OPINION: The housing market spike wasn’t just a market failure; it was a professional one

A major contributor to the price distortion during that period was widespread professional incompetence within the real estate industry itself, particularly in the areas of pricing, risk management and client advice.

As someone who has served as an expert witness in lawsuits involving real estate agents, I have reviewed numerous transaction failures, failed deals, and post-closing disputes from that era. Patterns repeat with striking consistency. These were not isolated errors. They were system errors.

Underlisting has replaced pricing skill

In a functioning market, price is based on evidence: comparable sales, adjustments, market trends and reasoned judgment. In the run-up to the peak of this cycle, that discipline was eroded.

Many real estate agents in Ontario did not have a good understanding of valuation. Instead of determining a reasonable market value range, they relied on aggressive undervaluation as a strategy. Homes were deliberately priced well below any defensible value estimate, not to reflect market reality, but to generate interest and create bidding wars.

This practice was often perceived as ‘letting the market decide’, but in reality it circumvented the agent’s professional responsibility to advise on value. The result was artificial competition, emotional decision-making, and prices that escalated far beyond fundamental values.

Buyer’s agents enabled risky behavior

On the buy side, the same lack of price competence was clearly visible. Many agents considered asking price to be a meaningful benchmark, despite knowing – or at least being able to know – that asking prices are arbitrary. They can be too low, too high or just wrong.

Buyers were encouraged to bid well above list price, with little reference to actual market value. Even more disturbing, they were routinely urged to remove all conditions in order to “win,” including financing and home inspections.

In the court filings I have reviewed, buyers have often stated that they did not fully understand the risks they were taking. They trusted their agent’s advice. If that advice is motivated by competition rather than competence, the consequences can be serious.

The disappearance of conditions and the rise of lawsuits

When the terms disappeared from the offers, post-closing issues emerged. Buyers discovered major defects, deferred maintenance, or safety issues that would likely have been revealed by inspections.

Repair costs often ran into the tens or even hundreds of thousands of dollars.

It is no surprise that the number of lawsuits increased. Buyers claimed they were pressured into unconditional offers and not properly informed of the risks. These claims did not arise because properties suddenly deteriorated; they arose because professional advice declined.

In many cases, the core problem was not disclosure by sellers, but the inability of buyers to slow the process, assess risk and provide balanced guidance.

Chain transactions and overpriced offers

Another recurring problem concerned chain transactions. Buyers were told that they could easily sell their existing home at a high price and therefore should make an unconditional purchase.

Too often that first property was far too expensive. It failed to sell. The buyer was unable to complete the new purchase. Deposits were forfeited, contracts collapsed and lawsuits ensued.

Once again the common thread was poor price advice on both the buy and sell sides, combined with unrealistic guarantees about market behavior.

A tidal wave of ill-prepared officers

Rising prices attracted record numbers of newcomers to the sector. Membership levels in Ontario reached historic highs. Experience and education did not keep pace.

Many new brokers entered the market with minimal training, little mentorship and limited understanding of valuation, broker duties or risk management. In a rapidly changing market, that lack of competence compounds every other problem.

The focus shifted from customer protection to transaction speed and commission capture.

A warning for the next cycle

This is not about vilifying individual officers. It’s about recognizing a systemic failure that has harmed consumers and distorted the market.

When large numbers of professionals fail to understand prices, markets lose their anchor to reality. When risks are downplayed or ignored, consumers suffer the consequences. And if liability arises later through lawsuits and claims, the damage has already been done.

The next hot market will come. When that happens, the same pressures will return: competition, fear of missing out and aggressive tactics. If education, standards and professional judgment do not improve, the outcome will be the same.

The lesson is clear: markets don’t just fail because of external forces; they fail when their professional competence fails.

What the industry needs to take away

The lasting lesson of 2021’s housing boom isn’t about timing the market. It’s about professional responsibility.

In my work as an expert witness, I have reviewed numerous lawsuits arising from transactions during that period. A recurring theme in these cases is not the market volatility itself, but the behavior and advice of agents – especially around pricing, risk disclosure and lifting conditions.

These disputes did not arise simply because prices subsequently fell. These arose because buyers and sellers claimed that they were not properly informed, adequately warned of the foreseeable risks, or encouraged to continue on assumptions that did not materialize. In many cases, the issue was not fraud or bad faith, but a failure to meet the expected professional standard of care.

Prices are not marketing theater; it is a professional obligation. When under-quoting replaces analysis, the risk of misaligned expectations increases. When buyers are encouraged to rely on asking prices rather than market data, the margin for error decreases. When conditions are lifted without a clear, documented explanation of the consequences, agents expose not only their clients but themselves as well.

Chain transactions proved to be particularly vulnerable. Litigation frequently ensued, with clients being advised to proceed with unconditional purchases based on optimistic assumptions about the sale of their existing properties at inflated prices. When these assumptions failed, the resulting losses were often attributed to the advice given, rather than the market itself.

The next active market will create the same pressures: speed, competition and fear of missing out. The difference between a successful cycle and a wave of lawsuits will depend on whether officers slow down the process enough to apply judgment, evidence and restraint.

Brokers cannot control market cycles, but they can control their advice. Courts and insurers tend to focus less on outcomes and more on conduct: what was said, what was recommended, what was documented, and whether a reasonable professional would have acted differently.

The takeaway is clear. Markets recover. Reputations and claim histories do not always do this easily. Competent pricing, careful risk explanations and disciplined advice are not just good practice; they are the strongest protection a broker has when the next cycle inevitably tests the profession again.

From a professional risk perspective, many of the disputes arising from this period ultimately concerned errors and omissions coverage, with the focus not on market outcomes but on whether an agent’s advice, documentation and conduct met the expected standard of care at the time.