The Calgary Real Estate Review

The Calgary Real Estate Board revealed to its membership on December 29th, 2011, that the rules dealing with conditional sales have now changed.  Rule 16.05 has been deleted, effective immediately as a result of a vote of the Board of  Directors at meetings held November 3rd and December 16, 2011.

Rule 18.2  has been amended as follows.

NEW AMENDED RULE 18.02 REPORTING OF SALES:
Straight sales and confirmations shall be reported to the Board office by the Listing Brokerage. All Conditional Sales will be reported at the time of acceptance of a conditional offer sale except where the Seller has given written instruction not to report the conditional sale until conditions are waived in writing.

Rule 16.05 has been deleted.  It read

16.05 SUBJECT TO SALE OF BUYER’S HOME CONDITION CLAUSE
Properties sold with a “Subject to Sale of Buyer’s Home” condition shall remain on the market. (August 2010) (Deleted)

These are major shifts in how all our real estate transactions are reported which may have far reaching effects on the public.  The changes were considered by the board, who agreed that the current rules may not be in the best interest of the sellers, who may decide they would rather not have the sale reported until such time as it is firm.

From a buyers perspective it will mean than they may be viewing properties which already have a conditional sale on them.  They may in fact write an offer on a property which already has a conditional contract accepted, without having the information disclosed, since the seller may have chosen not to disclose this minor detail.

The seller may at his option accept a 2nd offer as a back-up offer with a sellers condition.  This may cause some angst amongst buyers, especially in a brisk seller’s market when time is of the essence. 

The new policies may well create a great deal more complication and paperwork and more than likely be the cause  of many a costly and potentially life-changing error.  With condition date overlaps,  and multiple concurrent purchase agreements, sellers will really need to be absolutely sure that they are not entering into conflicting agreements to which they can be bound. Realtors will have to be extremely diligent when weaving the intricate details of multiple Purchase Agreements together,  ensuring that they do not end up with one big “train crash” at the end of the day.

The majority of these concurrent offers will die a very slow death, as conditions on the primary offer are removed in the majority of cases.  This being the case, their offer will become null and void and the buyer is back to square one after everyone involved having invested far too much time and effort on the process already.  Fortunately, a good REALTOR® will be able to spot a deception on the part of the seller aimed at hiding the fact that the second buyer’s offer is merely being used as a pawn in negotiating better terms with the original buyer.

The idea of multiple concurrent Purchase Agreements is nothing new. REALTORS® have not in the past had too many opportunities to utilize them, or may have decided that the risks and complexities were too great to even go there.

From a legal perspective, the board may have had good reason to make the change as the courts are always examining these situations as new case law is ruled upon and a precedence is set. 

We will be seeing more litigation being initiated as a result of catastrophic contractual errors created because of sellers instructing their agent to enter into risky and improperly executed concurrent Purchase Agreements.

This is not to say that REALTORS® as a group are necessarily careless, it’s just that they are rather human, and as such not immune to making mistakes in judgement or contracts.  If there are too many “mine fields” to cross, sooner or later there is going to be an accident.    I wish I could count the number of times that even lawyers for example have erred in the execution of their fiduciary duties. It happens far more often than we would like to think, however that is not the “courts” problem.