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.

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Thaddeus
10 years ago

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.

TimeforChange
11 years ago

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.

LC
11 years ago

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.

Lisa
11 years ago

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.

Rachelle
11 years ago

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.

Mike in Alberta
11 years ago

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.

Renovation Journey
11 years ago

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.

Rachelle
11 years ago

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.

Michael
11 years ago

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.

cannon_fodder
11 years ago

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.