On the Canadian Real Estate Association Resolving the Competition Bureau…

iStock_000004655909XSmallNote: these are my personal thoughts and have absolutely no connection to any volunteer positions that I hold.

At the end of the month the Canadian Real Estate Association will be voting to resolve a battle with the Competition Bureau. The big question that everyone wants to know is how this will change the landscape of Real Estate in Canada.

The answer is not very much…there have always been options for sellers whether it has been to sell privately, or to list with REALTORS® or Brokers who provide a multitude of services. I think that a lot of Sellers who would have previously chosen the “private for Sale” option will now be placing their properties on the MLS system with brokerage models who only offer that option.

The misconceptions are out there: some consumers think that full service companies will now be forced to list properties on the MLS with little or no service or a schedule of services. This is not the case. It is up to the Owner/Broker to decide what offerings they will make as part of their business model.

The BIGGEST misconception is that the Seller is the one paying the commission…think about the transaction. It is the Seller who writes the cheque but the price of the house is paid by the Buyer and the commission is deducted from that price. The Seller wrongly thinks that they are benefiting, but the benefit really goes to the Buyer….it is the Buyer who gets the lesser price to be paid and the Seller may be disadvantaged by not having a full marketing program.

As a REALTOR®, I see myself as a marketer and negotiator providing services for a fee. If some Sellers feel that they can manage that part on their own, then I wish them all the best. It has taken years to develop a successful marketing plan. Good REALTORS® make it look easy, we act as a buffer and try to keep a very difficult process as calm as possible. 

Like any service well done it has lead consumers to think that the process is easy. Some consumers see the transaction as the only time we work; They don’t see the hours of preparing the house for sale, research to get the proper asking price, months of showings with buyers to educate them, licensing, ongoing education and insurance; one of our biggest jobs these days is to make sure that Bona Fide clients are exposed to the property and that clients do not lose proper perspective when negotiating.

Unrepresentated Sellers would be well advised to hire a lawyer and use their services.  However they should be prepared that Lawyers charge whether the Property sells or not whereas REALTORS® fees, for the most part, are charged on a successful completion of the transaction.

There will be some confusion for a while as Sellers, REALTORS® and Buyers get used to some of these changes and some behaviours will have to change. Buyer Representation which involves a service contract between the Buyer and their agent, will become more and more important as it solidifies the fiduciary duty of the agent to the Buyer. 

Good agents will continue to offer many services to their sellers and Buyers. At the end of the day, competition allows great service providers to shine and this discussion is all about service.

21 Responses

  1. Barrie Condominiums

    Great Post Richard! I agree – “good agents will continue to offer many services to their sellers and buyers.”

    Cheers,

    Stephanie Adams
    Barrie Condo Team

  2. Laddi

    Great post Richard..It doesnt look like its gonna change anything..there were discount brokerages already in our market.

  3. Ramona Strojevs

    Very well written and well said. It will be interesting to follow how all of this is handled. I agree that good agents will continue to offer many services to their buyers and sellers. It *is* what we do!
    Ramona Strojevs

  4. Steven Silva

    As with any service provided, I think the true test is wheather the people in the transaction are still happy At The End of the deal. I doubt that any Buyer having worked with a professional Full Time Realtor has ever regretted the assistance.
    Unfortunately, Selllers that work with great agents may feel that it was easy. As Realtors, we need to start better educating the public to the true benefits sellers get. The value Sellers get is huge. It is time that we start articulating those values.

  5. Barry Lebow

    Richard, very good, you have a good grasp of the realities. An English lord once said, “if there were no agents, we would have to invent one” and that was in the 19th century. People can do a lot of the mechnical or technical aspects of buying and selling and always could BUT they lack a list of clients, a customer base and despite being a success with their yard sale, good negotiators are special and it takes years of training to be good at that aspect of the deal. I have bought and sold, as you know hundreds of properties in my career. I am a registered broker and I found one fact – I could not sell my own so I always have used the services of Realtors and got the best deals possible. Selling privately is very difficult to impossible to achieve not only a good deal but to be assured that the deal will actually close.

  6. Joe Hough

    Great post Richard. This will not affect the way many of the dedicated Real Estate Professionals do their business. Yes they may alter or tweek a few things, yes they may offer a menu of services for an UP FRONT fee, for those that wish to do things that way…..but is that any real change??? Many of us have offered that service for years but only a few consumers wish to pay the money up front, in other words they are not prepared to risk their money they want the REALTOR to take that risk. As I have said for years you can pay me now (at a reduced rate) and you take the risk of your home selling or you can pay me later, and I take the risk that your home will sell. Its always been the consumers choice.

  7. Laurence

    Really good explanation of the situation and a clear definition of the options. It remains up to each individual realtor to make a compelling case for their specific value proposition versus other options; in your case you seem to make it a no brainer.

  8. Richard Silver Post author

    Many thanks Laurence and thanks for your thoughts. The whole question is one of service…like in most service-oriented businesses.

  9. Victoria Boscariol

    Great post! Thanks for bringing logic and balance to this topic as the media seems to have omitted in covering this issue.

  10. Robert Crowe

    Great post! Really the more things change – the more they remain the same.

  11. David Armstrong

    Excellent post that represents how many professional Realtors feel. Unfortunately, the media and some Realtors have mistakenly understood that private sellers can now list on MLS and many members of the public believe that all Realtors are obligated to take “posting” listings. As a Broker of Record my company won’t be, we will cintinue to offer full service to our clients and compete in that arena. The consumer will have to decide how much service they want and how much they are willing to pay. I believe that full service Brokers will prosper as a result. Great post, this message needs to be heard by more people.

  12. Nan Levitt

    Thank you, Richard, for a clear and succinct explanation of this issue.

  13. JT Brown

    Interesting article. Not that I disagree with the current model which a majority of Canadians seem compelled to follow, however as a successful FSBO in Victoria, BC, I would have to say that there is another perspective to consider other than that of a realtor justifying a model that seems to benefit the agent far more than the client.

    Consider an individual trying to perhaps move into a more suitable neighbourhood in the same city for their family as my wife and I did. As a seller, I successfully sold my house in one day on Craigslist for $65K higher than the highest “recommended listing price” I received from a realtor. Without telling anyone this I chatted with a number of realtors (while self-searching for a new home) and was amazed to hear some of the following comments:
    • any attempt I make to sell on my own would likely end in me contacting an agent to do the job properly,
    • MLS is the best marketing tool – only accessible with an agent,
    • I will not show my clients listings from discount agencies/FSBO.
    Not that I am poo-pooing what agents do, but these are actual conversations I had with agents, and I found it condescending to be treated like licensed agents have the market cornered on sales pitches and marketing plans for homes. I am living proof that one can sell their own home with well written ad, a point and shoot camera, and a little know-how with web 2.0! I saved over $25K in realtor fees on my sale and was able to search on my own for a new home in the same market and put an offer in with an agent who offered to split the commission with me (as I did all the work setting up my own appointments). As such, I was able to save over $30K (mind you I had to pay a premium on the other end as that seller was using an agent and thus jacked up their asking price accordingly – fortunately I was able to negotiate a $20K discount on the listing price). Despite around $10K in property transfer taxes and another $2-3K in closing costs I was able to make a move within the same market, get a better house for less money, and pocket a few extra bucks for furnishings.

    Now I realise that this is not the norm; I saw an opportunity to make it happen and I and I demonstrated that we are not all at the mercy of paying thousands of dollars for what could have been very little work for an agent ($25K to sell my house in a day – $12.5K commission no matter how you spin it, for the amount of work that would have been necessary from an agent in my case, is in any consumer circle…ridiculous (or gouging).

    I know agents who have worked very hard and negotiated great deals for their client and saved their clients more money than they earned in commission. I am glad however that the competition bureau and real estate board are having these discussions, as there need to be more options out there for consumers that are savvy enough to look for alternative models for buying/selling real estate. What I would like to see, are discussions around ensuring that agents put the client’s needs first and consider options that are best for them, rather than what will best line the their own pockets – an agent not afraid to buck the old boys club and start showing FSBO and discount listing agencies if the property matches something their client is looking for. Again, this is not the case for all realtors, but sadly there are enough out there that work like this, to ruin the reputations of the many more integrity-bound realtors that are out there.

    Anyway, that’s my 2cents…no commission charged. Thanks for reading :)

    1. Richard Silver Post author

      Thanks for your comments. You are right that sadly there are some bad apples in every bunch. Please remember that access to MLS will still be through a Brokerage, however one that offers only that service.

  14. Rick Snell

    Nice post Richard. I am reminded of the quote by John Ruskin: “The bitterness of poor quality lingers long after the sweetness of low price is forgotten” This is especially true in real estate! The marketplace will sort out and test the validity of different business models, as it always has. I am very concerned that the quality of the data in the MLS(R) will be compromised. A business model that merely posts a listing for an upfront fee does not have a vested interest in maintaining an accurate high quality database of real estate information. Rules that require accurate and timely reporting of information must be diligently enforced. There is much at stake. Buyer’s, sellers, REALTOR(S), lenders, CMHC, appraisers, municipalities all depend upon and trust the MLS(R)!

  15. Larry Hann

    Richard – It’s always good to see a reasonably presented argument and the comments added to the discussion. Things will change, but I don’t think to any significant degree. I compete now with many Realtors who charge a much lower commission than I do but I still get a good number of listings, I don’t see that changing. JT Brown, for sure some people are very successful selling their home themselves as you proved. It is interesting however that you as the seller gained the advantage of not using a Realtor, many buyers assume that if a home is being sold privately it will sell for less than if it was listed with a Realtor. This is often not the case, and the buyers end up saving little to nothing while buying a home with no representation. People often forget this side of the coin.

  16. Adorna Carroll

    Hi Richard – excellent article and follow up comments from the fans of your blog! The representation of clients that are buying and selling property goes way beyond the basics of merely securing the real estate license. The final determination of the Competition Bureau will have no effect other than to personify that it is imperative to have the benefit of the representational skills of a true professional. I also applaud all of the Toronto Realtors who are taking time out of their very busy schedules to invest in the ABR – Accredited Buyer Representative Designation so that they can better understand and manage the needs of clients!

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