Is the rebate from a cashback brokerage taxable as income?

Please be advised that you should not consider the following a formal legal opinion, my answering this question does not constitute the formation of a lawyer-client relationship, and if you would like advice on your particular situation, you should retain a tax professional to advise you, which could, but doesn't have to, be me.

The thing to understand about this question is that has two elements which make it potentially complex. The first is that it is situation-dependent. The second is that there is very little direct caselaw on the subject, meaning there is no simple and obvious prior decision to which we can point.

The general answer for individuals buying homes in which they will live is no, any cash back you receive from a realtor will not be taxable as income. Corporations and individuals buying for profit have more complex answers. I will only consider cash back in the context of buying here, because in the context of selling it doesn't make any sense; you'd negotiate a lower commission, not pay and get some of it back.

Let's start by considering what is going on with a cashback rebate. When you retain an agent in a buying scenario, one of the terms on the standard Buyer's Representation Agreement (BRA) is that the commission payable is either a percentage of the value of the property purchased, or a fixed amount, and the agent is allowed to take any amount offered by the listing agent, with the client obligated to make up any shortfall. Cashback arrangements work by having the commission be less than the cooperating agent commission offered by the listing agent, so there is money to return to the buyer after the agent has been paid.

Now let's consider how income taxes work in this situation. Sales tax (HST) is not being considered here. S.3(a) of the Income Tax Act, R.S.C. 1985, states that income must come from a 'source' which is an office, employment, business or property. Since getting cash back from an agent isn't an office, employment or property, the question turns on whether it is a business. This definition is found at s.248(1) of the ITA, and states that it "includes a profession, calling, trade, manufacture or undertaking of any kind whatever and, except for the purposes of paragraph 18(2)(c), section 54.2, subsection 95(1) and paragraph 110.6(14)(f), an adventure or concern in the nature of trade but does not include an office or employment." That definition says what a business includes, but doesn't really define a line between things which are and aren't a business, so to find that, we have to turn to case law. Specifically, R. v. Stewart, 2002 SCC 46, a decision of the Supreme Court of Canada.

The question of what is a business, and when should expenses be deductible and income taxable is examined in detail by the Court in paragraphs 48-60. In it, the Court lays out a two-step test to determine if a source of income is taxable:

(i)   Is the activity of the taxpayer undertaken in pursuit of profit, or is it a personal endeavour?

(ii)   If it is not a personal endeavour, is the source of the income a business or property?

Buying a home for personal occupation is clearly a personal endeavour. People who undertake more work in return for a greater cashback are not engaged in a business, since they are not selling anything to the public at large, but are working to reduce the cost of a personal transaction. Some services even offer total cash back in return for doing no work, such as Zero Value Realty. In that case the buyer has undertaken all the responsibilities of their own purchase. This does not create a business, and does not create taxable deductions for the buyer. The only reason this arrangement is necessary is because listing agents will not normally refund the buyer's agent commission to an unrepresented buyer, so buyer's who do not see value in having a buyer's agent must find an agent willing to refund all, or nearly all, of the buyer's agent commission. Since there is no business, there is neither income tax on the money received, nor available deductions for money spent in the course of finding a personal use property.

I have seen that some buyers who used cash back agents received T4As, and that the income was reported by the agent's brokerage to CRA, and thus had to pay tax on it. This is actually a mistake on the part of the brokerage, which should never have issued a T4A to these buyers. The brokerage had to deal with the fact that it received a commission, but was only entitled to keep part of it, so it needed a way to make sure they didn't have to pay tax on the whole commission. Their answer to this was to use a T4A (probably an accountant's idea; tax accountants love filing more forms) to create a deduction. The other side of this is that it ostensibly creates income in the hands of the buyer. What the brokerage should have done is simply transfer the balance to the buyer, and rely on the terms of the contract with the buyer to show that only the amount agreed is the income of the brokerage, and was the only money retained, so that is the only part which is taxable. If you have received a T4A for a buyer's commission cashback you definitely face an uphill battle with CRA, who also love following forms and resist when someone claims that the filed form is wrong and they don't owe tax. Frankly, the reasoning outlined here is pretty far above the level of most CRA auditors I've encountered, and in order to win the argument that the cashback isn't income, you would likely at least need to appeal the matter within CRA, and possibly to the Tax Court of Canada so the matter gets into the hands of a Department of Justice lawyer.

Having considered this, we can now look at the one case on this subject decided by the Tax Court of Canada, Zhang v. The Queen, 2020 TCC 49. There are three elements to this case which limit its use for precedential purposes: First, Zhang was purchasing properties as investments, not personal use. Second, the trial was held under the Informal Procedure, which means the Court will not weigh it as heavily when considering it in the future. Third, the appellant self-represented, so her argument was not made with the benefit of a professional understanding of the tax law. Before I get into the case, I should mention that there is a presumption in tax disputes that when the Minister (CRA) makes an assumption of fact, he can rely upon it and must be 'demolished' by the taxpayer for a judge to consider the facts to be other than as the Minister has assumed. In the case, the taxpayer bought four condos in Toronto as investments, and received a commission rebate from her brokerage. They issued her a T4A slip, but she did not think it was payable, and testified that she thought it was a gift. This is a spectacularly bad argument. Her testimony was inconsistent, and she failed to provide any evidence regarding the transactions to buy the properties, which gave rise to the payment. She also did not call her realtor to testify, from which the Court drew a negative inference. The judge says repeatedly that there is not evidence before him to overturn the assumption of the Minister. He also describes the taxpayer as inconsistent and inattentive, not qualities which make one a convincing witness. For all of these reasons, I do not consider this case especially useful in determining the taxability of cashback commissions.

Thus, for individuals buying properties for their own use, I conclude that any money received as a cashback from a realtor would not be considered taxable income. It does not arise from employment, business or property, but rather a personal activity. People buying for personal use are not typically in the business of buying and selling houses, so the payment is not an inducement to form a business relationship, or any other similar class of payment which would be taxable in a purely business case.
The fact that it is a rebate at all, rather than just a reduced payment, is down to the convoluted way commissions work in Ontario. The Buyer must pay the Seller for the property, through their respective lawyers. The Seller must then pay his agent, usually done by the Seller's brokerage keeping the deposit originally paid by the Buyer before lawyers were retained, and supplemented from closing funds from the Seller's lawyer's trust account. Then the Seller's brokerage pays the Buyer's brokerage. A cashback Buyer's brokerage then completes the circle, by giving money back to the Buyer. This is probably the least efficient and most convoluted way to compete on price, but I believe the obfuscation in the system is a feature, not a bug. Realtors like the whole system complex and murky, because it hides the amount they make. In the UK, for example, there is a rule which requires anyone who retains an estate agent to pay that agent directly. As a consequence, buyer's agents are almost never used, and the total commissions on property purchases are around 1%.

Briefly, let's now consider the case of individuals buying for the purposes of 1) renting and 2) flipping the property. For tax purposes, these are actually quite different. If someone is buying for the purpose of renting the property out, it is definitely done in the course of business, so the Stewart criteria are satisfied in that the rebate is taxable income. We then need to consider whether it is on account of income or capital. In this scenario, because the house is purchased to be rented out, the return of commission is part of the calculation for the cost of the acquisition of the property for the purpose of calculating capital gains taxes. Capitals gains or losses are calculated like this: sale price - costs of sale (lawyer, realtor, advertising) - purchase price - costs of purchase (lawyer, transfer taxes). The rebate would be counted as decreasing the amount you could claim for the costs of purchase, making the overall capital gains taxes greater. Let's use an example to flesh this out. Rented house sold for $1,000,000, originally bought for $500,000, and always used as a rental. $45,000 of sale costs, and $15,000 of purchase costs. The capital gain is thus $1,000,000-$500,000-$45,000-$15,000, or $440,000. Let's say the Seller paid a 5% commission when you bought the property from him, so 5% on a $500,000 sale, or $25,000 (I'm excluding HST here for the sake of easy numbers, and because HST can't be rebated for a host of complex reasons). If the buyer's commission was fully rebated, then you'd get back $12,500. This means your costs of acquisition are $2500 instead of $15,000, and the capital gain when you sell it would be $452,500. Remember: capital gains taxes are calculated and payable only when you sell the capital asset. It's a capital asset because it's used to make income (rent), not itself traded for profit. Capital assets are the trees, income property is the apple.

Now let's consider what happens in the case of house flipping. This is very similar because in that case the rebate is similarly a reduction in the cost of purchasing the house for the purpose of resale, which means it increases the income tax when you sell it. In this context the house is considered an inventory, and under the matching principle you claim the cost of acquisition as a deduction against proceeds of sale at the time of sale, and the difference is income if positive or a deductible loss if negative.

Thus, in no scenario is the rebate of realtor fees provided by cashback agents considered 'income' in the sense of it being a separate amount of income to declare. In all cases it will be tied to the acquisition of a particular asset, and the taxability of the rebate is tied directly to that asset and how you intend to use it. For more complex scenarios, such as if you change a property from personal use to income, or vice versa, while you own it, I recommend retaining a tax professional to advise you.

Offers and Counter-Offers: Law and Strategy

Sometimes, when making offers for real property, a Seller will send back an offer with something changed, often literally, in the sense that they send back the offer you previously provided, but with certain parts of it crossed out and some new things written in.  This is a counter offer, and there are some things you need to know about them, both in terms of what the law of contracts says about them, and how to approach them as a part of negotiation strategy.

Basics of a Counter Offer

A counter offer is essentially any offer made in reply to an earlier offer.  From a contract law point of view, making a counter offer is an explicit rejection of the previous offer, meaning once you make a counter you cannot accept the previous offer and bind the other side into a contract.  This is a subtle but important point of contract law.  Let’s say you make an offer for a house at $1M, and the Seller comes back and says he wants $1.1M.  If you say you will not pay $1.1M the Seller cannot then simply say ‘Then I accept your earlier offer for $1M.’ and create a binding contract.  He can offer to sell for $1M, and you can accept it, which you may well do, but he cannot force you to contract to buy the house for $1M.  You may have, since he made the counter and you were unwilling to accept it, made an offer on a different property.  It is important to at all times know what offers you have made, and what have been made to you, to make certain you do not end up in more agreements than you can satisfy.

When a counter offer comes from a Realtor, typically the format is that the Realtor will just cross out something on your offer and write in something else.  The price is the most common, where a line will go through it and a new price will be written somewhere nearby.  This is actually a very lazy way of doing this, and leads to a very messy document if there is any back and forth, but it is the standard practise.  Really they should provide a whole new offer to sell (though you will encounter some Realtors who think that offers can only come from buyers; they actually think that someone cannot make an offer to sell something, a position so contrary to law it is difficult to describe how baffling it is), and in this their practise of simply sending back offers with amendments is generally helpful for those using ZVR, because it leaves all the contractual terms in Schedule A which protect the Buyer intact.

When the counter offer comes in, there will be several elements of it you need to consider.  First, the price is usually one of the things which is changed, so consider that.  Second, the timing.  The offer is only open for acceptance for a limited period, so you need to immediately take note of how long you have to consider it.  Finally, if they have struck or amended any of the other clauses in the contract, such as the clauses in Schedule A.  You may want to consider having a conversation with your lawyer if any of the Schedule A clauses were struck or changed, unless you are very confident you know what those clauses do and to what risks you are exposed by their amendment or removal.

Offer and Counter Offer Strategy

Many transactions will not involve counter offers.  If there are multiple offers on a property Realtors will urge the Seller to simply pick one and have an agreement, because this minimises the amount of work for the Realtor and maximises the changes of him earning a commission.  Counter offers will typically only come in when there are few, or even just one, offer, and there is something about it which the other side wants changed.  Most commonly the Seller simply wants more money.  It is up to you to be the judge of both your financial comfort in accepting an offer to sell for a higher price, and the situation between yourself and the Seller, and if you believe you can simply reject offers to sell for a higher price because you believe the Seller will ultimately agree to your original offer price.  Each situation is different, both in the circumstance of the Buyer and that of the Seller.

Once you see a counter offer you know that the Seller is willing to negotiate with you on the deal, and most likely there either is no other potential buyer for the property at present, or your offer was the best of what offers were submitted.  This means that you have a measure of commercial leverage, but how you behave is based on your own objectives and financial situation.  You should make sure to keep your situation unknown to the Seller, unless telling them something serves your interest.  For example, if you have received a counter offer asking for more money, and your original offer was already everything you could afford and all the bank will lend you, telling them you’ve given your best offer and they’ll not get a better one is a perfectly legitimate response.  Since it is true, whether they think you are simply holding out for a lower price or actually can’t afford more, you can’t afford more, so either the Seller will agree to your offer, or there will be no deal.

Conversely, even if you can afford more you simply don’t want to pay more for a particular property because you do not believe it is worth any more than your offer, or that the Seller is under enough pressure that he will accept your offer, you can follow that course.  Your willingness to risk not getting an agreement to buy a property is entirely an exercise of your own discretion.  

There are some useful tips if you are engaged in a genuine back and forth negotiation over a property.  The first is that if you receive a counter you are willing to accept, but want to see if you can get it for less, do not send a counter of your own right away, but instead engage in some verbal negotiation.  Since a counter offer from you would negate the previous offer, if you still want to be able to accept the last one, do not make a new counter.  Second: get information.  You can go to onland.ca and pull the title register for the property, and with that you will be able to find the mortgage instrument registered on the property, if any.  Knowing how much the Seller owes, and being able to calculate roughly how much he pays per month (especially if you can see that the mortgage is variable with interest rates rising) can tell you that the Seller needs to sell soon, which means if you have time on your side you may be able to exert pressure for a lower price by threatening to walk away.  Lastly, Realtors can often be used against their own clients.  They are often so desperate to close a deal (the average Ontario Realtor only closes 2-3 deals per year) that they will betray their client’s position to you in the hope that you will make an offer and they can get their client to accept it, by telling you things like that their client still has ‘room to move’ on price.  If you hear that, you immediately know that your offer should be less than whatever it was last time.

Lawyer Review: When you need it

So, you’ve signed up for Zero Value Realty, now what?

You’ve just signed up for ZVR, now you’re ready to start searching for a property, but what do you do now?  The job of searching for properties and deciding what you think they are worth is up to you, ZVR as a system is based on clients being self-motivated.  The process will go as fast or as slowly as you want, based on how aggressively you search, make and submit offers, and how you price those offers.  Whether you are more afraid of not getting something or of paying too much for something is up to you.

ZVR made me retain a lawyer, but how do I know when I should ask him something?

This is a matter of understanding what it is you are doing, and knowing that there are things you don’t know.  A good example is if you make an offer, and the other side makes you a counter-offer, and in their counter they change the price, but they also remove some of the clauses included in your offer, crossing them out.  Unless you are confident that 1) you know exactly what those clauses do, 2) you know what effect, both in terms of what is now permitted and what is no longer required, removing those clauses will have and 3) you are willing to accept those risks, should you be willing to accept the amendment.  You should only proceed without lawyer input if you are confident that you know all three of those things.  Remember: you are making a contract for hundreds of thousands, if not millions, of dollars.  It is essential that you do so in full knowledge of the risks.

What sort of advice can I expect from the lawyer?

Lawyers can only give you legal advice, that means advice on the legal implications of documents or actions.  They cannot give business advice, this is prohibited by the Rules of Professional Conduct for Ontario lawyers.  This means if you ask a lawyer about including a particular clause in a contract, she could tell you that including it protects you from a potentially expensive problem, but she could not tell you how much you should change the amount of your offer based on whether or not that clause is included.

Remember, there are two sorts of concerns with submitting offers: legal and commercial.  Legal concerns or risks are those contained within the contract.  It refers to what can or cannot happen based on the terms of the contract, and who is responsible under the contract should a particular thing turn out to be true.  For example, a clause in a contract stating that “The Seller warrants that the furnace was installed new in 2022.” means that should the furnace turn out to be older than that, the Seller has breached the agreement, and you, as Buyer, can claim compensation.  Not including a term like that means if the furnace is new or old you have no claim for compensation, because the Seller has not made a contractual representation (statement that something is true).  The commercial risk is whether or not an offer will be accepted based on its contents.  You could have a contract full of conditions and representations to protect you, so it guards your legal risks very well, but if no Seller will ever accept it because of those terms, then the contract does not serve your intention of buying a property.  You will need to judge when certain risks are acceptable, so that you do not need contractual terms to protect you.  Taking the earlier furnace example, if the whole house was built new in 2021, you know the furnace will not likely be older than that, so putting in conditions about it specifically is probably unnecessary. 

The other angle from which to view legal and commercial risks comes from contemplating the value to you of taking on a particular risk.  For example, let’s say there is a property you know may have a particular flaw, a damaged roof, let’s say.  You could put a term in the contract making the Seller state that the roof is undamaged, and if you are only interested in having a house with undamaged roof, this is what you should do.  On the other hand, you may be willing to accept the possibility of a damaged roof, but are not willing to offer the value of a house with an undamaged roof for a house which may be damaged.  This will mean you can consider two offers: one for the full price with a guarantee from the Seller that nothing is damaged, and one without that guarantee, but with the price reduced by an estimate of what it will cost to fix what problems you think may be present.  Generally speaking, more conditions means a higher offer price, because you can be more certain of what you are buying, and few to no conditions means a lower price, because of uncertainty. This process is not easy, because it involves trying to reduce all the different things about a complex purchase, size, age, location, bedrooms, bathrooms, garage spaces, renovations, wear, landscaping, etc., into a single number.  A lawyer can help guide you through what choices you are making, and point out what risks you are accepting, but it will always be up to you to determine the price, both for property, and for risk. Ultimately, what conditions you include, and what price you offer, is a matter for what risks you feel like taking, including the risk that the Seller will not accept.

The Wild Card: Opposing Realtors

The one thing which is inevitably virtually impossible to predict are the actions of Realtors on the other side of transactions.  Realtors are not formally trained in law, and across the profession the most charitable way to describe their knowledge of law and contract is ‘inconsistent.’  Further, the method Realtors use to sell properties, with all the offers being submitted and then presented together at the same time, is not conducive to negotiating out terms.  This is because Realtors only get paid when deals are agreed, which means Realtors want to put offers before a Seller, and have a Seller just pick one to accept, as it sits.  Negotiation back and forth takes work, and raises the possibility that an agreement won’t be reached.  Realtors don’t want to risk losing their commission by going back to any one of those who made offers and saying they’d like more, or a condition removed, or something.  They’d rather have their client just accept something and be done with it.

This means that you can be fully certain that your offer is exactly what you want to make, and it can even be the best offer, but because it contains a term the Realtor doesn’t like for his own reasons, or doesn’t understand (this happens a lot), and he tells his client not to accept it because of that.  This is a risk against which both your lawyer and the ZVR staff more broadly will not be able to guard.

Condominium Buying: Inspections and Status Certificates

A condo purchase is now a frequent city or first time purchase for those looking to move out of rental properties.  Despite how common they are, it is often not well understood exactly what condos are, and what makes them different from freehold properties.  In this article we will examine what is special about a condominium property, and some things you need to consider if you want to make an offer for one.

What are Condos?:  The Condominium Act

A condominium is, legally speaking, a specific type of property created by the Condominium Act.  They have no ancient, common law principle, like leases, but are an entirely modern, statutory creation.  In basic terms what happens is a developer buys a piece of land and constructs a building upon it, and once it has passed a certain threshold of completion, a condominium corporation may be created.  Leaving aside the technical requirements for the registration of the condominium corporation, what this does is create an entity, the condominium corporation, which will own the land, and allow for the creation of individual units which can be bought and sold.  There are actually several different types of condominium corporations, but we will restrict ourselves to considering only the common, multi-unit kind.  Such a condominium corporation will have the individual units, but also common elements, which remain the property of the condominium corporation, and cannot be bought and sold.  Condominium corporations are by law non-profits, and the shareholders are the unit holders.  As a corporation, it must have all the ordinary trappings of a corporation, meaning it must have Articles of Incorporation, rules on general meetings, board meetings, elections, financial statements, filing of returns, and dissolution.  Condominium corporations also have special rules regarding funding, and the keeping of a reserve fund.

What this all means is that when you buy a condo, you aren’t buying a piece of land like you are if you get a freehold house.  You get a unit which is part of a larger entity, but even if you have a condo townhouse you don’t actually own the land under the building, but rather the unit as defined in the documents of the condominium corporation.  This means you are subject to the rules of the condominium corporation, and the things you own will be different from if you bought the same sort of place as a freehold.  Let’s consider two townhouses as examples, on opposite sides of the same street, one freehold, one condo.  When you buy the freehold property you simply own everything within the property lines, and barring any registered easements, charges, liens, or other rights, that is without caveat.  When you buy the condo property, on the other hand, you would typically own only the interior of the unit, while everything outside, such as the exterior walls, roof, eaves and driveway, are all property of the condominium corporation.  On the one hand, this should make the condo unit cheaper, because you own less, but you are also not personally financially responsible for the maintenance of the things owned by the condominium corporation, it is.  This means it will need to get money from you and all the other unit owns to do things like fix rooves, replace driveways, repair cracked foundations, keep insurance policies, and so on.  These are the common expenses which condominium corporations charge their unit holders.  It also means you do not have as much control over things like maintenance schedules and choices, because you do not own those exterior features.

Condominium corporations can have very different configurations.  Some are rows of townhouses with very few common elements, and relatively low common expenses.  Others are groups of towers with substantial amenities available only to the unit holders, such as concierge, security guards, pools, gyms, parking garages, party rooms, BBQs, private lawns and gardens, and so on.  What services a condominium corporation provides is entirely a matter of choice, and the willingness of the unit holders to pay the common expenses necessary to support those services and amenities.  Choosing a condo then is not merely a matter of choosing a unit, but choosing the sort of corporation which sits around it, as a sort of immediate neighbourhood.

Buying Condos: Inspection and Status Certificate Review Clauses

When buying a freehold property one clause you will always want to have in your offer is an inspection clause, allowing you to physically inspect the property with a professional inspector, and if you find defects, allowing you to demand a reduction in price based on the estimate for repair, or to walk away from the transaction without penalty.  What about condos?  When you’re buying one of those, do you need an inspection clause?

As a general rule, no, you don’t need inspection clauses for condos, because most of the things which would be expensive to fix are the responsibility of the condominium corporation.  When you look at a condo unit you are only buying everything inside the paint on the walls, which means that you should be able to see yourself if there are problems with flooring, walls, fixtures or fittings.

What you definitely will need when making an offer to buy a condo is a condition allowing you to review the status certificate, or to have reviewed the status certificate before making the offer.  You will probably want a lawyer to help you with this, as these document packages can be both large and confusing.  The status certificate is shorthand for a package of documents which you get which includes a specific certificate related to the unit you are looking to purchase, and which states whether the unit is itself behind on common expenses, how much the expenses are, and makes statements regarding the most recent financial statements and budget of the condominium corporation and the status of the reserve fund.

As a corporation, all condominium corporations must produce annual financial statements, which must then be presented to the unit holders in advance of an annual general meeting, at which the unit holders can question the managers of the condominium corporation about the spending during the previous year.  Think of this as being like an extra, super-local level of government, with the common expenses as the taxes and the condo board as the town council.  They will also need to make a budget for the next year, and explain how they intend to pay for everything in it, including whether they think they will need to raise the common expenses to do it.  Budgets will include schedules showing by how much they expect to increase the common expenses over the next several years.

The reserve fund is a sort of savings account condominium corporations are required to keep by the Condominium Act.  Basically, the Act says that they need to do studies of all the things which will need to be repaired and replaced on a regular basis, these are carried out by engineering firms, and then make a plan to have enough money to afford the repairs based on the engineers’ cost estimates by the time the repair needs to be done.

It is with regards to the budget and the reserve fund that the most common problems with condominium corporations can be found.  Sometimes things happen which cause condominium corporations to have to spend a lot of money unexpectedly, such as heavy rainfall causing flooding, which required a lot of repairs.  Insurance can cover many costs, but not always.  Other times, condominium corporations will have made poor choices in the past to keep costs down for the unit holders at the time, and now a much more serious problem requires a more serious fix.  Older buildings will also be much more likely to have more expensive maintenance requirements than newer ones, so expect them to have higher common expenses because of that.

Finally, there are things called special assessments.  These occur when the condominium corporation needs money for something and doesn’t have a way to pay for it, even with borrowing, with the common expenses as they are.  A special assessment is usually levied to deal with a substantial, one-off payment, such as for an uninsured risk or an unexpected maintenance issue before a scheduled repair.  Status certificates will reveal declared special assessments, but you should be wary of condominium corporations which have issued any recently.  They may be the result of bad luck, but it could also be bad planning, and you should do your best to determine which before making an offer or waiving a condition.

One of the biggest reasons you should consider hiring professional help with the review of a status certificate is that the people who produce them know what effect changing common expenses and condo fees have on property prices.  As you would expect, a condo with higher condo fees is cheaper to buy than an otherwise identical one with lower fees, because the first condo is more expensive once you own it.  This means that raising common expense fees, because inflation has made all the required maintenance more expensive, for example, will reduce the value of all the units.  Condo boards know this, and so seek to find a way to raise fees as little as possible, sometimes through the use of special assessments, while not violating their obligation under the Condominium Act to stick to the plan laid out in the reserve fund study.  Remember: the danger is not just that you may end up buying something you realise you do not want, but that you later realise you paid more than it is worth.

Conclusion: Know what you’re buying

Buying a condo isn’t inherently better or worse than buying a freehold property, it’s just different.  They come with different concerns, obligations and responsibilities, and with both it is important that you choose the one that best suits your needs and wants, and do it in full knowledge of what you’re buying.  For a freehold property you need to make sure of the physical state of the property, and for a condo you need to be sure about the financial state of the condominium corporation.  In both cases you should consider hiring the appropriate professional to assist you in making your determination: a building inspector for the freehold and a lawyer for the condo status certificate.

Buyer’s Guide to Title Insurance

If you are buying real estate, at some point in the process you will come across something called ‘Title Insurance’.  What is Title Insurance?  The purpose of this article is to outline what it does, why it comes up in the course of a real estate purchase, the different sorts of policies, and give you some guidance on which you should choose in the course of a residential purchase.

What is Title Insurance?

Title Insurance is insurance which protects against problems with title, that is, with issues related to the formal ownership of real property.  To explain this, we need to consider how land ownership works in Ontario.  Land, or real property, is different from all other sorts of property, for two reasons.  Consider something you have nearby for the purpose of this example, such as a pen.  The first difference is boundaries.  The boundaries of a pen are clear and obvious, where it meets the air, but the boundaries of land are not obvious, they need to be drawn by surveyors.  The second difference is permanence.  If you fed your pen through a woodchipper it wouldn’t be a pen anymore, but if you drop a grenade on a patch of land and it goes off the land is still there (albeit with a new hole.)  This issue of permanence means that we need to be sure we are buying land from the right person, who bought it from the right person previously, who in turn bought it from the right person before that.  This is called the chain of ownership.  In Ontario these chains stretch all the way back to the late 18th century if you care to look.  We solve both of these problems, boundaries and permanence, in Ontario today through the Land Registry.  Basically, surveyors go out and make a detailed map of an area, dividing it up into parcels, and then submit this map (called a survey plan) to a Land Registry Office for that area, which they keeps an electronic register of all the people or companies which have any right in each parcel the plan creates.  When you buy a piece of land your name is entered into the register as the new owner at the bottom, and any mortgage you have is added on as well.

Having covered this, how does Title Insurance fit in?  Title Insurance is insurance against problems with the title, problems with the rights as described on the register.  The reason this is useful is twofold: first, formal registration is not the only way one can acquire rights in land, and second, entries can be made onto the title register through fraud.  Now we can consider how these work.

First, rights acquired other than by formal registration.  The easiest one of these is what is called a matrimonial property right.  Imagine there is a property inhabited by a married couple, though only one of them is registered on title.  Under the Family Law Act the spouse not registered on title does have rights in the matrimonial home, even though he or she is not registered formally on title.  If you were giving a loan to the person on title, you would need to make sure that the other spouse consented to the loan, or else your right as a lender with a mortgage would not be enforceable against the spouse not on title.  There can also be rights, handed down through the old English common law, which are attached to a parcel of land from before its conversion to the current Land Titles System.  The risk of such things existing depends upon what sort of parcel you are buying.  If it is a condominium, this risk is nonexistent, because before a condo building is built there must be an application by the builder for something called Absolute Title, which extinguishes any previous rights.  If you are buying a rural parcel which was originally created 200 years ago, there is a much greater chance that some ancient rights exist.

Second, rights acquired through fraud.  This one is pretty simple.  If, for example, someone impersonates you to a bank, and takes out a mortgage in your name, gets it registered on title, and then disappears, Title Insurance will reimburse you to have the mortgage removed.

The exact nature of the protected interests will vary from one policy to the next, and this is not an exhaustive list, but rather a description of the two broad categories of risks covered.  If you have a specific question about whether your policy covers a specific circumstance, you should consult your policy documents or ask your lawyer.

Why does Title Insurance come up?

Title insurance is at this point a standard requirement of lenders granting mortgages in Ontario.  When you purchase a property your lawyer will pull the title register and examine it for any issues with title which could cause problems for you, and will make requisitions of the seller’s lawyer regarding them, such as that an existing mortgage be removed.  This only works for things which show up on the title register, and lenders don’t want to be caught out by things which don’t appear, such as survey problems, (lawyer’s do not typically order new surveys nor do they physically examine the land) or problems which could occur in the future, such as mortgage fraud.  Lenders want to be protected from such risks, and so have lawyers acting for the purchaser buy a title insurance policy, at the purchaser’s expense, to insure the lender against these risks.

What sorts of policies are there?

There are only two types of policy: owner and lender.  It is also possible to buy both.  If you have a mortgage, your lender will require a lender policy.  Sometimes they will require your lawyer purchase the policy and send them proof, other times they will purchase the policy themselves and simply take the cost out of the mortgage proceeds (so your lawyer will not get all the money you will owe back, since the bank spent some of it buying the policy.)  A lender policy will reimburse the bank for any issues with either the registration of the mortgage or the title in your name, so that should problems occur they are still able to collect on the mortgage.  From your point of view this means that if a title problem does occur you at least don’t have to worry about your mortgage, since the lender will be compensated for any losses suffered, though you will still lose equity value in the property.  An owner policy protects your interests more directly, and will pay to defend your title rights in court if challenged.

Should I get Title Insurance?

This very much depends upon the circumstances of your purchase, and must always be weighed against cost.  For subdivision houses the cost of Title Insurance is usually about 0.1% of the purchase price, for each the lender and owner policies, so 0.2% if you get both.  This varies considerably based on the nature of the property however.  If you are buying a newer home the price is less, because there has been less time for previous title issues to occur.  If you are buying a condo the cost is much less, less than 0.05% of the purchase price in some cases.  If you are buying large, older, rural parcels, the price is much more.

One of the biggest factors to consider when deciding to get an owner’s policy is ironically whether or not you have a mortgage.  If you have no mortgage you are a much better target for mortgage fraud, because you have more equity to steal.  A large charge on your property means that banks will not offer much additional credit, since there is only limited remaining equity.

Whether you get Title Insurance ultimately depends on how you feel about the cost against the risks and the probability that anything covered will occur.  Title Insurance is best thought of as insurance against the small chance of a big problem, since there are very few small problems with title (nobody is committing $500 worth of mortgage fraud).  A guide to how likely Title Insurance is going to be useful is actually the price of the policy.  Insurers have a great deal of data on the probability of risks, so if the policy is more expensive that is because they have reason to believe a covered risk will one day require payment.

How Many Offers on a Property?

One of the advantages agents claim to provide is being able to tell you how many offers a property has on it. That can be useful, as it can influence what you may want to offer a seller. If only you could easily accomplish the same feat! First, a quick understanding of what the regulations are. According to REBBA 2002, if you are making an offer on a property agents must reveal to you the number of offers (but not their contents)

26. (1) If a brokerage that has a seller as a client receives a competing written offer, the brokerage shall disclose the number of competing written offers to every person who is making one of the competing offers, but shall not disclose the substance of the competing offers.  O. Reg. 580/05, s. 26 (1).

That means you don’t need to be an agent to get this information. That means that getting that information can be as simple as calling them and asking.

Internally most brokerages in Ontario use one of two tools to manage offers: BrokerBay and ShowingTime. These are tools internal to brokerages, which show listing information, contact information, and the number of registered offers for the property. TRREB brokerages use BrokerBay. Conveniently enough, these tools are not available to the general public, only to agents. That is why at Zero Value Realty we created our own tool which extracts that information and makes it available to our registered customers, bypassing this artificial barrier. However, even though all TRREB agents have BrokerBay available to them, and ZVR will give you the information it contains, that doesn’t mean that information is necessarily accurate. That is, if there are offers counter there you can be sure that they exist. But if an agent simply doesn’t use it, doesn’t let offers be automatically registered through BrokerBay, and then doesn’t update it, it can be inaccurate. That is why sometimes BrokerBay will show having zero offers on the property but when called the agent might say there are some. You can of course ask the agent to please use the tools available to record them.

Remember that you can also always contact the listing agent directly (such as by phone and email) even without our automation, as they are liable to reveal this to anyone making an offer.

When is an agent my agent?

Buyers are often confused about what, if anything, they may owe a real estate when they haven’t signed with them.  The concern pops up most often when buyers view a home, but are unsure of the obligations they may have to the real estate agent who shows up.  This issue gets even more muddied with misinformation given by salespeople who may have overheard a lawyer speaking about the issue, and then understood none of the intricacies.  We want to address head-on the issue of when an agency relationship is formed with a real estate agent, and what obligations a buyer might have to one.

An agency relationship means when one party has the authority to act on behalf of another, including binding them in contracts.  This is usually combined with a fiduciary obligation on the part of the agent, such as with lawyers.

When contemplating buying a home, and making offers, one will frequently be confronted with real estate agents attempting to insert themselves into the process.  In response to the recent case 2021 ONSC 4743 (CanLII) | Homelife Maple Realty et al v. Singh et al | CanLII it is reasonable for people to wonder when they have retained an agent, and upon what terms.  I will review the case, and consider the law of contract, and equitable remedy, in considering this issue.

The first thing to consider is the very basic question, Law 101, of what makes a contract.  A contract, at its core, is an offer, and an acceptance.  One party makes an offer, to buy or sell, and the other accepts. The critical element of a contract forming is what is called the 'meeting of minds', which means that the parties involved either did, or should reasonably be expected in the circumstances, to have understood they have made the same agreement.  This is why contracts are best done in writing: so both sides can consider the document and agree that everything written constitutes the agreement being made.

This is also why it is essential to read carefully any written agreement presented to you for your signature.  The law assumes that if you signed an agreement you intended to be bound by its terms, and were aware of them at the time you signed it. If you were misled or deceived into signing a contract, you will need to prove that deception, but even that does not relieve you of the obligation to actually read what you sign.  In the case of the OREA 300, it contains an important clause to make sure buyers who sign it are bound to it: an ‘Entire Agreement’ clause, which excludes any representation made outside the contract from forming part of the contract.  Agreements don't need to be in writing, but it is much easier to determine when an agreement has been made and upon what terms if it is in writing.

Turning to the case above, it is reasonable to ask what it says about retaining a real estate agent, and when there is an agreement.  Have I retained an agent when I ask them any questions?  If I view a property and an agent is there, have I retained them?  You need to consider the circumstances, but basically, the answer is no.  The agent cannot force a contract upon you by deception.  What the case above reveals is that the buyers had an agent, and that agent was doing work for them, and then they decided, when they needed more money to buy the property they wanted, to rely upon the fact that they never actually signed the Buyer Representation Agreement (BRA) to claim that they had never retained their agent.  The agent sent them a BRA, and then proceeded to do a lot of work for the buyers, engaging in negotiation on their behalf, and making offers.  This is what in law is called 'reasonable reliance'.  The agent had sent the BRA to the buyers, and the buyers, though they had not signed it, were acting, in legal terms 'with the intent to be bound' by the terms of the contract.  Meaning, their actions indicated that they wanted the agent to do things for them in their search for a home, and were aware of the terms of him doing that, because the BRA had been provided to them.  They knew, or reasonably should have known, that the agent was acting on the basis of being bound by his BRA, and, as the judge found in the above ruling, there would be unjust enrichment were the buyers permitted to avoid paying the agent because the BRA was not signed.

At ZVR, we consider the standard OREA 300 BRA to be predatory in nature, and refuse to use it. The contract obligates the buyer to pay the commission to the agent on the purchase of a property during the period of the Agreement, even if the agent was not involved in finding, negotiating or signing the Purchase Agreement. In addition, signing it often follows false representations as inducements. Agents quite often say not to worry about signing it  because it is standard (as if that helps), and critically, that the seller will pay the commission required by the BRA. This is contrary to the terms on the face of the BRA. The OREA 300 states that a buyer will pay no matter what a seller agrees to. Worse than that, the practice of using co-operating commissions, where the Seller’s agent agrees to pay a portion of his commission to the Buyer’s agent, is hidden from buyers, and they are unable to make a proper decision or even discover the true cost of their agent.  In short, the entire structure is unjust, and fundamentally based upon deception.

What does this mean then for understanding when you have, or have not, retained a real estate agent, and what to do?  Firstly, be clear.   If you want to avoid uncertainty or argument about whether you have retained an agent to work for you, be explicit at all times, if you can, in writing by email or text message, because those have date and time stamps.   If representations are made to induce you to a contract, it is best to include them in writing in the contract itself.   Second, enquire.  If you're asking an agent for something, and they appear willing to do an awful lot of work and you don't think you've hired them, remind them that you have not retained them, again in writing if possible.  Finally, stand your ground.  Agents will sometimes do things for you, and then try to guilt you or otherwise convince you to sign up to being their client when you have no obligation to do so.  For example, if you search on Redfin, House Sigma, Fairsquare Properly or Zolo for a property, and book a showing, buyers are often surprised that the person who shows up is not the Seller's agent, but a buyer's agent who is attempting to insert himself into the transaction to get paid.  They'll sometimes go through the whole showing without explaining who they are or their relationship to the transaction.  Them showing up and doing something, without explaining the terms of any agreement, does not obligate you to do anything.  The same would apply to the listing agent.  Remember: the meeting of minds.  They cannot deceive you into an agreement; that violates the most basic precept of contract law.

In summary, contracts are formed by an offer and an acceptance, which creates a meeting of minds, when the parties understand they have made an agreement in the same way.  Contracts do not have to be written, but generally written is preferred because it allows for greater certainty of terms.  Contracts can arise by conduct, if the parties act in a way which indicates their intention to create legal relations.  Essentially, law is more complex and nuanced than a set of simple statements (beware anyone who tells you something which begins with "All you have to do is...") which allows obviously unjust situations to be enforced.  You need to be aware, and clarify with people with whom you interact in their professional capacity, when they are being asked to do something for compensation, and how much.  It is for exactly this reason that lawyers insist upon written retainer letters before they do anything for clients, and expressly state on websites and in emails that they are not retained because they answer an email question.

Lies, Damn Lies, and Development Charges

When someone tells you that there is corruption in a system, like saying ‘The construction industry is corrupt’, most people imagine a series of kickbacks and payoffs.  Officials paid to look the other way on safety inspections that weren’t passed, more money paid for materials than should have been, or bids preferred because one of the bidders bought a backyard pool or a car for the members of the panel who pick the winning bid.  Home construction in Ontario is deeply corrupt, but not in that way.  Being Canadians, we have a much quieter, more polite and technical version of corruption, one which massively inflates the cost of housing in a way which hides itself from purchasers, and keeps other homeowners happy because it provides a lot of money to the coffers of the municipality: development charges.

At first glance, development charges appear to be a perfectly reasonable concept.  A builder of homes, needing approval from the municipality for construction, must pay the municipality to have the area on which it seeks to build zoned appropriately, which the municipality can use to conduct studies to make sure construction won’t cause flooding, building the municipal services in the area, and generally paying for everything the municipality will need to do for all the new houses being built.  The reality of how it works is rather different.  First, all the roads, services and everything else in the area are built by the builder as a condition of approval, not at the cost of the municipality.  Second, the amount of the development charges are well more in most cases than any cost the municipality incurs for the actual construction.  When a new neighbourhood is built, everything is new.  Roads, sewers, parks, pipes, all of it.  New things don’t tend to need a lot of maintenance, but old things everywhere else certainly do. 

To give you an idea of what I’m talking about, consider this scenario: In a neighbourhood in Waterloo, one of those semi-rural developments from the 1970s which cities eventually grew around, there was a house, a reasonable bungalow but on a big lot, nearly 2 acres.  The owner died, and his estate subdivided the lot to sell the empty half.  The empty lot was sold for $350,000, but the development charges and surveys required to get the permission to sever cost the estate $75,000.  To put it on a grander scale, consider the story of Mississauga, as reported in the Globe and Mail on January 1, 2022 (Mississauga a ‘cautionary tale’ as cities sprawl out across Southern Ontario - The Globe and Mail) Mississauga sprawled for decades, but has now run out of land to develop, and without the development charges from new developments, they don’t have the money necessary to do the maintenance on the neighbourhoods they already have.  Development of Ontario suburbs has become a pyramid scheme, where each new development pays for the upkeep of those behind it, which in turn need more new developments to pay for them.  As sprawl continues, ever more money is needed in order to pay for the maintenance of previous sprawl.  That means you need either more developments, or more money in development charges from each new house that is approved, which means either shrinking lots, or charging more per lot.  In Mississauga, both occurred.

This obviously seems quite foolish, but not quite so obviously corrupt.  The corruption comes in two places.  First, paying for development and maintenance like this means the municipality doesn’t need to pay for it in other ways, such as taxes on properties.  Politicians like doing it that way, because keeping taxes low means keeping people happy, and keeping people happy means staying in office.  The money obviously needed to come from somewhere, but a way was found to keep it out of sight, and as long as people don’t think they’re paying for it and nothing is going wrong, they don’t seem to question very much.  The development charges are hidden in the cost of a new house; it doesn’t show up as a line item when someone buys a new property how much the developer paid for the development charges, the house simply costs more. These costs are also hidden in yet another hard to find place: car insurance and automobile costs. Brampton has the highest insurance costs in the entire country, which is chiefly a result of poor urban planning and development. It is a car-dependent, generally unwalkable suburb which forces people to pay for car ownership, and the multitude constituent parts of that ownership. As car insurance is entirely private in Ontario, that means mandating placing more money into private hands as a direct result of hiding costs of poor development.  

Development charges, as opposed to land value tax for example, create perverse incentives for inefficient land use, and as they are a one-off charge, do not respond to changes in the value of land as the decades go on.

 This means municipalities have kept a huge source of revenue essentially out of the public eye, which makes them unaccountable for it in a very profound way.  People aren’t nearly so exercised about how the money of others is spent as they are about how their own money is spent.  This runs fundamentally against the founding idea of English Parliamentary democracy, which Canada inherited.  Only the Commons was permitted to raise taxes from the common people, and that ‘power of the purse’ was translated into real political power when kings needed money (Henry VIII) and civil war when kings tried to circumvent it (Charles I).  Modern municipalities have found a cute way to circumvent this system, but with the flaw of creating an ever-increasing obligation for maintenance, with a continuously decreasing ability for more development charges as the available land dwindles.  It is a continuous bet on unlimited growth, which must, inevitably, fail.

The second element of corruption comes in the sort of developments which get approved.  Municipalities so desperately need growth to fund themselves that developers have huge leverage in getting what they want approved.  After all, if the municipality doesn’t approve it, they can always take their plans and all the charges, and the future growth, somewhere else.  Whole developments of identical, soulless suburban houses are built in places like Minto and Palmerston, which could easily be mistaken for homes in Kitchener.  Or, consider the proposed development in Belmont as reported in the Record on January 1: ‘Would you entertain an eight-storey’ condo tower in Belmont Village rather than 11-storeys, some councillors ask the developer | TheRecord.com.  Of the 132 units, 92 of them, 70%, are one bedroom.  Or this one, at Charles and Francis, 532 units, nearly ¾ of them 1 bedroom: Tallest condo tower in Waterloo Region will be ‘centre ice’ in downtown Kitchener | TheRecord.com  In the midst of an affordability crisis, in the middle of neighbourhoods full of family homes, these developments are almost entirely suited only to single millennial tech workers.  Why?  Two reasons: first, it makes the average cost of the units lower, which makes for more ‘affordable housing units’ even if they’re of no use to a family with two children who can’t afford somewhere to live.  Second, selling two 500 square foot one bedroom units is more profitable than a single, 1000 square foot two bedroom unit.  

Why would a municipality approve these, or any of the other condo towers going up in Kitchener, all of which are more than half one bedroom units?  They worship at the altar of unlimited growth as the solution to every problem, and the City needs the money the developments provide.  This is the corruption which lies at the heart of development in Ontario, the lie we’ve all been told and that we tell ourselves about what it costs, and who should pay for it.  At some point, the room for new development and growth has to end, and then we’re all going to learn the cost of keeping everything we’ve built.  As it is, Canada already relies upon immigration to drive growth.  Who’s going to immigrate somewhere they can’t afford to live?

Platinum VIP - New Construction

A stock image to make you think you are special

You have finally found it. That elusive, exclusive, Super Duper Platinum VIP Goldfinger Special Access real estate agent. Only they can apparently get you that foot in the door with a new builder before the rest of the crowd. You will have your pick of good units, unlike the rest of the plebs who can fight over the poorly laid out scraps the builder might have left. You made it in this world, and your dream of home ownership is about to become a reality all thanks to that special connection a friend made for you with that real estate agent.

Except that is all a lie. All too often a real estate will tell you about the exclusive access they have to some new development, and their Platinum VIP status. At ZVR we wanted to understand just what is going on here. Are developers truly forcing buyers to grease the palms of some third-party salespeople just to be able to buy a home? After all, it makes no sense to reduce the number of bids on homes, especially for the most desirable ones.

In our investigation we called several brokers who claimed to have such access, and then called the developer which they claim to have the access to confirm. The developers did state they have something called the Platinum VIP list. They also stated there is another name for that list: their mailing list. That is right, anyone can sign up to receive emails from most developers and now say they have Platinum VIP access, no matter how absurd the name sounds. We called a number of developers, many of whom are well known names: Tridel, Daniels, CentreCourt and Vandyk. All confirmed that if a customer wanted to buy a home, they can have access to a development round all they need to do is sign up for the mailing list.

There is more to this story though. First, when signing up for a developer’s mailing list some will ask whether you have an agent or not. If you say you don’t, then they will not pay your agent if you happen to bring one later on. Otherwise, most will pay the prevailing commission in Ontario, which is 2.5% + HST. We asked these developers if instead of coming in with an agent they can just give us 2.5% off. Every single one said “no”. That the price will be the same whether you use an agent or you don’t. That doesn’t make too much sense to us, especially given the size of some of these gorillas. Wouldn’t they at least try to save money by splitting the difference with a customer? Our conjecture is that these developers are just like every other seller, and are afraid of the collective steering they will suffer if they refuse to pay the cartel. At the same time they realize that if an interested customer found their way to them all without a salesperson, then they can get away without paying one. After all, what customer will go out of their way to hire an agent if they can have access to the home all on their own? The price is the same. No amount of negotiation would have the developer budge.

A buyer agent’s role is even more obsolete when it comes to new construction. There is no home at the time a buyer commits to a purchase, so physical inspection cannot happen. The contract is not the OREA purchase and sale, so a lawyer will need to review it. The developer is unlikely to negotiate the price in a hot market, and if they were willing to do so then there is nothing special a salesperson can do that a lawyer or a clever customer cannot do. It is a completely contrived role that is no more than being a parasitic middleperson. The price will stay the same.

The price might have been the same that is until ZVR came into existence. By happenstance, we can proudly say that new home builders have created an opportunity especially tailored to our business model: we are now the only service that can get you 2.5% off a newly built home.

Throw out the rental appliances

Ontario has an almost unique sort of scam: rental appliances. Aside from Saskatchewan, there is no other province where this sort of arrangement is common. After all, who in their right mind would want to rent an appliance for 3-5 times its actual price? It is the equivalent of paying a 30% interest rate, all for the pleasure of having yet another bill to deal with. Unlike in Saskatchewan it does not even include the yearly service. The appliances themselves are not too expensive to buy outright either; a traditional water heater can be between $500-$1000 and usually comes with a 5-10 year warranty, so you can have peace of mind if you are into that sort of thing. It is only some types of appliances: it is somehow considered reasonable to rent a water heater but not a fridge.

Most consumers in Ontario don’t make a well-informed choice to have this wretched deal. Instead, it is builders in a tight housing market looking to save a few thousands by saddling a buyer with these rental appliances. Some landlords also choose this arrangement, as any increases to appliance rental costs are not subject to Guideline Increases. When a home is resold buyers often enough mistakenly think they must take over those rental appliances, or just find themselves in a position where they cannot buy immediately and outright the replacement appliances.

This is where at ZVR we would like to poke companies like Reliance and Enercare in the eye with the same zeal as we do real estate agents. The key is to understand that there is nothing legally compelling a buyer to take over the appliance contract from the seller when they buy a home. Enercare for example even tries to embed its appliance rental fee in utility bills through Enbridge. One aspect of their trickery is sending letters that state that making a payment indicates acceptance of appliance rental contract assumption. We don’t think this would do too well if challenged in court, as it is clear that a meeting of minds is likely to be absent. In our contracts we always try to omit the rental appliance assumption, and if the seller is insistent then we negotiate a price that includes a buyout for the rentals.

Practically, here is what a buyer needs to do: first, never pay. When a utility bill comes, ensure only the utility itself is paid, and never the rent for an appliance. If you did not assume the rental contract you only need to tell the rental company the following: “Your junk is on my property. You have 6 weeks to remove it. If you do not, I will dispose of it.” Otherwise, it isn’t a certainty you will need to pay the rental companies what they ask to break the contract. There is a consent order that strictly limits what Reliance might be able to charge. They may try to deceive you by saying the only way to break the contract is to purchase the appliance, but the consent order is quite clear about how Reliance “shall” permit the contract to terminate and what they may charge. For details specific to your situation you can contact a ZVR lawyer for advice.

Many homebuyers would be cash-strapped after closing, having spent all they had and more to purchase the home. A ZVR customer on the other hand would have their commission rebate arrive soon after closing, which should be quite a bit more than necessary to replace rental appliances with new, fully-owned ones.

Is a buyer agent’s role contrived?

There is a false dichotomy peddled by salespeople in the real estate industry: you either hire one of them, or you have to do everything yourself. Worse yet, the salespeople sometimes even try to convince people they will not be able to buy without them. Only they are licensed to provide you the full service you apparently need. But what does full service mean here anyway? And are these salespeople even qualified to provide it? Before the advent of internet mass adoption, the most difficult part of trading in real estate was finding a buyer or a seller for a property. Theoretically, we have had the technology to eliminate salespeople the moment the Sears catalogue came out. First, let us address what full service actually means for a buyer in real estate. It means that a salesperson will consult with you, tag along with you as you view homes, and finally submit and negotiate offers on your behalf.

Salespeople claim that they are “showing” clients homes, but that claim is ludicrous on its face. What does showing even mean? They have never set foot in the home either. Perhaps reading off information from the listing? Narrating the tour? Perhaps they are going to point to the washroom and explain that is the philosophy chamber. Somehow we don’t think anyone needs explanations about how the toilet works, nor any other part of the home. I can just as well argue it is the buyer showing the agent the home. Unless it is that home in Philadelphia that came with a sex dungeon, no explanation is needed. Whatever your opinion of property salespeople, you must still do the legwork and show up to see each home. While they might book these showings for you, it is as easy as picking up the phone and calling. Is that sort of service really worth tens of thousands of dollars? The internal system for these salespeople even enables automatic appointment booking, but they deliberately prevent anyone but them from accessing it.

One of the worst aspects of the service salespeople provide is when they masquerade as other professions. Taking advice on physical defects of a home from a salesperson is about as prudent as taking it from an accountant. While there may be salespeople and accountants who also know something about home inspection, they are not inspectors and nor are they general or even specific contractors. Their opinions about home defects are worthless at best, and dangerous at worst. If you do buy a home that had undiscovered defects, the salesperson you may have hired will have nothing to do with the process of recovering any damages. Another profession these salespeople masquerade as is a legal professional. Under no circumstances would we ever advise a client to have a legal contract drafted by a salesperson. Nor would we suggest taking advice about the clauses of that contract from them. They are not trained in real estate or contract law, and they can and do botch contracts. Trusting a salesperson to do so is about as wise as hiring a plumber to do a root canal.

Interestingly, the salespeople also advise clients what to bid on a home. Not only are they outmatched by machines for the task, they have no more information than anyone else these days. They do not have any better tools than the layperson has at their disposal. They do have a strong motivation to get you to buy anything, and so push clients to buy faster.

It is no coincidence that in most other countries a buyer’s agent is not a thing. In the UK and Australia for example they simply do not exist. In those countries by the way it is also illegal for a salesperson to be drafting contracts. In addition, everyone must pay for their own representation in those countries, and demands for a buyer agent’s commission would probably be viewed there as an awkward attempt at extortion. Why then, do so many people use these salespeople in Canada? Are Canadian home buyers uniquely helpless? The answer is that this informal cartel creates artificial barriers. In order to submit an offer, a buyer needs to know the seller’s name and the legal PIN of the property. However, you must first understand that there are two versions of every listing on the MLS: what you see, and the full internal listing that only agents can see. You cannot see the necessary information to place an offer while these salespeople can. Theoretically, anyone can go to onland.ca and perform a search of the land registry for this information. That is not free of course, because the government of Ontario decided to allow a company called Teranet to have literal monopoly control over electronic land registry. Each search will cost a person north of $30. Then the full listing contains “broker notes”, which are notes kept away from public view, and even away from the seller’s agent’s own clients. Sometimes (around 10% of listings) these notes state that the buyer agent’s commission will be reduced if the seller’s agent has to do their job and show the home. Or they contain a reference to other forms they would like submitted with the offer, which are hidden from public view. Finally, with a move that can only be described as cartel-like, some salespeople even try to block people from viewing a home unless they are hiring a member of this cartel.

As you can see, salespeople are unqualified to provide the service they claim to provide. A fair part of the service is entirely contrived. The ZVR solution is to maneuver around this unfair system. We provide the full broker listings and the hidden forms, allowing you to either submit an offer yourself or have your lawyer do so. We provide you an hourly real estate agent whose role is to circumvent being blocked from viewing some homes, and to prevent the discount being reduced. It is a shame that we need to do so. In a fair market ZVR wouldn’t even need to exist. Until legislation changes the market, it is unfortunately the best option.

Meet the Cartel

Real estate boards in Ontario form an informal cartel. This isn’t just our opinion, but the conclusion of an academic paper published by Dr. Mark S. Nadel. He is a veteran employee of the US government who published a paper in the Berkeley Journal of Law. The paper itself is an enticing read, but unfortunately does not offer good solutions to the problem. Our own founder has written more about the solution in a medium article titled Meet the Cartel.

We would like to expand on the claims in both papers and drill down into price fixing in Ontario, and in Canada as a whole. There is empirical evidence that shows this price fixing is alive and well. In Canada our informal cartels set pricing structures and standards provincially. Take a look at the structure of fees in each province and the average take on each transaction under the heading "Comparison of Real Estate Commission Across Provinces": https://wowa.ca/calculators/commission-calculator-bc. Notice something weird? Despite BC real estate being on average more expensive than in Ontario, agents in Ontario tend to make more on each transaction.

These prices are detached from any fundamentals. Is selling real estate in Newfoundland and Labrador a third as hard as selling in Toronto? I would argue it is the other way around. Relatively uniform fees and fee structures across a province, and yet different between provinces. In a healthy market there is variance in the prices between offerings, even though there might be an average price. It would be extremely unusual for a price to be nearly uniform in a given market. Similar competitive markets should converge to a similar average price. If they truly are competitive and with similar fundamentals then they shouldn’t settle at different averages. In a market dominated by an informal cartel, after an equilibrium has been reached it is very difficult to change. There is no incentive for any market participant to lower prices, because a buyer’s agent commission is hidden from buyers. They do not properly negotiate it, creating an obstacle to price competition. Since informal cartel prices are already high, there is almost no possibility to raise prices either. A company like Properly claims to provide far more value to a customer compared to a traditional brokerage. Why is it then unable to raise the price of its offering in places in Ontario where 4% commission is the going rate? Because it is not a free and healthy market.

Let us dig into the Ontario cartel's internal commission data. It turns out that while commissions are relatively uniform across the province, they differ slightly between each fief of the cartel. Ontario brokerages are grouped into local and then regional real estate boards, and each one informally fixes prices in the territory it carved out. Here is listing data from June 2021 in two towns in Ontario that are not too far from each other:

a) Orangeville: https://imgur.com/hoEvg69

b) Niagara: https://imgur.com/9lzbDAh

Notice something weird again? Orangeville's are all around 2.5% with 2.25% and 2% being the odd exception. This isn't the entirety of the data of course, and there are a few listings in Orangeville offering 2%. However, the standard going rate is 2.5%. In Niagara on the other hand 2% seems to be the rule. Is it 25% harder to be a buyer's agent in Orangeville than in Niagara? We don't think so.

These eye-watering transaction fees inflate housing for everyone. On an average Ontario house, that is about $37,000. For many people this might be their entire down payment and would have taken multiple years of saving. While the real estate cartel is not the main issue behind the current housing crisis, it is an enthusiastic contributor to it.

It is time to call a buyer's agent commission exactly what it is: extortion. Not in the individual legal sense, but it is hard to differentiate from it. A buyer agent’s demand is an often successful attempt to extract a fee from an unwilling seller. A fee for the pleasure of being negotiated against, and having one’s economic interest actively harmed. There is always the implicit “or else” to the request: if you refuse, a majority of buyers will be steered away and you will suffer even greater harm. The threat is economic damage made possible through the dominant market position of this informal cartel.

This system also creates incentives for agents that are directly opposed to their own buyer client's interests. It is incompatible with fiduciary duties on a macro scale, and any lawyer who tries a similar compensation structure will lose their license. We see people calling for capping commission rates, banning double-ended deals, or making fees flat, but these proposals fail to see the informal cartel structure itself and its vulnerabilities. They also ignore the economics of a monopoly. To fight this monopoly, the monopoly position itself must be torn down and the market will do the rest. The legislative solution is surprisingly simple: mandate that all parties pay for their own representation. When buyers are no longer told the big lie that their agent's services are "free", they will seriously consider how much they will pay them, if at all. No longer would a seller be effectively extorted or risk losing over 90% of buyers. In other countries such as the UK and Australia sold data is freely available, and everyone pays for their own representation. In those countries a buyer's agent is not a thing.

While the legislative solution is to this racket is to mandate that everyone pay for their own representation, it is not the only solution. The decentralized solution is Zero Value Realty.

Most Exciting Real Estate Startups

One of the first free stock images we found

There is nothing like seeing what innovations are taking hold in property tech. That is, whether truly better tech or what passes for innovation in our market, given how starved of change it has been for decades, and the dominant market position of traditional brokerages. After all, it is in the interest of traditional brokerages to place hurdles in the way of new entrants. Lets examine some of them.

One favourite is Unreserved. This start-up aims to have open online bidding as its model for home sales. They offer all sorts of services for the seller, such as staging and fun home descriptions. Transparency is the name of their game, often including inspection and appraisal reports. It can seem relatively innovative for Canada, where our bidding process is closed, lacks any tech, and is quite slow. Open bids are already the law in Denmark, and auctions are quite common in Australia. They offer to clean, stage and show a home while offering to do minor repairs.

Unreserved claims to charge sellers no fees at all, but buyers a 1% fee for a winning bid. They even offer sellers a guarantee, offering to buy the home for 95% of its market rate, which they claim would be the “true price” if you were to sell with a traditional real estate agent. We wish this company great success, but we must first ask how is 95% of market value a “true price”. We have to protest the claim that somehow an artificially fixed 5% + HST is the only alternative. A home seller can always advertise a home outside the MLS, but otherwise the least expensive option appears to be Listed by Seller, which allows home sellers to have mere-postings on the MLS for maximum exposure. Sellers have every option to refuse offering a buyer’s agent any commission. However, no matter how you decide to sell, every property tech start-up like Unreserved will always hit the informal cartel’s brick wall: over 85% of buyers tend to first hire an agent. The seller can either pay their (sometimes negotiable) fee of 2.5% to negotiate against their interests, or they will likely steer their clients away. Unreserved does not appear to even advertise on the MLS, choosing to bypass agents completely. That is a bold decision which I support in principle, but one which will meet strong headwinds from entrenched members in the industry. This decision likely isn’t by choice; CREA forbids agents disclosing the content of other bids, so Unreserved is shut out of the system if it wants to enact a change as sensible as open bidding.

The price of their services is similar to what a traditional estate agent in the UK would charge. That is, inexpensive by Canadian standards, but pricy by global standards. While 1% appears to be little, with the average home in Toronto topping 1M, that is over $10,000. In a rational market without our eye-bleeding transaction costs a reasonable buyer should then bid 1% less than fair market value. In the current market environment it makes the model 1% less competitive, and 3.5% less competitive than Zero Value Realty. This is a real shame, because ZVR is just an economic hack rather than any true innovation. What their model does show is that it is entirely possible to demand that all parties to a real estate transaction be compelled to pay for their own representation. Despite all the noise from traditional brokerages that buyers wouldn’t be able to afford their fees if paid in cash, Unreserved shows this isn’t the case, partly by significantly lowering the fees.

Then there is Properly, backed by some of the bigger incumbents. It is in our opinion what appears to be a laughably lame attempt to artificially preserve the role of salespeople in real estate transactions instead of relegating them to their proper place: the dustbin of history. Having raised $44M in a series B round, this company is a testament to the seemingly bottomless pockets of Softbank despite the WeWork debacle. The company has plenty of dry powder to attempt out-advertising upstarts, all while keeping the price of their services fixed at 5% + HST. They offer an instant home price estimation algorithm, which is rougher than a stucco bathtub when compared to the state-of-the-art in machine learning. Their claim is that their internal machine learning model that they only let their own agents access is better. As they have not published any results on public data sets, there is no way to really know.

It seems to us that Properly tries to appeal to a rather odd and specific niche: the over-leveraged homeowner trying to switch homes, but one who cannot swing a HELOC to buy first and sell later. The vast majority of people can accomplish a similar feat by using bridge financing and a condition-free offer on their current home. Properly offers a guaranteed sale within 90 days, taking their 5% + HST fee on top of it. Properly hence provides such a condition-free offer, but any real estate wholesaler would provide the same. This guarantee isn’t so valuable in Toronto in the last 20 years, and one whose term we predict will be stretched if the market ever cools down. In addition, Properly provides a $20,000 loan for repairs before a sale. Given how cheap money is today, such a 90 day loan has a value of less than $100, in addition to only being relevant to those who cannot access their own home equity through a HELOC. As every property sales company does, they offer to clean, stage and show a home while offering to do minor repairs. It is our opinion that the 5% + HST fee will hurt an order of magnitude or two more than any value that can possibly be provided.

Bode we like very much. The company encourages both buyers and sellers to bypass salespeople completely, taking an a-la-carte approach to real estate services, providing professionals that can take care of any individual task that might be required. That includes cleaners, appraisers, lawyers, stagers and contracts for repairs. Bode even approaches the smart-contracts model, where if both buyer and seller use Bode then contracts for the lawyers are automatically generated. Bode wants buyers and sellers to understand that there is no need for salespeople to be part of this process, and with the right tools and data anyone can buy and sell a home. The sold data Bode has is quite comprehensive, in addition to one of the best algorithms for finding comprable listings. The fee to sellers is 1%, which as we discussed before we believe is far too high by global standards. On the other hand Bode mostly operates in Alberta, where home are affordable and 1% in absolute terms is lower on average.

Bode does recognize that their sellers would hit the informal cartel’s brick wall if no buyer’s agent commission is offered. They do let their customers make the choice of whether to pay the cartel’s fee. Open bidding would be welcome, but Bode chose to comply with CREA in order not to be shut out from the MLS.

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So there you have it, anywhere from effective technology that lets buyers and sellers conduct the transaction themselves to pathetic attempts to keep transaction costs high.

Ultimate Zero Value Buying Guide

Some free stock photo of a cookie-cutter house

Unlike most guides, we are not going to be telling you that buying a house is a good or bad idea. Housing as a whole has underperformed the TSX, and authors like Alex Avery recommend renting if optimal returns are your goal. On the other hand, over the last 20 years housing in Ontario has undeniably been a good investment, especially when leverage is considered. Regardless, if you already made it here then you want to get to the nuts and bolts of the deed.

1. Figure out what you want and what you can afford

   Only you know what you actually desire, and in what neighbourhood. All the stats like crime and schools you can just use a search engine for. Want to know how long the commute to work will be? Use Google maps. Want to know how long it will be in the winter? Change the date for your query. A ZVR customer needs no hand-holding. As far as financing a purchase, few people are capable of coming up with 100% cash, so qualifying for a bank loan is one the of the first things you will need to do. There is nothing stopping you inquiring and negotiating rates at multiple banks at once. In the vast majority of cases there is only one type of rate that makes sense to get: variable. That helps to make comparison shopping easier. There are however some lenders like MCAP that only go through mortgage brokers.
   
   In the current lending environment it is best to first see if a bank with discounted rates and more flexible conditions like HSBC or Tangerine will qualify you for a mortgage. If you have loyalty to any bank, it is greatly misplaced. The big banks though can be negotiated with down to the rates of the cheaper ones, but almost never for better rates. What big banks do offer though is more flexibility as far as which deals they will qualify. Do not be deceived by advertised low rates which are actually for high-ratio mortgages (high ratio means downpayment less than 20%). The rate might seem good, but if you put less than 20% you must pay for mortgage insurance, which is quite expensive.
   
   The CMHC provides some handy calculators for debt service ratios to estimate whether you would qualify for a loan. In addition, you need to understand the rules about minimum down payments set by the government. It is 5% of the first 500k, 10% on amounts between 500k and 1M, and 20% on greater amounts. For example, that means that if you want to buy a home with a high-ratio mortgage for 1.3M, the minimum downpayment on it is 135k. The funds for a downpayment cannot be borrowed.
   
   One thing we cannot stress enough is that before you begin the hunt you need to know exactly how much a bank is willing to lend you. Get it directly from the horse’s mouth.

2. Find a lawyer to represent you

   Get an experienced lawyer you trust. It baffles us that people get a lawyer as an after-though instead of it being one of the first steps. Whether you like it or not, to buy real estate you must use a lawyer anyway. ZVR recommended lawyers are experts in contract and real estate law, and yes, we are obviously trying to butter our own bread here. The last place you should start at is with a salesperson. You may as well be consulting about home purchases with a plumber (no offense to any plumbers, contract law just isn’t their wheelhouse). Not to mention that doing so is extremely expensive.

A free stock photo of a lawyer to break up the monotony of text without adding any useful information to the article

3. Research the market

Don’t just look at what homes are listed at, since often enough sellers list considerably below the market value in order to attract a bidding war. Instead look at sold data as it compares to list data over the last 7, 30, 90 and 360 days. Despite TREB having in the past jealously guarded this information, there are now a plethora of websites that publish this data. Some examples are rew.ca, housesigma.ca, and bungol.ca. You can use a search engine to find more. Some have automated rough home value estimators like zoocasa.com. Don’t forget to look at new construction homes too, as they may be competitively priced but outside the MLS. When you buy a home, one very important condition is financing and appraisal. A bank would normally send an appraiser to determine its value, and generally will not lend more than 80% of the value for a standard mortgage. A shrewd ZVR buyer does this research and knows what they want to bid.

Researching the market is more than just understanding prices, it is also about understanding risks. For example, you need to know if the home you are buying might be on a flood plane. Some homes may not even be insurable because of this, making it impossible to finance through a bank.

4. Find a home you like

Most of the time it is as easy as calling the number on the listing and booking a viewing. However, you must first understand that there are two versions of every listing on the MLS: what you see, and the full internal listing that only agents can see. The full listing contains “broker notes”, which are notes kept away from public view, and even away from their own clients. Sometimes (around 10% of listings) these notes state that the buyer agent’s commission will be reduced if the seller’s agent has to do their job and show the home. ZVR will provide you the full internal listings for every property you want to visit. If the listing brokerage does not reduce commissions, you can just call and book a time.

a. Request the full broker listing from ZVR by using our online form. This also enables you to auto-generate offers using our automatic offer generator
b. If there is no commission reduction, book a viewing yourself. Tell the cartelito on the other side that you are unrepresented. This is true, as no real estate agent is representing you until the moment you send in an offer. For some reason these salespeople don’t see a lawyer as representation.
c. If there is a commission reduction, you can book a ZVR licensed agent as escort by emailing showings@zerovaluerealty.ca.

Some listing agents refuse to show the property to someone who did not hire one of their informal cartel members. This is against their own rules, but reporting them to RECO will not help you get a viewing. Worry not, for here too ZVR will provide you a licensed real estate agent paid per visit to accompany you while they do nothing of value.

5. Submit an offer

At ZVR we have a unique automatic offer generator. It uses the standard OREA contracts to submit offers: OREA 100, 101, 320 and 801. You will also be given such a blank fillable form in your starter pack, along with a sample of a completed purchase agreement. We highly recommend lawyer reviews for unconditional offers, as they are experts in contract law. Unless you are entirely comfortable with the consequences, never submit an unconditional offer, for it is extremely risky to do so. If the house has any defects you are still bound to purchase it, and if you back out of the contract you will be in breach. Some people mistakenly think that the worst that can happen is that you will lose the deposit. That is not the case at all. Instead, you will be liable in this case for all damages you caused to the seller, which can exceed the deposit. This is why we recommend a legal expert to conduct this step. If you are comfortable and experienced, you may submit offers conditional on financing or inspection yourself, with only an agent signature and review. However, if you want the ZVR rebate you must either have the lawyer review the contract before lifting conditions, or inform the lawyer you intend to accept any potential consequences.

6. Inspection and final negotiation

Use an expert to find the physical defects of a property. A licensed inspector is useful as a vessel of insurance, but for experienced buyers not always necessary. It is entirely possible to have a general contractor accompany an experienced buyer and estimate the costs of renovations. This is where you can use the lawyer to confirm measurements and title, which is especially important when purchasing condos. The final negotiation and the lifting of conditions are done by the lawyer. You will be consulting with them to determine any final changes.

7. Closing

The lawyer will handle everything required for closing. That includes a title search to ensure the seller has a good and valid title, registering a mortgage if any, and transferring the funds to the seller’s lawyer.

No! Money, Down!

A common refrain we get from real estate agents is that for all the work they might put in they might not see any reward if their client does not end up buying. That means they might go to tens of viewings and submit multiple offers without being paid. Ignore for a moment that the idea of a person showing up with a buyer to view a home is itself a contrived task. After all, if the intent is to make sure people are not stealing from your home it should be the seller or their agent’s job. That is precisely the case in other countries. Ignore that a buyer’s agent showing a home to their client does not make any sense; they know as much about the home they never set foot in as the buyer. They do not have the technical background to understand physical defects, making them a glorified door opener. Often enough there is just a lockbox with a code anyway.

The core problem is that their clients expect them to work on contingency. Some lawyers also work on contingency, and on average it is less expensive to pay up front. The reason is that if you expect someone to take a risk to be paid, then they must be compensated for that risk. Clients then are also not as efficient with their use of the service, as they believe it is a sunk cost. Even if salespeople were somehow qualified for the task, the existing system does not give clients choice. At ZVR we sometimes have clients ask why they should have to pay for per-use fees such as the offer generator, viewing time and lawyer time if they do not end up getting an accepted offer. The answer is that to keep costs to a minimum we can only do so by also shifting the risk from us back to where it belongs: the buyer.

Buyers are often deceived into thinking that they will not be paying a commission, but clearly the commission is baked into the sale price. For this reason they do not properly negotiate for the price of the services they are getting. With ZVR we allow clients to un-bake this commission from the price by rebating it back to them, and hopefully creating a fairer system for home purchase.

In-justo.ca

One of our favourite brokerages is Justo. They claim to be the champions of justice in this archaic real estate industry, giving you 50% cash back on their commission while pairing you with one of their salespeople. As far as ZVR is concerned, half-priced highway robbery is still highway robbery. They even tell you pleasing lies, such as saying they include the price of an inspection and a lawyer, but in reality they deduct it from your reimbursement. That means you pay for it out of pocket. There is a mistaken belief that this cash is falling from the sky, but actually it is just your money. For all their claims of being a tech company and disruptor, they have yet to publish the results of any new tech. There are machine learning competitions where engineers compete to create the most accurate home price prediction models, one of which Zillow hosted.

They do one useful thing though. They are one of the first brokerages to publish what the listing brokerage offers as commission to the buyer’s agent without being sued into non-existence. ZVR’s proposal is simple: we will approximately double it. You have to do the legwork anyway when buying. After all, what does a buyer’s agent showing you a home even mean? Do they give you a ride to the home and hold you by the hand? Do they point at the toilet and tell you that is the philosophy chamber? Unlike the seller they have never even been inside the home, and know as much as you do about it. No matter how entertaining they may be as company, you must physically view a home yourself anyway, as few people trust another to select their home for them. These salespeople are not useful to point out physical defects, because they do not have the technical background for it. When it comes to contract formation and negotiation, it appears to us that they might just be practicing law without a license. What is certain though, is that their mistakes in this field can cost their customers large amounts. This isn’t normal by the way. In the UK a buyer negotiates a purchase agreement with an estate agent in principle, and then they both step back and let lawyers form the contract that becomes binding.

If you insist on half-priced highway robbery, ZVR will also offer you 50% cash back to have a salesperson tag along with you to home viewings and provide full service. By the the time the process is done, you will see how little value salespeople provide in this process. Our estimate: zero value.

(Edit 11 Sep 2021): As our brand here at ZVR is to poke these land salespeople in the eye, we are pleased to say that this article made its rounds within Justo and has caused discomfort. We suppose that is what happens when the front page of your website still contains highly misleading information, tricking customers into believing legal fees and inspection are covered. In fact, when clicking on the asterisk beside their claim you will quickly find out it isn’t covered at all, and that their so-called preferred prices are basically just the market value for such services. Even the arithmetic in Justo’s blog articles is occasionally incorrect. This is why at ZVR we state our fees plainly, and otherwise offer full cash-back of the buyer agent’s commission.

We would also like to take the opportunity to rub more salt in this wound, and call out their CEO directly. Daphne De Groot claims that Justo’s model is somehow innovative and disruptive, whereas in fact she just plagiarized a decades-old idea. She just happened to convince a hockey player to dump money into better advertising. Here is a newspaper article dated 13 Aug 2004, which is far from the first iteration of the 50% cash-back model:

De Groot is quite lucid about the undeniable truth: that there is no reason that salespeople have to be involved in a real estate transaction. In her home country of Israel she readily admits that buyers simply use a lawyer to transact in real estate. Instead she calls her discount “money out of the sky”, because unlike a traditional agent she has just one hand in your pocket instead of two. She could have implemented a fair model like ZVR, but clearly money speaks louder than justice.