Tied-selling and the private home seller

dream home

dream home So let’s say you’ve found the perfect house while searching online. You contacted the Realtor. You’ve decided that you can just barely afford to purchase it if you can sell your home privately and avoid paying a Realtor commission.

You contact the Listing Realtor and he tells you that in order to put in an offer on this home – your dream home – you’ll have to list your home for sale with a Realtor within his office.

You wonder if this is legal. You wonder if this is “tied selling”.

Let’s talk about that. But let’s first talk about why you are in this situation and what you could have done differently.

  1. You’ve been searching online. That means you know the asking prices for home in the market. But do you know what they are selling for or if they are selling at all. By causally looking at houses like this, you are not getting a true picture of value. You may be offering too much for your dream home.
  2. You’ve contacted the Listing Agent directly. The Listing Agent is the home seller’s Realtor. He works for the seller. The seller pays his commission and he’s going to do everything he can for his client. You, on the other hand, are a customer and will be treated as such.
  3. You should have crunched the numbers before you started looking. Your first stop in your house-hunting journey should be with your lender. Your bank or mortgage broker will tell you how much you can afford. Get pre-qualified. Get pre-approved. Then start looking.

You could have avoided the above three issues by finding a Realtor to help you. And you would have avoided the issue of “tied-selling” as well.

What is Tied-selling?

According to the Competition Bureau: Tied-selling exists when a supplier, as a condition of supplying a particular product, requires or induces a customer to buy a second product. It may also occur when the supplier prevents the customer from using a second product with the supplied product.

And When Does the Competition Act Apply?

The exclusive dealing, tied-selling and market restriction sections of the Competition Act may apply when the following conditions are met:

  • The conduct is engaged in by a major supplier or is widespread in a market. A firm with less than 35 percent market share is not generally considered to be a major supplier. However, market share is only one factor that must be considered. Others include the existence of barriers to entry that limit competition, a lack of substitute products, and lack of competition among existing suppliers.
  • The conduct in question constitutes a practice. Different restrictive acts considered together, as well as repeated instances of one act with one or more customers, may constitute a practice.
  • The restrictive practice discourages a firm’s entry into, or expansion in, the market; in other words, you must show an exclusionary effect.
  • The practice has substantially lessened competition, or is likely to do so. This may happen when the supplier’s restrictive practice prevents, for example, a rival’s entry into the market, potential competition, product innovation or lower prices.

These sections of the Competition Act may not apply to major suppliers who make temporary exclusive dealing arrangements or who might restrict the supply of a product to a particular market to promote a new supplier or product. The Act might not apply to a supplier requiring a customer to buy certain products together because of the technological relationship between such products, or to financial institutions imposing tied-selling arrangements to better secure a loan. Furthermore, the Act does not apply to such conduct practised between or among affiliated companies.

Alright. Going back to our scenario above, the Listing Agent has asked you to list with his brokerage rather than sell you home privately. Is this tied selling?

Maybe, but I don’t think so. I don’t think it is widespread, repeated or restrictive.

Is it the right thing to do?

No. You should avoid Dual Agency situations. Dual Agency is when the brokerage represents both the selling and the buying sides of an agreement.

What should you do?

You should seek out another brokerage to help you.

Why?

What you are going to do is put in an offer to buy that property – your dream home (assuming you really can afford it). Your offer will include a “Sale of Buyer’s Property clause” making your purchase conditional upon finding a buyer for your home. The sellers want the assurance that your property will sell so that everyone can make their moves. The seller understands the value of using a Realtor and if you are not using one your offer is not an informed one. Without a Realtor your home will likely stay on the market longer and your sale might become bogged down and delayed with all the mumbo jumbo of reduced exposure, price reductions, negotiation breakdowns, false starts and broken promises, home inspection problems, and legal issues. It’s a lot of blah blah blah to selling a house but it all has to be done in a professional and timely manner for sales to happen. That is the issue here.

 

 

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