GTA real estate broker demands commission even after failed house sale

Click to play video: 'Sale doesn’t close, realtor demands commission anyway'
Sale doesn’t close, realtor demands commission anyway
WATCH ABOVE: A Newmarket, Ont., real estate broker is suing his former client. Why? Even though the sale didn't close, he is claiming he's owed commission from the home seller. Sean O'Shea reports – Sep 6, 2018

A real estate broker north of Toronto is suing a consumer for commission even though a $900,000 home sale arranged by his company fell through.

”He really feels he’s owed it and I don’t know why,” Marlene Nemeth said in an interview.

The brokerage claims, in a statement to Global News, that it had a signed deal with the seller “which provides that our commission is payable upon acceptance of a satisfactory offer, even if the deal doesn’t close.”

Hans Ohrstrom, broker of record at HomeLife Eagle Realty, Inc., sent a bill for $45,765.00 to Nemeth in February of this year. A month later, he sent her a revised bill for $30,510. When Nemeth refused to pay either invoice, on the advice of a lawyer, Ohrstrom’s company reduced its claim to $25,000 plus HST in order to be able to sue her in small claims court.

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Ohrstrom’s lawyer denies Nemeth was kept in the dark about the buyer’s financial difficulties, and told Global News “regardless of the buyer’s financial situation, to Ms. Nemeth’s knowledge the buyer was the owner of an existing property of significant value.”

HomeLife Eagle Realty was also providing “customer service” to the buyer, Sayed Moussavi, according to documents filed in court.

Nemeth said she can’t understand how a real estate broker can bill her tens of thousands of dollars when the sale didn’t close and she didn’t do anything to interfere with the deal.

Ohrstrom’s website describes him as “No. 3 Top Producer of Home Life’s 5000+ agents!”

On April 17, 2017, Nemeth signed a listing agreement with Ohrstrom’s brokerage to sell her Newmarket home. The agreement was in place until Sept. 30.

In May 2017, she agreed to accept a $900,000 offer from Moussavi, the buyer.

It is legal for a real estate brokerage to provide services to buyer and seller, although Ontario’s real estate regulator considers the arrangement potentially problematic.

“At its core, there is an inherent conflict of interest when one person represents a buyer and a seller. These two parties to a trade have different interests: A seller’s primary goal is likely to sell their property for as much money as they can, whereas a buyer would aim to purchase a property for as little as they can,” wrote Joseph Richer, registrar of the Real Estate Council of Ontario (RECO) on the commission’s website.

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While a document signed by the parties indicates that HomeLife did not represent the buyer in negotiations, it does say the brokerage provided “customer services” to the buyer.

Under the arrangement to sell Nemeth’s home, HomeLife Eagle Realty was to receive the entire real estate commission, but at a discounted rate: Three per cent of the selling price, rather than a typical 4.5 or five per cent split between two different brokerages.

Nemeth agreed to the buyer’s insistence on a long closing: 120 days. But on closing day, the buyer didn’t produce the funds to complete the deal, apparently because HomeLife hadn’t sold Moussavi’s home, according to Nemeth’s defence.

Her listing agent, Nina Bonakdar, asked Nemeth to give the buyer more time.

In a text message from Bonakdar to Nemeth, shown to Global News, the agent wrote: “I get Hans involved. As per Hans, buyer has no money. He is in max on all his financial mean (sic). But he is waiting to receive wire transfers from overseas so he will close end of November even if his house doesn’t close.”

“The agent asked for us to consider giving an extension,” Nemeth said.

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“She promised he had money; if he wasn’t able to close, he was going to get money, she assured me,” Nemeth said.

Based on the statements by her agent, Nemeth said she finally agreed to give the buyer another two months to come up with the money.

But as the Nov. 30 closing date approached, Nemeth said she was told Moussavi still could not close the deal.

At that point, Moussavi agreed to forfeit his $40,000 deposit, plus $2500 in damages, in exchange for a mutual release from any future legal action. Nemeth said she decided to take the money and grant the release because she needed the cash. By now she had moved into her new home in East Gwillimbury and had to carry two mortgages, plus utility bills and taxes, all because the deal had fallen through.

By the time Nemeth finally sold her home on April 29, using a different real estate broker, the housing market had tumbled: The selling price was a disappointing $699,800.

Even though Ohrstrom’s brokerage did not successfully complete the original sale, Ohrstrom took the position that his brokerage was entitled to its commission.

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“HomeLife Eagle Realty Inc. had a signed listing agreement with Ms. Nemeth, which provides that our commission is payable upon acceptance of a satisfactory offer, even if the deal doesn’t close, especially in circumstances where the seller bears some responsibility for the failure of the deal to close,” Ohrstrom said, in a statement released by his lawyer.

His lawyer said: “Ms. Nemeth demonstrated default or neglect by, prior to the date set for closing, releasing the purchaser from its obligations under Agreement of Purchase and Sale and by not insisting that the purchaser comply with its contractual obligation to complete the agreement and pay the purchase price in full in accordance with the terms of the Agreement of Purchase and Sale. It should be noted that Ms. Nemeth took this action without the knowledge or the advice of HomeLife Eagle.”

But veteran Toronto real estate lawyer Bob Aaron, who is not directly involved in the case, said Nemeth had every right to keep the deposit and move on.

“I don’t think the broker can dictate what the seller should have done. I think it’s reasonable for the seller to say, I’ll grab what I can rather than sue and not get anything, or get less money from the buyer than the court case cost me,” Aaron told Global News.

In her statement of defence, Nemeth said: “It became apparent…that Nina and HomeLife (Hans) were less interested in protecting her interests and rather closing the deal, whereby the plaintiffs would be able to claim full commission fees from the sale and purchase of both properties. It seemed like the plaintiffs (HomeLife Eagle Realty Inc.) were not concerned with how the deal would close, who may be placed at risk, and at what personal costs to the parties involved.”

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Ohrstrom refused requests for an interview, and would not accept questions directly from Global News.

“I am not prepared to be interviewed by you on camera. I would consider your presence at my office under the circumstances to constitute trespass,” he wrote in an email.

Hours after an initial written request for comment in June, Ohrstrom hired Toronto defamation lawyer Howard Winkler, who wrote a series of emails to Global News, including a demand for time to consider any questions.

Winkler wrote, “There is nothing newsworthy or in the public interest about this situation,” after being asked how Ohrstrom could justify the commission for a sale that wasn’t consummated. He implied it was Nemeth’s own fault.

“Any losses suffered by Ms. Nemeth, while regrettable, are as a result of her own actions in not requiring the buyer to complete the transaction. HomeLife Eagle, if given the opportunity (which it was not) would not have recommended this course of action,” Winkler wrote.

But prior to the first, failed closing, Bonakdar discouraged Nemeth from pulling the plug on the deal, downplaying the value of taking legal action against the buyer.

“Taking a legal action is costly and time consuming,” wrote Bonakdar in a text.

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Ohrstrom’s lawyer cautioned Global News about any reporting on Ohrstrom’s financial demands.

“You and Global News would be wise to consult legal counsel before broadcasting anything of and concerning Mr. Ohrstrom or HomeLife Eagle,” Winkler wrote.

After warning Global News several times in connection with reporting on Ohrstrom’s demand for payment, Winkler then alluded to potential legal action against Nemeth for speaking out, even though it was Ohrstrom who first made the claim public by launching legal action.

“…We trust you have alerted Ms. Nemeth to the potential further liability you and Global News are exposing her to through her cooperation with your story, which only serves to enhance your interests and those of Global News,” Winkler wrote.

It’s uncommon for a brokerage to sue a client in circumstances like this one, but it happens occasionally.

“People don’t want to hire brokers who sue their clients when the deal goes south,” Aaron said.

“When a broker sues his or her client, the optics are really bad and it does nothing for that person’s reputation,” he added.

Asked if Ohrstrom is accustomed to suing his clients even when a sale doesn’t go through, Winkler said “this is the first time HomeLife Eagle has litigated a situation like this.”

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Ohrstrom’s lawyer said the brokerage “spent considerable sums of money for advertising” in an attempt to sell the home.

Global News asked the Toronto Real Estate Board (TREB) and the Ontario Real Estate Association (OREA), organizations that advocate for realtors, whether it’s ethical or appropriate for a broker to pursue a claim against a client who waited six months to complete a sale that ultimately failed.

“This issue does not fall within the jurisdiction of the Toronto Real Estate Board. The Real Estate Council of Ontario (RECO) is the appropriate organization to contact for comments/further information on matters such as a consumer complaint dealing with an issue addressed under the Real Estate and Business Brokers Act Code of Ethics,” wrote Mary Gallagher, senior manager of public affairs for TREB.

“We appreciate the invitation to comment, however, OREA feels it’s best to allow the matter to be handled by the courts and those involved,” wrote Katarina Markovinovic-Praljak, head of communications and media relations for OREA.

Ohrstrom, whose website says he covers “Newmarket, Aurora and Bradford” frequently posts videos where, on camera, he describes how much buyers have paid for homes his brokerage has sold and how happy they are as a result.

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In one video on YouTube and posted to his Facebook page, Ohrstrom is dressed in a Superman costume with his company logo onscreen touting a Halloween contest.

He also advertises “Sold or I’ll buy it!” on transit billboards bearing an image of him smiling broadly, above the words “#1 Newmarket real estate team.”

Nemeth said when her deal fell through, twice, Ohrstrom didn’t offer to buy the property as the ad suggests.

But Winkler said that promised deal on the transit shelter has conditions and was not available to Nemeth.

“The Program offered by HomeLife Eagle is available only upon request at the time the listing agreement is executed and only available to sellers who purchase a home offered for sale by HomeLife Eagle. Ms. Nemeth at no time inquired about participating in the program nor did she otherwise qualify for participation in the program,” Winkler wrote.

Nemeth has filed a written complaint about the conduct of HomeLife Eagle Realty, her agent Nahid “Nina” Bonakdar and Hans Ohrstrom with RECO, the regulator.

Kelvin Kucey, deputy registrar of regulatory compliance with RECO, said with regard to advertising “you cannot in any way be misleading or provide misinformation.”

“If you’re promising something, then you must deliver. There’s no middle ground on that whatsoever,” Kucey said.

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Nemeth has still not been interviewed by RECO yet concerning her complaint.

A settlement conference on the litigation is scheduled for Sept. 18.

None of the allegations has been proven in court.

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