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Canadian Real Estate Board VS Competition Commissioner

I have been following the story about what is going on with CREA and the Competition Commissioner. For months now, I have been following this case in the news and I just finished reading the entire case which can be found here (link).

Here is an introduction to the people involved and their roles, as well as a summary of what I read and my conclusions.

CREA

CREA represents 96,000 real estate agents. They are basically a union for real estate brokers and agents. You must be a member to trade in real estate. Like any union their job is to help provide the best possible pay and benefits for their members.

CREA also owns the MLS and Realtor.ca and the ICX.ca for commercial properties. I don’t imagine that when some hotshot decided to put all their records and listings online that they could not have predicted the future dominance of the internet. All properties listed for sale by real estate agents and sold by real estate agents have been in their database for years. Initially they were just making things easier for themselves; now the internet is here to stay. It could be argued that real estate agents today have less work to do selling a property; according to their statistics 90% of people look up property on the realtor.ca website before calling an agent.

Competition Commissioner

The current Competition Commissioner’s name is Melanie Aitken. Her biography is here for those who want to know more. It speaks volumes that the Commissioner herself is bringing forward this complaint.

How does it work?  The Commissioner and other investigators are charged with enforcing the Competition Act. They explore allegations of malfeasance, price fixing and anti-competitive acts. If there is an unlawful act occurring, which cannot be negotiated or resolved, they will bring their findings to the Competition Tribunal, who then pass judgement based on the merits of the complaint. The Tribunal then decides what penalties are appropriate. In some cases people even get sent to jail or get fined.

The Commissioner’s case

The Commissioner alleges that “CREA has used their control of the MLS and related trademarks to impose exclusionary restrictions on their use and thereby maintain substantial or complete control of the market for the supply of residential real estate brokerage services.”

The case is that the MLS restrictions imposed by CREA dissuade and prevent more competitive real estate services from being started or continuing. It goes on to describe the MLS database as a powerful network and essential to any real estate brokerage. As 80% or so of all home sales go through the MLS it’s not difficult to see the power of this system. Furthermore, most historical transactions are recorded including listings and sales. Any broker that did not have access to the MLS would find it very difficult to price homes properly.

CREA requires that real estate boards sign an agreement that they are complying with their rules so that they can access the MLS. Furthermore CREA has continued to add rules to ensure that the only services offered are “full service” with full prices.

Mentioned in the case is a company that used to offer a fee-for-service model called Realtysellers. Lawrence Mark Dale & Stephen Moranis started Realtysellers in 2000, closing in 2006. Realtysellers sued CREA before and reached a settlement and is currently suing them again for damaging their business.

CREA’s Reply

I quote from the first page of their response to the Commissioner’s application “The application is fundamentally misconceived”.

To summarize: We didn’t do it. The Commissioner is out to get us.

As a part of their case there is a list of some fee-for-service and lower cost broker’s to substantiate their claim that competition exists. With 96,000 members the list is 8 brokers long….. For those of you shopping for less expensive service or just an MLS listing here they are.

  • Best Value Realty (Ontario) MLS listing for $109 – www.bestvalue.biz
  • Remax 1% commission + 2.5% to buyer’s agent – www.saveoncommission.ca
  • Calgary Discount Realty $579 – www.calgarydiscountrealestate.com
  • Donald Hewie Brokerage flat MLS fee + 1-3% commission – www.hewie.com
  • MLSByOwner – $279 – $599 flat fee – www.mlsbyowner.net

For some reason of the 8 links posted for “evidence” 3 are not working which is why I have posted only 5.

My Thoughts

I want the Commissioner of Competition to force CREA to sell the MLS database to another company. I want the information within it to be easily searchable by anyone. This information is already in the public sphere. It is possible to find all the information contained on an MLS listing by searching property tax records by address and searching land titles registry. It’s just not practical.

I am absolutely and entirely uncomfortable with a real estate agent being the gatekeeper of this kind of valuable information. It makes me very unhappy, and I’ll give you an example. Last month I was dealing with an investor who wanted to buy a property. When we went to the viewing we got a list of comparable properties. All the comparables were the same or higher priced than the property we were looking at. I was pretty happy about that, and I thought my friend is going to get a good deal. That night, I happened to look at Realtor.ca and found a listing $20,000 lower than the property we were looking at!

What is the effect of this kind of behaviour on the market? Higher prices, that’s what.

What about these bidding wars we keep hearing about? Do the bidders have the proper information to make proper choices?

I have a huge problems with the ethical dilemma of the real estate agents controlling the flow of information to consumers. Consumers have no way of verifying this information. I don’t need a gatekeeper to massage the information I get. Nor do I think that it’s competitive. That is the greatest harm that is being done by CREA. They restrict the free flow of information: they are keeping consumers naive and uninformed. They have a vested interest in keeping us that way; an informed consumer may decide not to participate in multiple offer situations or to pay above market prices.

Are current “full service” real estate fees good value?

In Toronto with an average price of over $400,000 the conventional real estate commission is over $20,000. If you consider that the average income in Toronto for a couple is about $80,000, one partner could stay home and sell their house full time for 6 months and come out ahead. With fee-for-service real estate, people could elect to take their own phone calls, do their own showings, drive their own car, fill out their own offer of purchase and sale and save money. For those who choose full service it would still be an option, but we would no longer be forced to consume these services at enormous expense through loss of choice.

If the MLS database were searchable by everyone, real estate agents would no longer be in the position of having to provide this information to investors and shoppers, an activity that takes up an inordinate amount of time I’m sure. Currently, if you want to sell your house yourself and you want to know how much it’s worth, you call a real estate agent to get an idea of the market price. This is free but really shouldn’t be. Conversely it gives the real estate agent first crack at every transaction on the market. They get an opportunity to change your mind and get you to sign a listing. Most will also tell you about the competitive advantages of the MLS.

What about “the competition” that CREA has talked about? Eight examples out of 96,000? That’s 0.0008%. That alone is suspicious. In fact, it speaks to the success of CREA’s alleged endeavors. Of the 96,000 real estate agents it represents, eight have come up with these competitive business models. One of their examples, Joe Williams of Ottawa, calls himself the most hated man in Ottawa Real Estate (link). The exception does not prove the rule. Clearly, something is underfoot. It’s statistically improbable that the wares offered are not under some powerful shaping influence.

I am grateful to the Competition Board and to the Commissioner for tackling this issue. These government organizations are there to intervene on behalf of the average person who could never hope to tackle a lawsuit against such a large, expansive organization. I hope they win for consumers’ sake. We deserve more options and more competition. We deserve better prices.

Oh, and for those of you who are thinking that I am anti-business, nothing could be further from the truth: CREA has been given monopolistic powers over all real estate trade by legislation. Live by the sword: die by the sword.

About the Author: Rachelle specializes in renting property on behalf of landlords. She also works with investors to find good investments in Toronto and surrounding areas. Her passion is bringing multi res properties back from the brink and maximizing profitability.

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

About the author: This is a guest post. You can read more about the author in the biography above.

{ 41 comments… add one }
  • Mike 4P April 22, 2010, 9:15 am

    Why are you guys always picking on those poor, defenceless real estate agents? ;)

    Great post – one thing to remember is that the fees charged are not just for the selling agent since they get split with the buying agent. It’s easy to use the example of “$20k to sell a house” but in reality it is “$10k to sell your house and $10k for some other agent to buy your house”.

    If there was a proper pricing schedule available (ie you pay for the services you need) then it is likely that the savings would be significant but not as much as mentioned in the article.

    On another note – FT, would it be possible to introduce the “guest blogger” at the top of the post? I like to know who wrote it before reading and I have to scroll all the way down to the bottom first.

  • Rachelle April 22, 2010, 9:49 am

    Actually Mike for the real estate agents it’s worse that that….

    1/2 will go to the other broker then the agent has to split their half with their broker in whatever way has been negotiated. The the agent has to pay for desk fees, membership to their local real estate board, business cards, signs and more.

    It’s more like a pay to work scheme.

    Not sure if anyone has noticed but ReMax has just launched a campaign against part time real estate agents as well.

    So real estate agents can make good money but they do have to work hard after paying all the fees, the courses, their broker, their cards, their signs, their car, their membership and more.

  • willfly April 22, 2010, 11:05 am

    RE agents filled a gap few years ago, when consumers didn’t have access to information. Just like I shop for used cars through information databases on internet, I can look around for homes, if I had access to information. In totality, I don’t feel having received 5% worth of service. Still, it has to be paid, if one wants to go through their propriety database.

  • Steve April 22, 2010, 11:26 am

    Excellent article. Content is provided in a clear, concise and appropriate manner.

    One could argue the article is a little too biased against the CREA. I don’t have any counter arguments since I have a low opinion of real estate agents (most of them are people with high school education who couldnt’ make it in a real career). It seems everybody and their brother became an agent during the housing boom.

    And if the good, skilled agents aren’t willing to protect the integrity of their profession, well, this is what you get. You are now viewed by the public to be as greedy and unethical as personal injury lawyers.

  • Red April 22, 2010, 12:53 pm

    “CREA has been given monopolistic powers over all real estate trade by legislation”
    What legislation?

    “$400,000 the conventional real estate commission is over $20,000”
    and in Vancouver that same $400k has an average commission of $14,500. So it’s not all the same everywhere. And after your split with the Buyer agent that would be about $7250. Hardly worth quitting your day job over. Don’t forget, agents don’t get any benefits, vacation allowance, health care, pensions, etc. etc. and the broker will take some of that as well… so maybe you’re left with $5-6,000. If it took a 3 weeks to sell, great. If not….

    “90% of people look up property on the realtor.ca website before calling an agent.”
    Yeah. It’s that easy. I put it up and get a call right away. Sold. Double ended, too. The Realtor.ca site that you know is merely a public advertising arm of the far greater MLS that realtors use. The calls we get from people looking on the MLS are 99/100 dreamers, time wasters, or just plain incompatible buyers. That 1/100 that is worth it often doesn’t buy that property but we pick them up as clients for other properties (and the time that involves to find it) or as a seller. The Realtor.ca site is not really meant to sell properties… it’s meant to capture leads. Far more valuable are the other realtors who call us with serious clients, who know the market and their client’s needs, and request a showing or attend an open house.

    “Joe Williams of Ottawa, calls himself the most hated man in Ottawa Real Estate”
    Yes, calls HIMSELF. Great marketing. There are also a lot more than just those eight. In BC alone there is a $649 MLS listing agent, 1% realty (minimum $6000), Team 3000 (minimum $3000), Condogo, a few Remax agents who charge a lot less, and looking at Surrey commissions a lot of “traditional agents” who are doing things the same with heavily “discounted” commissions.

  • Bill April 22, 2010, 1:10 pm

    This is a well thought out post, and something I wasn’t aware of, so thank you.

    One of your conclusions though, the forced sale of MLS, doesn’t really seem reasonable. The database was privately developed and maintained, and they have a right to charge for, and control, it’s use. Especially when considering the privacy issue of making public the amount someone paid for a specific address.
    That said, I do believe that the data behind MLS should be publicly available, in one form or another. To me, the most appropriate route is for data to be collected and made publicly avialable through Statistics Canada, in the same way that the values of imported goods are publicly available.

  • Rachelle April 22, 2010, 1:11 pm

    I was trying to be unbiased and rewrote the article many times.

    During the course of writing the article I actually reminded myself of one of the initial reason for passing up this career path in the first place.

    Real Estate agents are just as much a victim of the lack of competition as anyone. You have no choice but to pay fee after fee.

    They have to pay and pay and they need to sell a lot of houses to make a living. Investors actually find it difficult to find agents who will work for them because they may have to look at many houses before finding something that works. It’s a lot easier to sell to first time buyers than to find solid profitable properties.

    That’s why there are so many part time agents and agents who pay to park their licence and take a job. Then there are those who take advantage of their position and find partners and buy real estate through intermediaries to profit from their ability to take first crack at properties.

    So it is very difficult for someone who has been around this industry for years to countenance the type of behaviour I have seen. I did try to leave it aside when looking at the case.

    Of further note the competition bureau has been negotiating and talking with CREA for years. This case did not come out of the blue.

    This case speak to huge problems in the industry from the top down. Agents need money to survive and have to sell a lot of houses because of all the fees they pay to be real estate agents. These fees are charged by the brokers and local real estate boards and provincial real estate boards. IF THOSE fees were reduced maybe we would see more competition as well.

    Where you see how crazy these fees are is when you start comparing to other countries. In the UK for example it’s about 1%

    The other thing is why not flat fees rather than commission? Is it more work to sell a $200,000 home rather than a $400,000 or $800,000 home?

  • TL April 22, 2010, 1:38 pm

    My sister in-law recently just bought a place and we took her through the whole process without a buying agent. All the while the selling agent used various unethical and sleazy techniques that we do not appreciate and reinforces our low opinion of many realtors. Let’s start off with the “added value” during the open house. I find it comical that they make general comments about the unit that is just a regurgitation of the listing sheet or point to things in the property that a 5 year old would say. “Look, here’s a washroom and over there is the kitchen.” I’m not going to rant much more but I really hope the competition bureau wins. It’s the appraisers, inspectors, and lawyers that really provide the added value service and put their necks on the line. Realtors are just middle persons that are just an excess layer of fat that we should be able to trim off if so choose.

  • Rachelle April 22, 2010, 2:22 pm

    The monopolistic legislation I was referring to is the Real Estate and Business Broker’s Act.

    http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_02r30_e.htm

    In particular this section…

    Prohibition against trade in real estate unless registered
    4. (1) No person shall,
    (a) trade in real estate as a brokerage unless the person is registered as a brokerage;
    (b) trade in real estate as a broker unless he or she is registered as a broker of a brokerage;
    (c) trade in real estate as a salesperson unless he or she is registered as a salesperson of a brokerage; or
    (d) trade in real estate unless registered under this Act. 2002, c. 30, Sched. C, s. 4 (1).

    Also Red your point about the Realtor.ca site is part of the reason I would love to see the MLS sold off to a third party. I have noticed a horrible change since the website was changed. It’s become absolutely useless. Buyers and investors need proper information. If the website was accurate you might get proper leads instead of tons of people calling about a property that’s been sold for a month and is just waiting for closing.

    To address your issue Bill about the price paid for an address. It is already public information as is the owner’s name and the address the tax bill is sent to. So privacy is not really an issue.

  • MM April 22, 2010, 2:49 pm

    Very informative blog.
    Is there a way for the average consumer to express support for the Competition Commissioner’s position? (e.g. letter writing?)

  • Red April 22, 2010, 3:04 pm

    Wow. So you approved half my comment but left out the real meat of it (that which discussed agency, questioned the authors purported expertise and legallity in their operation as an unlicensed agent offering property management and property consultation). This goes a long way in telling me what kind of site you are running. I have taken you off my feed reader and will not be returning. I simply cannot trust a site that edits the poster’s comments to fit their own agenda. You’d have been better off allowing Rachelle to address those concerns.

  • Astin April 22, 2010, 3:19 pm

    Oh please, opening the listing to be searchable by anyone would be a disaster on all sides.

    I agree that one should be able to pay a fee to LIST on the MLS, but providing unfettered access to BUYERS would be a catastrophe for sellers, agents, and the buyers. The number of ignorant home-buyers out there is astounding, and they’d be taken as suckers time and again.

    Sure, the more knowledgeable and sophisticated buyers would be able to navigate the pitfalls of the process, and probably do rather well for themselves, but the vast majority of people don’t have the time, nor the desire to put in the effort required to make the right decision on the largest purchase of their lives.

    Yes, there are unscrupulous agents out there that would be no better, but I’d like to think they’re in the minority.

  • Aston April 22, 2010, 4:17 pm

    Fabulous post. I couldn’t have said it better myself.

  • Aston April 22, 2010, 4:43 pm

    Astin: you’re right, there are countless ignorant homebuyers in this country. And they’re being led like lambs to slaughter by unscrupulous real estate agents.

    Access to information would change that. With access to the MLS database, buyers can inform themselves, instead of listening to realtors and mortgage brokers who don’t have the buyer’s best interests at heart.

    In the U.S., real estate information is much more readily accessible, making sites like Zillow and Trulia possible. I would love to see the same thing for Canadian real estate.

  • Rachelle April 22, 2010, 5:41 pm

    Red,

    Just to bring you up to speed on my credentials.

    First of all no real estate licence is required to be a property manager, but I took a two year course in property management and graduated with Honors in 1997. At that time there were no 4 year courses to take. Since then I have been working for various property owners.

    My specialization is in the area of vacancy reduction, evaluating buildings with 25% or more vacancy rates then renting them up to full occupancy and maximizing profitability.

    Currently I work leasing properties on behalf of owners that are either too busy to do it themselves or want a very specific type of tenant. If the tenant I present does not pay the rent I take the tenant to the Landlord & Tenant Board. This activity is specifically exempt from the “trading in real estate” provision.

    I also have more experience than I want with the Landlord & Tenant Board having worked full time at it for a period of several years.

    Furthermore I use my experience to help investors find properties that are profitable and have potential. I am paid by them to advise them because they trust my judgement. I’m there to assist them in their buying decisions because IMHO the real estate agent who ONLY gets paid when they BUY is hardly likely to be an impartial source of information.

    Figuring out if a property is a worthwhile investment, or a cash sucking nightmare that will never be worth what you paid for it, is an art form involving so many different factors I can’t even start to list them and that’s not including the conventional evaluations like calculating cap rate and cash on cash analysis. I get emails with every single multires building listed in the GTA the day they come out so I can have an idea of what’s out there. Most agents don’t even fill out the MLS form properly with the information needed to start an evaluation.

    For the single property owner it may not make a huge difference if the market will support an extra 50$ a unit without increasing vacancy but when you have multiple units it makes a difference.

    Rest assured, I have one purpose in life, to make money and lots of it for my clients. The deals I make have quantifiable goals and if I don’t hit the target I don’t get paid. I love to be paid for performance because for me those deals pay the best.

    I am well qualified to do what I do and I have an interest in this case because I am involved in real estate and I also have an interest in the law, specifically the Residential Tenancies Act and how it is applied but whenever there is a case like this, I do not rely on newspaper fluff, I go find the case and read it. I can then form my own opinion based on the merits of the case. I also allow other people the same option, that why the first link is to the actual case.

    It would be refreshing if the real estate agents asking me for my credentials would go read the case, all 100 pages or so and comment on the actual facts of the case.

  • Allenby April 22, 2010, 7:00 pm

    I bought my current home approx. 10 yrs ago in the GTA. Before buying, I sold the home I was living in at the time. I paid my R/E agent 3.25% to list and sell. It sold for approx $225,000. Of this amount 2.25% went to the co-operating broker. On the purchase side I paid nothing to the agent and he got paid 2.5% from the seller’s agent. From this 2.5%, I had him pay for the home inspection as well as the legals after closing. The house I bought was $375,000. This was 10 yrs ago and I am sure there are better bargains to be had in this ultra competitive environment.

    The point I am trying to make is that in the GTA (and larger urban areas) all you need to do is throw a dime and there will be a dozen realtors out to grab it. This puts you in the driver’s seat to hammer the bargain you want. Don’t be afraid to low ball – you will be surprised by the outcome. Always do your research and take control of the process.

  • Arizona Private Money Loans April 22, 2010, 10:02 pm

    Good agents are worth the commission and then some. Ever try to sell a home yourself? Do you want to negotiate with a trained buyers agent? You can get negotiated out of 20K pretty quick. What if you don’t disclose something material. A lawsuit will cost more than 20K. Most serious buyers are working with agents too. As a FSBO you will be dealing with bargain hunting investors who want to deduct that 20K you’re trying to save right off your price, and nosy tire kickers. List it with a good agent and save yourself thousands plus gain peace of mind.

  • Julie Kinnear April 23, 2010, 6:57 am

    Well, you can sell your property FSBO, what’s the problem? Naturally you will have no access to MLS, but come on, this has been improved for years, you now wonder that CREA doesn’t want to just give it away for free?

  • James April 23, 2010, 1:27 pm

    it is funny how the commissioner was the one who brought this up, i guess their still are some honest people out there.

  • Dave April 23, 2010, 1:53 pm

    The true issue here is being disguised as one whereby the public and government feel they have a ‘right’ to the private property owned and paid for by other citizens. Do buyers and sellers of real estate think the information the MLS system holds, appears out of thin air? As a REALTOR, I pay, pay, pay for the MLS system. My clients, both buyers and sellers, pay for the advantage the MLS system provides. They know I am educated in the industry; carry extensive liability insurance; have errors and omission insurance; intensely scrutinized by my local board and extensive government legislation designed to protect the public AND this is NOT optional. I pay all my own expenses. My fees to my local board start at a basic $2,000. To keep my license active, I pay the governing body, RECA over $800 a year. I pay my broker to hold my license and provide legislated supervision. I PAY for the power of the MLS and my clients benefit from the buying and selling advantages it provides. You, as a consumer have the constitutional right to NOT use the services of a REALTOR. You have the right to NOT go to the dentist, but you do not have the right to his tools of the trade. If you feel a real estate agent is not worth the money, DO NOT use him or her. Remember, we are talking about real property here and it’s inherent ‘rights’. The Competition Bureau has no right to my property. Using Google, for example, does not give you the ‘right ‘ to share in its’ profits because they made money from an advertiser you viewed, does it? The advertising industry actually sells and then profits from the ads they expose you to. Do you deserve a share of those profits? Just because there is a better way, namely the MLS system, does not mean consumers who do not wish to pay for it should get to use it. Walk out of a store with merchandise along with the attitude that it is your ‘right’ to keep it. I pay for the MLS system and the benefits it provides is the product I sell. If you don’t like it, don’t use it; do not hire a licensed real estate agent. To those who think this real estate sales bonanza is the ticket to easy street, go out and get your license and join us because you too have the ‘right’ to make more money than you deserve.

  • sco April 23, 2010, 2:03 pm

    The problem is that real-estate commissions are too high for the service offered. They should be a flat $2k-$3k.
    I wish more people would sell/buy themselves, without brokers. And I hope the listing service will be opened to individuals.

  • Rachelle April 23, 2010, 3:50 pm

    I’m grateful Dave chimed in here.

    Dave have you considered the value you’re getting for all those fees?

    For instance I am a member of Transunion another huge database similar to the MLS with access to all kinds of private information. I pay $240 per year and per inquiry. Before I was vetted for that I had to provide all kinds of information about myself and my company. They did an inspection of my office and checked my computer security.

    Why can’t the MLS be the same? Why should you have to pay so much?

    I know you guys are being fleeced and your paycheck by the time you finish paying all these fees can be dismal.

    That’s not the point.

    The case is that consumers are being forced to pay more than they should through lack of choice. Part of the resistance agents have towards changing the commission structure is because after paying all these costs they need to charge 5% to support themselves.

    The primary charge of the competition commissioner is that CREA has prevented expansion of different kinds of real estate brokerages by terminating the access of members who do not toe the line.

    I didn’t even mention CREA having to send out a notice to all members that they have to show listings of the lower commission brokerages. That was through earlier negotiations with the competition commissioner.

    There’s no doubt in my mind that as an agent you guys are being squeezed between a rock and a hard place.

    By selling off the MLS it removes the conflict of interest. Agents will still have to pay for access. It will just be to someone else. Different companies have been split up for anticompetitive acts. Do you remember how much we all had to pay for long distance 10 years ago? Before competition?

  • Chuck April 23, 2010, 6:51 pm

    Who pays 5% on a commission? I used a 3 tier commission when we changed houses 5 years ago with a national anency.

    4.5% on the sale of the house (includes the 2.5% to buying agent)
    -0.X% if my agent also represented whoever bought my house
    -0.Y% if my agent’s office (not him, a coworker) rep’d the buyer
    -0.Z% if my agent represented us on buying our current home

    Though my issue with the industry are the “super agents”. IMHO if someone’s name is going on the for sale sign, they better be the one servicing my account. Not some underling.

    I’m aware of “real estate agents” in the GTA who don’t even list on MLS, and push all of their listings in alternate sources. However I think these “agents” are grey market agents, and I wouldn’t deal with one myself.

  • Thicken My Wallet April 23, 2010, 7:52 pm

    While I agree with most of your points, the proposed solution, forcing a divesture of MLS, is simply not practical once you work through the implications of a divesture.

    The assumption of a divesture seems to be that the buyer would allow readily available access to the public at a reasonable price. MLS has decades of built up goodwill and millions in sunk development costs. The acquisition, if there actually would be a buyer, would not be cheap.

    Any buyer of MLS will have to recoup its acquisition cost by charging a premium for access. The sale of Highway 407 is instructive in what happens when infrastructure (and let’s call MLS’ database, virtual infrastructure) which previously had hidden costs (taxes for Hwy. 407 and commission for MLS access) has to be paid by the consumer direct to an owner that spent a lot of money to acquire the asset (your example of long d is a poor one since long d rates are governed by a regulator, the CRTC, and there was a large entrant into the market- AT & T Canada).

    I assume that the cost of access will be higher if MLS is not owned by CREA since CREA can maintain MLS through membership fees which a buyer of MLS cannot. By also handing to a third party a monopoly over access, you remove the conflict of interest problem by creating a pricing problem; what shrewd business person with a monopoly on access to information would not jack up the price of access?

    If this assumption is true (and this is where your analysis and mine differ), it defeats some of the underlying goals you are attempting.

    The remedy is not remotely novel. The U.S. Justice Department several years ago forced access to MLS regardless of what services agents had to provide. The question to be asked is why it took Canada so much longer to come to this point?

  • Rachelle April 23, 2010, 11:13 pm

    My assumption is that the cost will be much lower for everyone because I am comparing it to Transunion.

    If you compare MLS to other online sites that display pictures of houses such as Viewit.ca it is quite expensive. Viewit.ca sends a photographer to your house to take pictures and sells you a sign for around 60$

    Additionally by gaining many other customers that could use the MLS the cost could go down even further.

    It’s not really a perfect solution and I’m not sure any perfect solutions exist that’s just the way of the world unfortunately.

  • jesse April 24, 2010, 3:13 am

    Ah the old MLS debate. Given the magnitude of a real estate transaction it is in the country’s best interests to have sales information public and the listing service easily accessible to anyone who wants to sell property.

    Will this prevent people from using Realtors? I doubt it. Selling a property takes special skills that are worth some fee. I know I would never sell a property myself but that’s because I know my limitations. I am effectively required to use a Realtor to gain access to the de facto marketplace and that I see as the major problem for those capable of going it alone.

    The CREA is fighting hard because it adds massive confusion to their current compensation scheme. Buyer agents are left in pseudo limbo when even more information is in the public domain. It calls into question how much value they bring at all. A 2.5% commish seems insane but if buyers are willing to pay it who am I to say. If/when the rules change we’ll see how flexible buyer agent commissions become.

    As a buyer I care less about what comparables are selling for. The price I pay has nothing to do with what some idiot paid for the place next door. As a seller that information is extremely important.

  • Brandon Schmid April 24, 2010, 4:26 pm

    I think you will always need a realtor. I could not imagine having one in fact. I would not want anything to with selling/buying a house on my own. I simply value my time too much.

    Cheers!

    Brandon

  • M. Taylor April 25, 2010, 1:52 pm

    Thanks for the article. I fully expect nothing to change because the avergage consumer always ends up getting screwed. But it’s good to at least be informed.

  • Financial Cents April 26, 2010, 1:29 pm

    An informative, nice lil’ rant Rachelle! I side with you on this battle.

  • Laurence April 26, 2010, 2:17 pm

    Entire fields of expertise have been utterly transformed by the internet, the digitization and commodification of information that was once rare or hard to access and therefore valuable. The real estate industry is no exception. It WILL be transformed. You can’t stop the internet. Ask the multinational record companies how trying to stop it is working out for them. Then ask Apple whether redefining the retail space for music has added to their bottom line.

    Will all realtors be put out of work? No. There are some services they provide that are truly valuable, worth paying for. There are people who need the assistance and guidance realtors offer. So good realtors who provide needed services will survive the coming transformation. The others will find new careers.

    The real estate industry is fundamentally flawed. Someone with a little vision, technical savvy, and a lot of capital will come along very soon and start hacking away at the roots of the real estate industry. Look soon for TV, newspaper and web ads touting no commission and a menu of for fee services.

    Hell, if I was well-capitalized I’d be doing this myself. It’s only a matter of time.

  • David April 26, 2010, 4:31 pm

    This is a great topic, but it seems this debate is now actually totally missing the entire issue between CREA and the Competition Bureau. The Competition Bureau is not asking CREA to make MLS a publicly available database, although I agree this would be great. The issue is that CREA is not allowing their own members, (realtors/agents/brokers), to offer all types of competitive services. CREA is forcing members to offer a minimum amount of service, which is basically full service, for a full service commission rate. There are many realtors out there who wish to offer a basic flat fee service, or pay per service structure that differs from full commission service, but CREA and most of its members are trying to avoid this so as to protect their (realtors) outrageous profits. Realtors should just get on board and embrace it, its coming, like it or not, so they should try come up with new alternatives for consumers instead of the basic rip off commision structure.

  • cannon_fodder April 26, 2010, 5:55 pm

    I think that there are a small minority of realtors that make a very good living doing what they are doing. I also think that, based on my own experience, there are a small minority of professional realtors that do provide tangible value.

    I would hope that there is a fundamental change in the industry that weeds out the less competent realtors, allows the professional realtors the opportunity to make more money, and brings down the price to sell a home to something a lot more reasonable than it is right now.

    The “negotiating” the realtors do is more with their clients than it is with the other realtors in my opinion. I was warned a long time ago to not disclose your true intentions to your realtor because their vested interest is to close the deal and move on to the next one. They don’t get paid unless the deal is closed. Thus, moving the price up/down $5k to you is a real loss/gain of $5k. But to them, it might represent only $100 or even $50. It is not worth their time to haggle.

    The individual who warned me was in fact a family friend who was a realtor.

  • Michael April 27, 2010, 1:06 am

    There is waaaay more companies out there that offer cheaper fees, in Edmonton alone there is 2% realty, seller-invite, flat rate realty. To say that there are only 8 in the whole country is completely bias on the author of this blog!!!! Please get the right info before you post!!! The competition is there but people need to open their eyes and actually research themselves instead of just reading irresponsible articles like this.

  • Rachelle April 27, 2010, 10:46 am

    Dear Micheal,

    Here’s the quote from my article. “As a part of their case there is a list of some fee-for-service and lower cost broker’s to substantiate their claim that competition exists. With 96,000 members the list is 8 brokers long….. For those of you shopping for less expensive service or just an MLS listing here they are.”

    I suggest you contact CREA and get upset at them. I did not draw up the case on realtors’ behalf. If there is more competition out there (and I’m not saying there isn’t) the list drawn up by the lawyers representing CREA should have been much more extensive. I personally would have included every single different competitive model I could lay hands on rather than 8.

    This article is not about a comprehensive comparison of different real estate services, it is about me reading over 100 pages of the case on both sides and talking about that.

    Quite frankly I am really surprised that more realtors haven’t read the ACTUAL case themselves rather then relying on what they are told. This case will have far ranging effects on your industry I’d suggest you get right to it so you can be informed.

  • Renovation Journey April 28, 2010, 5:40 pm

    My husband & I “flip” houses in BC on the side. We purchase a run-down home, live in it for at least a year, while we renovate it, & sell it, hopefully, at a profit. Because we know a bit more about the Real Estate “game” than the average seller, we could easily cut out some of the services that a traditional transaction requires:
    -We do not need any assistance “staging” our home. We have had several Realtors tell us that we could stage homes for a living, if we wanted.
    -Although we value a Realtor’s opinion on what our home is worth, we have typically done this type of research before even purchasing the home.
    -My husband is also quite into photography. Some of his photos of our houses are right up there in quality with those taken by the Realtor’s photographer.
    These are just a few examples of things we do not need to pay for, but do, because of the current commission structure.
    I agree that the average agent’s time vs. income probably doesn’t result in a a high income ratio. But, if the CREA allowed more flexibilty on what services agents provided & for what price, people like my husband & I would not be forced to pay for services we ultimatley don’t need.

  • Mike in Alberta May 3, 2010, 4:56 am

    TL wrote; ‘It’s the appraisers, inspectors, and lawyers that really provide the added value service and put their necks on the line’.

    Don’t even get me started. If you paid any attention, you would know that

    a. Lawyers simply use a computer program and an assistant to do their transactions. Yes they do contact land titles, and yes they have certain liablities. However, Realtors also have essentially the same fiduciary reponsibilities as a lawyer.

    b. Inspectors! Currently the biggest scam around. 1 to 2 hours – $400 -$500 – pop out a report from a cut and paste program. Ever read one of their reports; it’s genius. ‘Couldn’t inspect this because of that type of idea.

    c. Appraisers. The best. In Alberta, if an appraiser is called to appraise a property that is sold by a Realtor, their own associations regulations ‘require’ that they be given a copy of the conditional offer of purchase, prior to their producing their appraisal. They have full access to the MLS databse, (they pay), but guess where the final appraised value comes from. In 7 years as a Realtor, without fail, ALL the appraisals came in between 0.5% to 5% OVER the price on the offer. Well really.

  • Rachelle May 3, 2010, 10:10 am

    Even if your point is taken as entirely true Mike.

    The lawyer makes $500 to $2000 for their work.

    I’m not sure if you are aware of this but realtors have also been known to use both assistants and cut and paste when putting their offers together.

    Realtors do not have the same fiduciary responsibilities as lawyers, That’s just specious.

    Inspectors make $400 – $500 per inspection and also use cut and paste technology. The biggest problems I have heard is when an inspector gets referrals from a realtor funnily enough. So if you want a chance of getting a good home inspector don’t use the one your realtor referred. In any case small change compared to the realtor commission.

    You should get out a little more, appraisers can be worth their weight in gold. Maybe I’m just saying this because I see appraisers working on refinancings. I also got an appraisal on a property that was very very difficult to value with no comparables.

    In any case if you compare these other professionals combined they don’t cost even half of what the real estate agent will cost you. All of them have more educational requirements than realtors. So I’m not sure if you are trying to make a case for or against real estate agents.

    My issue is with the cost of hiring a real estate agent and the value it brings.

  • Lisa May 14, 2010, 3:45 pm

    I am a 32 year veteran. I remember when the only way buyers learned about a new listing was when I called them to tell them about it. I would read the room sizes and description, over the phone, from a small card. If they liked how it sounded, we made and appointment to go have a look. I worked for the seller, because he was paying me. There were no building inspection, there were “Uncle Louie’s”. Multiple offers were unheard of, people bought and sold houses with one piece of legal sized paper printed on both sides and computers hadn’t been invented!

    Now, buyers have access to the same MLS information we have instantly. We have MLS.ca, agency, webforms, energy audits, form 244, staging, websites, virtual tours, etc. It is staggering how much real estate has changed. We are required to be knowledgeable on aspects of construction, insurance, crime, zoning, development, taxes, financing… the list goes on.

    I now spend 50% of my time on the computer. I have negotiated transactions by text message. I use google street scape to check the surrounding houses of a new listing. I can see the 50 year sales history of a property in seconds.

    With Sellers, I now spend weeks or months, preparing the house to go on the market. House dressing, building inspection, renovations, repairs and cleaning. All the associated services that go with presenting a property in the best possible light, are available through me. Once a listing goes on the market, priced and presented properly, it will sell. The time may change, as the market changes, but the fundamentals won’t.

    With Buyers, they call or email me after they have received a new listing by auto-notification. We then decide if it is worth a visit. If they like it, they may be under pressure to make a decision, on the spot. There may be no offers presented until a certain date and they have to wait a week. What should they offer?

    With offers, we now have up to 15 pages to review with buyers or sellers. If I am the listing agent, I may have to manage dozens of people at the time of the offer presentation, making sure everyone is treated fairly. With Buyers, I must advise them on the best negotiating strategy in a pressured situation.

    People will always need help to buy and sell real estate and it will continue to be more and more complicated. There will always be FISBO’s, discount brokers, and different models of business. Good, honest realtors will never go out of style. Our business will continue to change, the fundamentals won’t. We are: “a guiding, knowledgeable, professional support” at a very stressfull time.

    I love my career. It has been exciting and rewarding. I work long hours and I make a positive difference in peoples lives. My fellow realtors and my past clients are my friends. I have served the real estate needs of three generations in the same family. I have made a good life for myself in this business. I am proud to be a realtor.

    Thanks for your time.

  • LC May 27, 2010, 6:20 pm

    I am living a bit of this right now. Not specifically regarding MLS, but rather the closing of ranks of the agents.

    I am in Québec and am restricted through my company to reimbursement up to a maximum commission of 4.4%. I am with the government, and have been told that they are trying to send realtors a bit of a message about their pricing. 4.4% is still a fairly healthy chunk of change – having moved here from BC where it is 6000+3% of the total past 100000, I was shocked to see that the ‘going rate’ here is 6 or preferably 7% of total selling price here. I understand that the average home price is higher in BC, but that price applies to agents buying as well! I think that it is exorbitant to expect 10000-12500 on a 350000 property – I do appreciate the comments from some real estate professionals in here about their costs, but still! In my case, the company brags about ‘how little they charge’ their agents, and I see that most agents have about 10 properties on the go….not chump change, no matter how you slice it – I should not have to pay my agent for slow market speculation.

    What shocked me more was that my realtor actually told me that the buying agents are not bringing their clients to my home because the commission is too low for them!!!! Is that not against a code of ethics somewhere? Do I have any recourse or reporting mechanism on these greedy weasels? Particularly for a buyer!!! It does little for my sympathy factor.

    With respect to this particular post. Whether it is the brokers or their agencies that are gouging the client, it is still the industry. To expect 7 percent of a selling price, which….is substantially higher when you consider percentage of equity held by the average customer with a mortgage, that is PRETTY steep. Perhaps the CREA needs to take their fight to the agencies instead of the client. The customer does not differentiate between the agent and their agency.

  • TimeforChange July 19, 2010, 11:06 am

    One thing people forget or don’t think about or don’t know
    .
    When you sell FSBO (for sale by owner) just to try & save on the commission, the buyer (dealing directly with you) no agents involved, usually chisels the seller down in price to the tune of the 5-6-7% anyway. Buyer says to Seller, well, it would have cost you that in commissions if you were dealing with an Agent!

    That is a REALITY, it happens ALL THE TIME. So what is the FSBO really saving here?

    The FSBO had to stay home for open houses only to find that they wasted their time to tire kickers (curious neighbours) that wanted to see how they live.

    Most every Agent knows that open houses really do NOT sell the property.

    Sellers can’t relate to that & demand Open House service.
    Open House is a tool used by Agents to generate buyers for themselves with other properties. That’s another REALITY.

    So the FSBO is upset that they have spent their long awaited weekends in an effort in futility. Maybe the FSBO also spent monies on adds in the newspaper, open house signs, posters etc. Now he is also out of pocket on that too, on top of the price reduction. That is IF, and I strongly highlight the IF he manages to sell.

    Also, lets not forget that the FSBO would have gone to a lawyer to draft of an Agreement of Purchase & Sale, which is an additional bill from the lawyer instead of just reviewing a already prepared standard P&S agreement prepared by the Real Estate Agent. And if the FSBO could not sell, then he is out of pocket on that as well.

    Lets NOT forget, timing is everything. If a FSBO tried for 3mths to sell his property & failed. He now has not only over exposed his property, which means that a price reduction is now in order, but he might have put himself into a bad selling time/market, by his delay in trying to sell it himself. Certain locations/properties sell better in different seasons. Or the heat of the moment. (Sellers Market)

    Bottom Line: Most FSBO’s end up calling a Real Estate Agent in the end. Actually no further ahead at all. They have done themselves a major disservice by what I have mentioned before. Out of pocket monies & major stress.

    Poster #5 Red, & # 36 Mike in Alberta covered a lot of TRUTH.

    FSBO’s have no idea how much time is wasted on tire kickers until they have tried it themselves.

    Part of our expertise is qualifying the buyer:

    Reading the buying signs.
    Needs, Wants & Desires.
    Screening mortgage qualifications.
    Arranging mtg.’s.
    Finding mtg. brokers in the event the banks don’t qualify the buyer.
    Making sure that they have a lawyer.

    There is so much involved in finding the right buyer for a property.
    We make it look real easy, so people think heck, I can do it for myself & save the commission. lolololol
    Believe me, you will cut your price equal to the commission or more in some cases.

    A experienced Real Estate person really does know their job. They really do know how to negotiate the price up or down depending on many factors. Lets face it. They always try for a higher price, because in the end, the little fraction that does go into their pocket, will be just a little bit more for them.

    My beef is with the EXPENSIVE Real Estate Fees just to keep my license alive. OREA, CREA & TREB. Errors & Omissions Insurance. Then the Broker desk fees $$$$. And that additional money grab, forcing us to update our knowledge every 2 yrs. More $$$$. That is a joke.
    Not to mention more & more & more paper work???? And the expense of advertising not only on the MLS.
    Long, long hours, day or night, rain or shine, snow storm or not.
    Hmmm, I just might be talking myself into a new career choice. lololol

    Personally, I think that the powers that be, dream up all this stuff to justify their EXORBITANT FEES. Imagine having to pay TREB just under $1,000/yr. for internet MLS! In the old days, they actually send someone out to take the pic’s of the houses & print paper dailies. What expense is involved to put a property on the MLS?
    We do all the work. We take the pic. We fill out the forms. We submit the forms. NO PAPER DAILIES INVOLVED. All TREB does is download our information.

    Most of the time, the MLS does NOT work right. Believe it or Not, it doesn’t. You have to know the glitches in the system if your searching for a property.
    i.e.: Single family, detached, w/o basement, fireplace, private drive, 2 car garage, attached, pool, 2 story, etc., the MLS system will NOT show you many!!! Apparently, less info produces more properties, which you have to painstakingly go thru to find the qualified property.

    UNBELIEVABLE….. How many agents in Ontario? Multiply that by approx. $800+ in MLS FEES and they still can’t get the system to work properly?

    Ok, I have gotten to share/enlighten the wonderful buyers & sellers of some additional information that they probably were not aware of.
    All that glitters is not necessarily Gold.

    And I have gotten to beef about the high Real Estate expenses, for not much in return. That is an issue that really should be addressed……PERIOD!

    As for the Competition Act. I agree with Melanie Aitken. The whole system Real Estate system is due for an overhaul, it really is long over due. And not just for Buyers & Sellers, but for the HARD WORKING “HONEST” AGENTS AS WELL, WHO ARE ALSO VICTIMS OF A GREEDY SYSTEM.

    p.s. forgive any grammar or spelling mistakes.

  • Thaddeus June 6, 2011, 6:27 pm

    Simply put – found this site by error. It’s amazing how ill informed your speaker and most of your guests are about the situation.

    How could you have a guest speaker who seemingly is trying act like a real estate sales person or broker with out being licensed by Ontario Legislation (R.E.B.B.A.) for those that don’t know what that means – figure it out you might learn something. Might I suggest they go to real estate school get their license and see what it is like. If she is from Toronto, TREB has over 30,000 registered real estate members, and it is projected that there will be a 10% increase in Sales persons and Brokers joining each year over the next 5 years. If you cannot find an “Brokerage”, “Salesperson” or “Broker” that charges less than 5% total, clearly you are extremely lazy – pick up the phone, there are plenty TREB members that will do it for less – it’s up to you to negotiate – if you can’t negotiate a commission, do you really think you could sell your home by yourself. Give up before even starting.

    As for information, there is plenty available, you just need to know where to look for it – it’s available to all – one thing, your might have to pay the Ontario Government for it – an appropriate tax structure called “User Fees” – you want the information pay for it. If you post this, I will read all comments – then be happy to rip your points – point by point.

    For a topic like this get someone whom knows the system from the inside out. Not someone who is a “wannabe” real estate agent – better stay working on behalf of your clients at the Tribunal. An even more stupid and comment worthy topic. The Residential Tenancies Act – more importantly the “Tribunal” is idiotic but with good fortune for your speaker – it keeps her gainfully employed.

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