The Real Estate Council of Ontario (RECO) swiftly froze iPro Realty’s accounts on Monday to safeguard trust funds after the real estate brokerage collapsed under a currently estimated shortfall of $8 million.

The firm had about 2,400 agents working out of 17 locations before the provincial regulator closed it down on August 14, giving the firm less than one week to phase out operations.

Trust accounts holding buyer deposits and realtor commissions are in limbo. Transactions will now be processed through ClaimsPro LP, an insurance adjudicating firm. The fallout follows a report from three years ago, in which Ontario’s auditor general found RECO wasn’t fully protecting the interests of homebuyers during real estate transactions.

As the public demands more details and transparency into why iPro hasn’t been charged with crime, the regulator announced that legal firm Dentons Canada LLP will conduct an independent audit into the matter, reporting back by September 30 and concluding its audit by October 30.

An independent accounting firm is also being engaged to oversee iPro’s closure and will ensure oversight for remaining transactions and give forensic audit services. As well, RECO’s CEO Brenda Buchanan will fully review compliance files and assess the audit, investigation, and enforcement procedures.

Chair Katie Steinfeld communicated that most agents and brokers meet the highest level of integrity in the profession. “The entire board is deeply committed to the effective regulation of the sector and expects that rogue players be held to account for their actions,” she said in a press release.

Although all attention is currently on iPro, its shutdown speaks to larger issues around buyer protection. “It’s a big deal and I think it’s going to impact consumer confidence,” says Joel Fox, co-founder and COO of Ownright, an online real estate lawyer that combines software and in-house lawyers to modernize property closings.

Fox has witnessed how little buyers understand about where their deposits go and what choices they have if something goes awry. There is often an assumption all is safe when oversight and enforcement can fail them.

Funds are often transferred in many directions, typically with four separate parties involved: realtors on both the buyer and seller side, the lawyer, and often a mortgage broker. While the case has yet to unfold, Fox suspects the iPro issue illustrates a lack of strong regulation or guidance for trust accounting practices at the brokerage level rather than at the lawyer level, where stringent trust account responsibilities are governed by the Law Society of Ontario.

At the brokerage level, there needs to be protection against error due to mistakes and poor practices, as well as managing trust accounting to prevent fraudulent activities. But given the huge shortfall, he says it’s hard to imagine the issue boils down to a few mistakes and money not being probably allocated.

Going forward, his advice for buyers is to start by asking questions about where their funds are going. On the lawyer side, trust ledgers are used to track the flow of funds into and out of the trust account. “I think a lot of buyers tend to gloss over that, but it’s an important document to look at—to understand how funds are being distributed,” he says. “The challenge is that the trust ledger doesn’t address your trust account at the brokerage level.”

Both homebuyers and sellers are advised to clarify where deposit funds are being held. “I can imagine this is also a wake-up call for agents to be a little bit more on top of understanding where their commission is and where it stands,” he adds.

As transactions grow more complex and trust-driven, technology is creating opportunities for transparency. For instance, the platform that Fox helped to build offers real-time updates for buyers and sellers via text, email and an online portal. From a trust accounting perspective, it streamlines communication around the standard documents that lawyers are required to compile, which have typically been confusing to navigate.

With so much money flowing in and out of its trust account on a daily basis, the online law platform created its own solution for staying organized and is now able to track, on a closing-by-closing basis, the receipt of funds into the trust account and the distribution of funds out of the trust account.

Fox says the process isn’t simple to stay on top of so it’s unsurprising if mistakes are made at the brokerage level. He reckons the misappropriation of funds is easy to get away with as well, which is where the regulators come into play.

“On the brokerage side, I really think there will be more frequent audits and probably multi-signing authority on the movement of funds out of a trust account,” he says. “To really build consumer confidence back up, the regulation is going to have to change. It can’t just be words; it has to be a clearly outlined plan that’s implemented and followed through with.”