2 thoughts on “Final Agreement Paves Way for More Competition in Canada’s Real Estate Market”

1. In order to interpret this:

   “Real estate agents who find a buyer for houses listed on the MLS by flat-fee agents can expect to be paid something for their effort. But in some cases, that payment will be one, shiny penny.

   That is the minimum amount set out in an agreement between the federal Competition Bureau and the Canadian Real Estate Association in an agreement ratified by CREA boards. The deal, which puts an end to a year-long battle between the two, ensures that homeowners can pay a broker a flat fee to have their homes listed on the Multiple Listing Service.

   The agreement, released in full on Monday after it was ratified by CREA on Sunday, ensures that brokers who post MLS listings for a flat fee will be able to operate without interference for at least the next 10 years.

   CREA changed its rules earlier this year to allow alternative business models to compete with the traditional commission-based structure. But Competition Commissioner Melanie Aitken was worried the association might arbitrarily change its rules down the road to stifle competition and make it difficult for low-cost operators to exist.

   The new agreement also ensures that sellers who opt for a flat-fee listing can have their contact information made available to interested buyers, through a link on the MLS listing. It also dictates that the seller must offer a finder’s fee for any agent who brings them a buyer – but stipulates only it must be more than zero.

   As before, only licensed brokers will be allowed to post MLS listings.

   “[The settlement] reaffirms the commitment to the rule of law and our commitment to competition,” said Georges Pahud, president of CREA.

   Ms. Aitken said the deal ensures Canadians will be able to choose between various service models. “For Canadian homeowners, it ensures that they will have the freedom to choose which services they want from a real estate agent and to pay for only those services,” she said. “For real estate agents, it ensures that they will be able to offer the variety of services and prices that meet the needs of consumers.”

   A host of services have already started, with some offering to post listings for as little as $100. Joe William, an Ottawa broker, has been offering one-cent commissions for most of this year.

   “My customers aren’t interested in paying commissions,” he said. “So that’s why we use that price. And I’m telling you, some agents write to me asking for that penny.”

   Propertyguys.com, the country’s largest for-sale-by-owner company, is using an Ontario broker to post its customers’ listings and offers real estate agents a finder fee of $1 – although it encourages its customers to negotiate a commission with anyone who finds them a buyer.

   While several of the flat-fee operators have worked quietly on the fringes for more than a year, Richard Rutkowski of Wiktor Realty Corp. said now that the changes are official, he will be able to launch formal complaints about agents who refuse to show his low-commission, flat-fee listings.

   Agents are obligated to show any house in which their client may be interested, he said, but many take a pass on his listings because of his business model. “Now we get to step it up and make sure agents are playing by the rules,” he said. “We can complain to regulators if agents are bad-mouthing us or avoiding our properties.”

   Phil Soper, president of Royal LePage, said the deal was a reasonable one. However, he said its contents are almost less important than the fact that a deal was reached after a year of difficult negotiations.

   “You have no idea how distracting this has been, at a time when the market itself has been tumultuous – it was expanding rapidly, people were worried about bubbles and then it contracts,” he said. “Against this backdrop, you have all this disagreement. It was very distracting.”

   http://www.theglobeandmail.com/report-on-business/economy/housing/real-estate-deal-opens-up-closed-shop/article1771467/

2. http://www.moneyville.ca/print/880853

   How to go? Full service realtor or discount broker

   October 25, 2010

   Stephen Hodge may someday be a rarity in the real estate business.

   As a full service broker with upscale realty firm Chestnut Park, he provides an array of services to his client.

   That could include picking them up to show homes, listing properties, conducting open houses and sometimes even staging the home to make it more appealing to a buyer.

   “People underestimate the amount of work that goes into selling a home,” says Hodge, who works with his wife Christine, who is also an agent.

   “Selling a house isn’t like selling anything else, there’s a tremendous amount of knowledge required.”

   For their efforts the Hodges charge the going rate, which could be as much as 5 per cent of the value of a home. But the dominance of the full service broker in Canada may be on the wane after an agreement tabled Monday between the Competition Bureau and organized real estate opened the market to discount brokers.

   The deal means that discount agents who continue to simply list their client’s home on the Multiple Listing Service and do nothing else will be protected.

   The deal will likely mean cheaper fees and a wider range of real estate services for Canadians, ensuring a greater mix of full service and discount brokers.

   “CREA shall not adopt, maintain, or enforce any rules that deny the ability of members to provide mere postings for sellers, or that discriminate against members because they offer, or wish to offer, mere postings for sellers,” says the agreement made public by the federal Competition Tribunal.

   Details of the 10- year agreement boil down to just a page in length. But it has the power to shake up the industry in favour of consumers.

   Some brokers already offer listing services for as low as $109, but they operate in a grey area. Other discounters have been anxiously waiting for the new rule changes before venturing into the market.

   The new agreement means that all agents can offer the services without fear of reprisal from the Canadian Real Estate Association, which owns the MLS, where more than 90 per cent of the sales are made.

   But the attention to discounters have not sat well with full service agents such as Hodge.

   “I think there will be a opportunity for consumers to save money, and that’s good, but what I see is a lot of attention focused on what you can save, rather than what agents bring to the table,” says Hodge.

   In a down market for example, agents will be able to move slow-moving homes faster than people two try to sell their properties themselves, he says.

   “In a market like today it will take a lot more effort to sell that home and that’s where the expertise counts,” says Hodge.

   Despite Hodge’s decision to provide full service, Queen’s University professor John Andrew says the new rules mean the standard 5 per cent commission rate many buyers pay for selling their home will likely not be the normal cost of doing business in the future.

   “The same thing happened to travel agents when the internet came along. People booked their own flights,” said Andrew.

   “The public is doing a lot of the work. And when you look at what other professionals charge in the real estate transaction such as lawyers, compared to the real estate agent, the gap is huge.”

   Phil Soper, CEO of Royal LePage, acknowledges that real estate agents don’t always have the best reputation.

   “There is a sense that they make a lot of money for little work and that doesn’t elicit a lot of compassion. But a good, knowledgable agent can make a tremendous difference in the transaction,” said Soper.

   Soper said there will always be a need for full service brokerages because not all consumers want to do the work themselves. “They will still have a choice, and overwhelming, many people still choose an agent to guide them through what can be a very complicated process.”

   Andrews said the landscape has already changed dramatically since Competition Bureau Commissioner Melanie Aitken decided to challenge CREA earlier this year.

   Aitken wanted to open up the market to more competition, and thought some rules were too restrictive. In the United States, Internet brokers had historically been blocked from accessing MLS sites managed by the National Association of Realtors. But a 2005 lawsuit by the federal Justice Department opened up the market.

   The agreement registered on Monday means that the two sides will not have to show up for a date next April at the Competition Tribunal.

   The new agreement also makes sure that private sellers who use the MLS are not shut out.

   CREA is also prevented from enacting rules that would prevent listing a seller’s contact information in the realtor’s only section of the site. This would allow sellers who want to sell their homes privately to be contacted.

   The deal also sets a baseline rate for compensation for buyer’s agents who bring in a client to the vendor. They must pay them at least one cent.

   Hodge, meanwhile, said he will still keep offering full services to his clients.

   “We allow our clients to focus on their lives so they don’t waste their time, that they get the home that suits them. And I think they appreciate that.”

   How much could you save?

   The difference in costs varies for real estate services. Here are two examples.

   Full service broker:

   Although prices are negotiable, the cost of selling your home could be as much as 5 per cent of the selling price.

   Under a traditional method, 2.5 per cent of the sale price would go to the selling broker and 2.5 per cent to the buying broker.

   For a $400,000 home that works out to $20,000 – $10,000 to the listing broker and $10,000 to the buyer’s broker.

   Discount broker:

   Discount models vary. But if you decided to sell your home yourself and list it on the MLS, you could pay as little as $109.

   In this case you would save the $10,000 you would normally pay a listing broker who would do all the work for you.

   You would have to show the home yourself and do all the negotiating. You would also incur expenses such as the $109 listing fee, any advertising, cost to make up feature sheets or signs, and time off to present the home.

   It would be up to you to determine how much you want to pay to the buyer’s broker.

   If the buyer contacts you directly and without an agent, then you have possibly saved yourself another $10,000.

   However, if the buyer comes in with a realtor, that realtor will want to be compensated. That could work out to 2.5 per cent or less, depending on what you stipulate.

   Under the new rules, you must pay at least 1 cent to the realtor. However, at that level of compensation, don’t expect them to make a beeline for your property.