methods in front of our clients. Galaxy Gate received an email from RECO mentioning the issue and that this con has come to their notice. The competitive market has made some realtors for the unlawful way to do business.
The majority of the realtors really work hard and ethically proceed in every deal. But due to malpractice of some realtors, we all suffer as an industry. Let’s clean up the mess, help us cleaning the mess.