Canada’s Competition Bureau concludes CREA’s rules are anti-competitive
There’s a good chance that you’ve come across news stories like this one published in today’s Star Phoenix about the conclusions reached by the Competition Bureau of Canada following their investigation of the Canadian Real Estate Association (CREA), owners of the MLS® trademark in Canada. The Competition Bureau has ruled that some of CREA’s policies that govern the operations of MLS® systems restrict consumer choice and limit the scope of alternative business models, which might be viable and beneficial to consumers if the policies didn’t exist. CREA has indicated to its members that it disagrees with the Bureau’s views.
For the record, CREA is a national association of REALTOR® members. All REALTORS® working in Canada are members of the association. CREA provides governance for the real estate industry at the national level and works in the interest of REALTOR® members. While I am a member of CREA, I do not a represent the organization and I have no authority to speak on their behalf. The following post reflects my opinions and understandings of what has transpired to date, based on a letter to members from CREA president Dale Ripplinger.
Here is a bit of a backgrounder and an overview of the policies, which the Competition Bureau has challenged CREA on.
In 2007, the membership of the Canadian Real Estate Association approved the “Three Pillars of the MLS® Mark” and Interpretations.
The Three Pillars of the MLS® Mark
1) Membership – Only REALTORS® may place a listing on a Board/Association’s MLS® System.
2) Agency – A listing REALTOR® must act as agent for the seller to sell the property and to assist the seller throughout the entire time of the listing contract.
3) Compensation to Cooperating Broker – The listing REALTOR® agrees to pay to the cooperating REALTOR® compensation for the cooperative selling of the property.
The Interpretations of the Three Pillars of the MLS® Mark
1) The listing REALTOR® shall receive and present all offers and counter offers to the seller.
2) The listing REALTOR® shall be available to provide professional advice and counsel to the seller on all offers and counter offers unless otherwise directed by the seller in writing.
3) The mere posting of property information in an MLS® system is contrary to CREA’s Rules. A “mere posting” occurs when the listing agreement relieves the listing member of any obligations under the Rules, including the obligation that the listing REALTOR® remain the agent of the seller throughout the term of the listing contract.
4) The listing REALTOR® is responsible and accountable for the accuracy of information submitted to a Board/Association for inclusion in the Board’s MLS® system, and the Board/Association is responsible for ensuring that the data submitted to it meets reasonable standards of quality.
5) Only REALTORS® are permitted to display the MLS® trademarks in signage, advertising, etc.
6) Only the listing REALTOR® name(s) and contact information may appear on REALTOR.ca. The seller’s name or contact information shall not appear on REALTOR.ca or in the public remarks section of the MLS® system.
7) In cases where a Board permits listings in which the seller has reserved the right to sell the property himself/herself, that fact shall be specified in the Board’s MLS® database.
The same year that these articles were passed, CREA was served a Section 11 Order, an investigatory order requiring CREA to produce documents related to CREA’s rules and the operation of an MLS® System. CREA has been engaged in regular discussions with the Bureau since the issuance of the Section 11 Order.
The Bureau ultimately concluded that specific aspects of CREA’s Three Pillars of the MLS® Mark and the accompanying Interpretations prevent innovative business models, and the potential “unbundling” of real estate services that could allow sellers to play a larger role in the home selling process, even while utilizing the limited services of a REALTOR®.
Specifically, the Competition Bureau has asked CREA to remove the “Agency” pillar, as well as interpretations 1, 3 and 6. Under the Bureau’s proposed remedy, the other two “pillars” would remain, and so would Interpretations 2, 4, 5 and 7.
It seems apparent, based on the articles targeted for removal that the Bureau would like to see REALTORS® having the option to offer limited services that do not bind the REALTOR® to meet fiduciary obligations that are normally assumed as a result of an agency relationship. Those obligations include accountability, confidentiality, full disclosure, competent care, obedience, loyalty, as well as protection and promotion of the client’s interests. If these obligations were removed, a REALTOR® could, on behalf of a seller, list a property for sale on an MLS® and then allow the seller to perform all of the other services normally provided by agents, for themselves. Some REALTORS have attempted to provide this minimum level of service and claim to have been ejected from membership as a result.
In the past, CREA has taken the position that “agency” is a key component of the service that a REALTOR® provides, and seemingly continues to believe that. I believe, that CREA would contend that all REALTORS® have the freedom to choose what levels of service they might provide to a seller, and determine the fee that they will charge for that service, but that the REALTOR® should continue to be bound as an agent, owing fiduciary duties of care to the seller.
CREA has also expressed concern that removing this particular pillar does not relieve the REALTOR® from agency obligations, as a matter of law and regulation. Even if the agency component were removed from the “pillars,” provincial and federal law and regulation would still bind REALTORS®. In fact, some of the interpretations which would remain if CREA agreed to remove those in question clearly imply the existence of an agency relationship, namely articles 2 and 4. In essence, the concern seems to be that REALTORS® could find themselves offering substantially limited services, which ultimately expose them to greater risk and liability resulting from a breach of fiduciary duty.
The Bureau has taken the position that if CREA does not remove the restrictions noted above, the Commissioner of Competition will initiate an application before the Competition Tribunal, a judicial body, which has authority under Canadian law to issue monetary penalties and prohibition orders.
CREA’s Board of Directors has agreed to work with the Competition Bureau towards a settlement, which would be presented to its membership for approval.
CREA is in the process of scheduling consultations with Boards and Associations across Canada to discuss the issue further.
Only time will tell how this all unfolds but we can hope that wherever it goes, it leads us forward and results in improvements to the real estate industry, for the consumer of real estate services.
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
Real estate geeks can follow our daily updates on Twitter @Norm_Fisher.
Our Saskatoon home search tool offers MLS® listings represented by all real estate brands, presented with more detail than you’ll find anywhere else. Check it out here.
Norm Fisher
Royal LePage Saskatoon Real Estate
28 comments so far. We'd love to hear your thoughts.
November 3rd, 2009 at 10:24 PM
What about this one? 1) Membership – Only REALTORS® may place a listing on a Board/Association’s MLS® Syste. There was a hint (perhaps wishful thinking) that non-members would have access to the MLS system in the future.
November 4th, 2009 at 6:40 AM
Jason,
“There was a hint…”
One of several “hints” that seems to amount to media sensationalism, at least if the president of CREA is being straight with members.
At this point, it’s my understanding that the four issues outlined are the subject of this ruling and that there is no push in that direction, though as Larry points out in his post (trackback above) the sand in the sandbox will never be just right for some.
Does that not seem a bit of a stretch? Perhaps it’s the early hour, but I can’t think of another parallel in business where something like that has happened. Would it be reasonable for me to cry “anti-competitive” if the local Chrysler dealer refused to allow me to sell me car privately on his or her car lot?
November 4th, 2009 at 10:08 AM
There is no question that MLS is an amazing sales tool … but the problem is, it’s the only game in town! When one business is dominating a market to the extent that no other business or business model can reasonably grow under it, that makes it a de facto monopoly … and breaking up non-sanctioned monopolies is part of the job that the Government is there to do, if it is in the interest of The People.
The other issue is the incestuous relationship between the MLS and the CREA. As has been pointed out during this discussion, a realtor doesn’t even have a choice whether or not they want to be part of the MLS! Many people have said that it’s not the RE Agent that sells the house any more, but the MLS listing that sells the house. I don’t agree entirely — after all, a RE agent has to create the listing, and some of them definitely do a better job (Norm!) than others — but I can see why some would say that. I personally have had the experience of driving past a ‘For Sale’ sign, and looking for the listing on MLS once at home; if it can’t be found there, I’ll most likely give up rather than check any single-agency websites.
Let’s say Zillow DID decide to try and start up shop in Canada … I don’t know this for a fact, but I suspect that no Realtor(tm) would be allowed to list houses with them, by edict of the CREA, under penalty of potential disciplinary action and/or loss of registration. After all, why would CREA want another business selling the same (or a better!) product to thrive? Given this threat, very vew Realtors(tm) would do buck the trend — they would, after all, risk losing access to the single biggest selling tool that exists, just for the possibility of gaining something else — and the competitor would die before it could ever begin. Again, we’re back to the issue of monopoly.
If I had to buy sand (to use Yatter’s example) every week, every month, or even just a couple of times a year .. then I’d have impetus to care about the sand-seller’s business practices. RE deals happen once or twice a decade (if that) for most folks, however, so while they may get frustrated at a system, they ultimately work within it and then forget about it. That’s normal human nature; once you’ve made it around an obstacle, there’s no impetus to move said obstacle… let the next guy do it! After all, you managed to do it — so why shouldn’t he have to as well? It’s only when that ‘he’ can be projected to be ‘me, in the near future’ that most people are moved to make changes.
There’s no question that some Realtors(tm) offer value added services, and I truly believe that Norm is one of them. This website, this blog, this post you’re reading — these are all great examples of those value-adds. Regardless of the landscape, people like that will always prosper, because they ‘get it’. The problem is that the current system also protects the lackadaisical, half-assed do-nothings which abound in any profession. (Think of how people discuss union members who know that their job is safe, for an example.) The people in this category are cushioned from having to perform because they are part of an organization that maintains a stranglehold on the single largest RE selling tool in the country.
November 4th, 2009 at 11:51 AM
Thanks Bookrat!
“The MLS,” by definition, has always been a tool that Realtors use to share information with each other about properties they have listed for sale, and to encourage cooperation between agents. It is a system designed by Realtors, built by Realtors and funded by Realtor dues. The ultimate objective is to help Realtors expose their properties to buyer’s agents. It’s not so much a business, as a business tool. “Member only” use of the system does not seem to be an issue with the Competition Bureau.
Realtor, by definition, means member of the Canadian Real Estate Association. If you’re a member, you’re a Realtor. With that membership comes the right to use the MLS trademark which is owned by Realtors. You do have to be a Realtor to use the MLS, but you don’t have to be a Realtor to be a real estate agent. I can have a license to trade, and not be a member of CREA. The primary benefit of being a Realtor is the MLS. Without the MLS, there wouldn’t be much of a reason to be a member.
Zillow? CREA does not tell us where we can or can’t advertise our listing. That would be anti-competitive (established in law) and I can assure you that there is no attempt to close that kind of stuff down. In fact, our local association, SRAR, packages MLS data on a daily basis and sends it to several outside sources for publication including Point2Homes. Any Realtor that wishes to have their listings appear there simply need to click a few links to make it an automatic.
I am not familiar with the facts of the case which led this Toronto broker to a showdown with CREA but I can tell you that I have had competition rules pounded into my head since I started in the business in 1993. I have signed CREA’s Competition Pledge and read their “Real Estate Competition Guide,” and for the most part I see Saskatoon Realtors doing business in compliance with these publications. Nobody is talking to me about limiting competition. We have numerous members who offer alternative models. Gven that everyone in Canada probably knows several Realtors it’s hard to imagine the industry could operate in a restrictive manner. The real estate business is extremely competitive.
November 4th, 2009 at 11:53 AM
Norm, “One of several ‘hints’ that seems to amount to media sensationalism…” And that could certainly be the case. But is it also not possible that the complete details and full extent of any settlement have not been entirely revealed, either?
“Does that not seem a bit of a stretch? Perhaps it’s the early hour, but I can’t think of another parallel in business where something like that has happened. Would it be reasonable for me to cry ‘anti-competitive’ if the local Chrysler dealer refused to allow me to sell me car privately on his or her car lot? Well, not to dissuade you from your analogy, but businesses sell things on consignment all the time, so in effect you do have access to their “system” provided you adhere to their rules and guidelines. The point is, you at least have that available as an option.
I’m neither for or against private listings in MLS. I think it’s an interesting idea but one that also needs to have specific guidelines to maintain the integrity of the MLS system (such as having to pay a fee or commission to list it through an agent, without necessarily any exclusivity or obligation that would preclude a private sale). I think change could be a good thing, though – provided it was well thought-out and implemented properly.
Excellent points Bookrat!
November 4th, 2009 at 12:04 PM
Jason,
An MLS agreement is simply a contract between two parties. Nearly anything can be agreed upon. I think that CREA has always taken the position that “agency” is an important component of the services that “agents” provide. You can find someone who will put your house on MLS for next to nothing and provide minimal services. That option exists today. If this business has made any mistakes over time, and we certainly have, lax minimum standards rank right up there. I don’t really see how taking responsibility to a client out of the picture improves things for consumers but I realize that I am biased.
Here’s a follow up from the Globe today.
It kills me to read “typical 5% commission.” It’s okay for the media and the anti-realtor folk to say this. It’s an unlawful act for an agent to even suggest that.
November 4th, 2009 at 12:52 PM
I see the problem as “gatekeeping”. Why shouldn’t a homeowner have access to submit a listing directly to MLS and pay a fee to use it. Say for example, a realtor gets a homeowner that wants to list a property below the value of a comparible property the realtor has had on the market for some time. As a gatekeeper, the realtor could say they wouldn’t list the property for the price the homeowner wants, or put up other hurdles for the homeowner. Gatekeeping currently happens as it is, because “all offers” are never presented. Some realtors refuse to write up offers. Refusing to write up low ball offers is collusion to keeping prices high (which may be happening). Thus I can see why an anti-competion complaint happened. Some realtor is not following codes of conduct. Takes one to abuse it and the rest lose it!
November 4th, 2009 at 1:16 PM
Good discussion.
Steven,
At law, agency is a specific relationship between two or more people. One person must authorize the other person to act on his/her behalf, and the other person must consent to do so.
There are a number of grounds on which an agent cannot refuse to work with someone (race, religion and other human rights violations) but the law does afford us the opportunity to decide who we might like to have as a client, and who we may not be compatible with. Neither is an agent obliged to represent more than one party to a transaction. In other words, a listing agent could have an agreement with a seller that he or she will only represent the seller. Just because it happens to be less convenient for you to have to locate another agent to write your offer doesn’t make it wrong, or gatekeeping. I get along with most people, but I occasionally meet people I do not like, and I know it right away. In a million years, I wouldn’t put myself in a position where I am bound to them in any way. That’s how you end up unhappy and in court. I don’t have a duty to represent anyone who asks me to. I do have a duty to present any offer that is brought to me.
By the way, I’m pretty open minded on all of this. As a general rule, I’m for fewer restrictions and limitations. For the past month or so, we have been leaning in the direction of a “three levels of service” approach and I expect that we will eventually come up with something. I’m saying, I don’t find the current rules particularly onerous or unreasonable. I can’t think of anything that I feel I’m not allowed to do under the current guidelines, including providing pro bono service which I have done on occasion when the situation warrants it.
SRAR and CREA don’t have me in a headlock. In fact, the forms that we use and submit to SRAR don’t even show the commission I charge, only what I’m offering as a co-op fee.
November 4th, 2009 at 4:36 PM
Norm, “An MLS agreement is simply a contract between two parties. Nearly anything can be agreed upon.” Except perhaps for commission, which I suspect is one of the sticking points. “You can find someone who will put your house on MLS for next to nothing and provide minimal services. That option exists today.” Really? If that’s the case, I would certainly appreciate more details…
“It kills me to read ‘typical 5% commission.’ It’s okay for the media and the anti-realtor folk to say this. It’s an unlawful act for an agent to even suggest that.” It’s more like 6/4/2, which has the potential to be split if both parties are represented by an agent, no?
“By the way, I’m pretty open minded on all of this. As a general rule, I’m for fewer restrictions and limitations.” You do seem really progressive in that respect Norm, I’ll give you that.
One brief comment about real estate commissions: on a $300k home sale, that’s roughly $15k. So it means that upon purchase, the buyers now need to sell that home for at least $315k just to break even. So they’re basically underwater at the time of purchase in the event they needed to sell. If the market has declined, that’s an even worse scenario. While this does tend to discourage speculating, it also tends to drive housing prices up indirectly as a result.
November 4th, 2009 at 4:40 PM
Jason,
“but businesses sell things on consignment all the time, so in effect you do have access to their “system” provided you adhere to their rules and guidelines. The point is, you at least have that available as an option.”
Uh huh, and this is also the basis nature of an MLS listing. We take real property, on consignment, put it into our system, which operates under rules and guidelines, get paid if we sell it, and suck lemons if we don’t.
Obviously, my car dealer would ultimately decide if he/she wants my vehicle on the lot, and if so, would propose terms which I would be free to accept or decline. I could not reasonably suggest he or she is anti-competitive simply because I didn’t care for the terms. I could go check out another dealer.
November 4th, 2009 at 5:04 PM
Norm, “Uh huh, and this is also the basis nature of an MLS listing. We take real property, on consignment, put it into our system, which operates under rules and guidelines, get paid if we sell it, and suck lemons if we don’t.” So if I list my house with an agent, and then someone walks in off the street and makes me an offer, my agent will just go suck lemons?
November 4th, 2009 at 6:25 PM
Jason,
You’ll have to ask your agent about that but there are no regulations that could prevent such an understanding. I suspect that any agent working under such an arrangement would be fairly conservative in the time and money that they would want to invest in a project that could be pulled from under them at any moment, but again, there’s no reason it couldn’t be negotiated.
November 4th, 2009 at 7:06 PM
Norm, if you’re suggesting an agent might be willing to work with that understanding (and not an exclusive, x number of months contract), one that would only charge a minimum to cover any fees (and not expect 1/2 of the full commission), I’d certainly love to learn more. In practice, I’ve found these to be as rare as a unicorn, though…
Anyway, my point was that most consignment arrangements don’t preclude the possibility of a private sale without any financial obligations to the vendor, ie: compensation is optional.
Delivering a buyer (gift-wrapped, naturally) is obviously worth something (but not necessarily full commission). The mere act of listing a property and collecting half the commission when another agent does all the work to bring-in a buyer is ludicrous, and one of the reasons real estate commissions are so high (they often have to be split). If anything, the agent representing the buyer should be able to reasonable ask for more than 50%. You need look no further than Phoenix, AZ to witness the end to many real estate traditions and practices.
November 4th, 2009 at 8:51 PM
Jason,
I’m only suggesting that there are no rules that would prevent such an arrangement. I thought that was what we were discussing. I certainly wouldn’t be interested in working for anyone who would insist that I should work for free in the event that they secured a buyer. We can easily have 25 man hours invested before the property is shown for the first time.
To your other point, I wholeheartedly disagree with the generalization, but I agree that sellers often end up with a useless boob that contributes little in the way of marketing or representation. This business has changed a lot in the last ten years and a strong listing agent has never been more important. Buyers more often call their buyer’s agent to arrange a showing on a home which they’ve been introduced to as the result of a seller’s agent’s marketing plan. Last month, there was a better chance that a buyer learned of my listing here, compared to anywhere else. We know that by the numbers which we track. Twice as many people viewed our listings here compared to mls.ca and royallepage.ca combined. In fact, mls.ca and royallepage.ca accounted for only 18% of the views our listings took. The other 82% were generated elsewhere by our marketing plan which we created and funded. I have easily invested over $100,000 of time and money to build this site to deliver results for sellers. Rarely a day goes by that we don’t get asked by some other agent’s client to show them one of our listings. When you consider the expenses the seller’s agent absorbs, and the fact that they assume the total risk of expenditures without return, it’s not a huge price to pay for strong representation, and every seller deserves strong representation. I pretty much do 100% seller representation personally and it keeps me busy all day, and most evenings. I also pay a full time assistant who puts in 40 hours a week helping me deliver service to my sellers. She doesn’t work for free. To be clear, I’m not complaining. I love every minute of it. I love working for sellers and I work hard doing it. You will never convince me that my service is worth less than the buyer’s agent. I go to bed completely guiltless and comfortable that I’m giving my best for each of my clients. They’re getting a bargain because I handle their deal like it’s my own.
There’s a certain kind of buyer who is efficient and skilled and would be in heaven with a smorgasbord of unrepresented sellers with less skill than they possess. I am that seller’s agent and that buyer doesn’t get very far trying to take advantage of my client.
November 4th, 2009 at 10:17 PM
Norm, “I’m only suggesting that there are no rules that would prevent such an arrangement. I certainly wouldn’t be interested in working for anyone who would insist that I should work for free in the event that they secured a buyer.” Fair enough, and I’m certainly not advocating that you even entertain such a scenario. However, I think you would agree that between the extremes of “free” and “full commission” there’s probably some middle ground to come to an arrangement. My only point was that this has not historically been the case, and that barring some radical changes or new way of thinking, is unlikely to evolve in the future.
“To your other point, I wholeheartedly disagree with the generalization.” I wasn’t trying imply that all realtors are ‘useless boobs’, but rather, that the real estate industry cannot claim any exception to occasionally employing less skilled or qualified representatives. Hopefully that puts it a bit more tactfully.
“You will never convince me that my service is worth less than the buyer’s agent.” Strangely enough, that’s what I heard from a lot of realtors in 2005. Many have since changed their tune with the economic realities of a housing crash. Far be it for me to try and suggest otherwise. I would only add that this has been anything but a balanced market for several years — and it is less challenging to sell in a market where people have almost unlimited to credit, with all sorts of industry and government endorsements to boot. It’s much harder to sell in a market where not only is demand down, but financing is hard to secure, and many buyers come to the table with cash offers in-hand (and typically with a hard list of demands).
“There’s a certain kind of buyer who is efficient and skilled and would be in heaven with a smorgasbord of unrepresented sellers with less skill than they possess. I am that seller’s agent and that buyer doesn’t get very far trying to take advantage of my client.” And I commend your efforts. However, when you have 10 sellers per qualified buyer, representation (however noble) only goes so far if the client is desperate to sell. All I’m saying is that in ideal market conditions, it’s much easier to adopt an idealistic perspective. Reality sometimes dictates otherwise.
Incidentally, I think you happen to do an excellent job. Not only representing your clients (buyers and sellers), but with the abstract/”out-of-box” thinking with respect to this blog, your candid posts and comments and the non-traditional ways of advertising. I did like the virtual tour you included with your latest listing in Stonebridge, btw.
November 4th, 2009 at 10:42 PM
Norm, I knew I could count on you flatlanders (it’s a compliment) to get it. Damn fine discussion going on here. It’s heartening to actually see that some consumers truly understand the nuance of our business. My greatest wish is that the following is not lost on everybody. Should the Bureau succeed, a great many consumers will be in jeopardy. Referring to the bit on “mere postings” – years of law have been cobbled together to provide the Law of Agency, and the Privacy Act. If that section is summarily removed, as has been suggested, I am dumbfounded to understand why any consumer would accept changes where assurances would be dismissed in favor of something called a ‘new business model’, one which essentially, exists today. The repercussions of this anticipated change must I believe, involve our lawmakers and politicians, for such a change will be precident and will affect many more than just users of Real Estate services. Curious is to see if and how many MLA’s or courts are prepared to save the day. A second, more minor curiosity, is to see what the papers make of this when they realize they may have ridden the wrong horse. Standing in my sand box – simply, if we as REALTORS truly believe that as professionals, we are to fulfill our fiduciary responsibility to our clients, and by that responsibility, we are charged to protect the users of our services, then it is paramount that CREA on our behalf as members, charge forward in it’s quest to find resolution with the Bureau to maintain those Pillars of Agency from which we REALTORS, go forth to conduct our business.
November 5th, 2009 at 6:56 AM
Larry,
Thanks for the comment.
Perhaps you haven’t heard that we’re living in backwardsville these days. Up is down and black is white. Criminals get deals from the crown to testify against victims and reckless people get handouts. Why would we be surprised that removing consumer protections could be successfully spun to be a great idea?
Even if all the parties involved in the current discussion were to agree that it’s cool that the “agent” no longer be an agent, we’d still be at odds with our provincial regulator. CREA could agree to remove those items and I would be no less my client’s agent. The Real Estate Act of Saskatchewan makes no provisions for a lesser level of responsibility under any circumstances that I’m aware of.
Jason,
“Fair enough, and I’m certainly not advocating that you even entertain such a scenario.”
My listing service comes with what I call my “easy-exit guarantee (ya, it’s a bit cheesy).” It’s a no questions asked cancellation clause. I have no problem offering it because I only work with people I trust to treat me fairly, and I strive to do the same for them. While I accept each assignment with the full realization that my investment of time and money could be lost, I’m challenged daily to do my best, and in most cases, that’s what I do. I understand that I work in a business where mediocrity is more common than not, and perhaps that’s part of the reason why I feel the way I do, and the reason why you feel the way you do. I know what my commitment and investment is and I can say with some degree of confidence that if, under the current constraints and models of efficiency which are available to me, I had to net 30% less than I do today, I would be looking for another career opportunity. It simply would not be worth it. I’m thankful that I do feel that it is worth it.
“Strangely enough, that’s what I heard from a lot of realtors in 2005.”
Not that strange. This is what their broker tells them to say. If I were sitting across your kitchen table I would endeavor to prove it.
I wasn’t suggested that “useless boobs” was your characterization. It’s mine. At least half of real estate agents have no plan and no system. They have to rethink each piece of business from scratch. Many have poor technical knowledge of contracts, agency, real estate law and regulation, or the real estate market. They know even less about human relations, how and why people are motivated; how they negotiate and can be negotiated with. There are people working in this business today who I’m certain haven’t taken the time to read our three page offer, let alone explain to a buyer or seller what it is they’re signing. An agent who knows little about any of these things is only masquerading as an “agent” but is really a “useless boob” who just adds costs to the transaction. The real estate industry should be ashamed of itself for some of the people they’re turning loose on clients. When the market finds a way to deal with all of that fat and people stop hiring idiots, the professional real estate services will be more widely available, and I expect they’ll be available at a lower cost. To be clear, I do not think that I’m better than everyone else but I do care about the industry and my clients. There is a growing number of agents who I am extremely proud to be associated with, in and outside of my company. Men and woman that “get it” and who are providing value to their clients so far above the norm, or the average that I’m bewildered as to why there still seems to be room for simpletons.
November 5th, 2009 at 11:26 AM
Norm, “My listing service comes with what I call my “easy-exit guarantee… It’s a no questions asked cancellation clause.” Very innovative. I have no doubt that puts potential clients at a lot more ease, and would imagine it’s only invoked on the rarest of occasions.
“…I had to net 30% less than I do today, I would be looking for another career opportunity. It simply would not be worth it.” I was more alluding to the reality that real estate commissions are high (in-part) because they most often have to be split between a ‘boob’ (as you put it) and someone, shall we say, “more committed”. Because of this, there’s typically not a lot of room for negotiation. I think you’d agree that the traditional 50-50 split is often not earned in some instances, but it’s honoured nonetheless.
I’ve had my share of experienced ‘boobs’, as well – where they’d digressed to the point they were so arrogant that they were actually behaving quite unprofessionally. I’ve started seeing this in Saskatoon as well, where agents were clearly buying into their own hype (it’s somewhat entertaining to hear a $100k overvaluation attempt to be justified because ‘the owners were already losing money on the deal’). There’s an expression: “Don’t try to sell a salesman.”
“I’m bewildered as to why there still seems to be room for simpletons.” I think this is the nature of the beast when you have a seller’s market (I’m referring more to 2007 and early 2008, of course), bidding wars and a general shortage of inventory. I think that if we see any sustained market correction, though, that we’ll see exit stage left of a lot of the ‘fluff’.
November 5th, 2009 at 11:47 AM
“I think you’d agree that the traditional 50-50 split is often not earned in some instances, but it’s honoured nonetheless.”
That may be true, but consider this. The amount of work that a good sellers agent will do for a client has increased wildly in the last ten years. Staging, photos, virtual tours, numerous internet initiatives, property disclosure, municipal compliance, and on, and on, and on, with much more coming down the road. Think about how much more information is floating around out there and how much more of a challenge it is to break through that and get a buyer’s attention, and the seller’s agent does need to attract the buyer’s attention directly and convince them to initiate the “request a viewing process.” Today, your buyer’s agent might email you stuff, and you select homes you’d like to see, often based on the seller’s agents presentation. You may also spend hours researching and viewing property online at various sites. The buyer’s agent has seen a large reduction in the amount of work they do. They show half as many homes as they did 10-15 years ago.
“they’d digressed to the point they were so arrogant that they were actually behaving quite unprofessionally.”
Well, you know what they say. We’re rarely as good as we think we are, seldom as bad as someone else thinks we are. Human nature I guess, and I’m sure it applies to me as well.
November 5th, 2009 at 11:49 AM
…and I’m not at all suggesting that a good buyer’s agent doesn’t have value, but in most cases, a seller’s agent who cares about the marketing of the home has invested more time and money into the transaction and is likely to have played a role in attracting the buyer to the listing.
November 5th, 2009 at 12:33 PM
Norm,
you say:
“we’d still be at odds with our provincial regulator. CREA could agree to remove those items and I would be no less my client’s agent”
EXACTLY!!
To my knowledge your legislation is little different from Ontario’s (TREB) or any other province. This is why I am convinced the Bureau is myopic and may be oblivious to the fact that it’s proposal contravenes current law. Allowing for doubt, it’s possible, I suppose, that they – the Bureau cannot figure itself out of this jamb and is counting on CREA to provide a solution but, then again, I’m being overtly positive.
Another curse of having senior’s moments.
November 5th, 2009 at 1:00 PM
Norm, “The amount of work that a good sellers agent will do for a client has increased wildly in the last ten years. Staging, photos, virtual tours, numerous internet initiatives, property disclosure, municipal compliance, and on, and on, and on, with much more coming down the road.” True, but this isn’t widespread – and is still the exception rather than the rule. When the majority of listings have a decent MLS write-up, a wide assortment of good quality photos and a link to a virtual tour with more information (such as floorplans, QTVR, etc.) then I’ll be convinced. Case-in-point: the system you use is far superior to realtor.ca.
“The buyer’s agent has seen a large reduction in the amount of work they do. They show half as many homes as they did 10-15 years ago.” I agree completely. And who is doing this additional time-consuming research, analysis and legwork? The buyer. Yet, the agent representing the buyer still expects their full commission. And incidentally, yes, while the seller does pay the commission, this is indirectly factored into the price already (so you’re paying for it in the end).
I think it’s fair to say there are seller’s agents that more than earn their split of the commission – just as there are a lot of ‘boobs’ that just plop up a sign and essentially do nothing. Similarly, there are a lot of buyer’s agents who are generally unavailable (or disinterested) outside of certain hours, do a poor job of communicating with their clients and really have to be prompted for viewing suggestions, market analysis, etc. – just as there are some really good buyer’s agents, who are available evenings/weekends, go out of their way to help their clients find their ‘dream home’ and are generally willing to please.
Because there is little or no room to negotiate around this ‘traditional arrangement’, though, it tends to reward the ‘boobs’ in the industry. And I think this manner of traditional, closed-mind thinking (more than any actual anti-competitive practices) is more at the root of these complaints and investigations than anything else.
Not being able to incentivize beyond (or outside of) the traditional split arrangement is one of the fundamental problems of the industry, because it’s designed to always reward mediocrity.
“Well, you know what they say. We’re rarely as good as we think we are, seldom as bad as someone else thinks we are. Human nature I guess, and I’m sure it applies to me as well.” If your listings had your name in neon lights, I might tend to agree; it takes a lot more humility to open yourself up to constructive criticism.
November 5th, 2009 at 6:45 PM
Thanks Jason. Nice discussing this with you.
For anyone interested: Here’s a copy of the infamous and shocking, “not-so-secret” letter from CREA president Dale Ripplinger.
November 6th, 2009 at 4:19 PM
Many have poor technical knowledge of contracts, agency, real estate law and regulation, or the real estate market. You are bang on there Norm. Unfortunately, some of the “boobs” are saying they have the same qualifications as good realtors like yourself. Real estate is not alone in this respect, other industries have these problems too. Only when a crackdown happens, do things get cleaned up and good people get caught in the crossfire.
I have no problem with paying what is due to the selling agents. However, on the buying side of things I feel most agents just want me to come as close to the asking price for an easy sale (commission). For a buying agent, I think the commission should be determined by how much money they get the purchase price away from the asking price. Like to write up an offer for the asking price, I could do that myself. Really I’d just rather write up my own offers and present them myself. There is no incentive for a buying agent to negotiate down any asking price!
If realtors were to lose the buying side structure of commissions, I think a lot of the boobs would disappear. Buying agents don’t work as hard as selling agents, they just ride the coattails.
November 8th, 2009 at 2:11 PM
Hi Norm
Great discussions going on here.
As I was reading I thought of a few points:
1. Do you see any concerns that Sellers might have due to exposing themselves and their homes to possible theft and home invasions by allowing a lot more easy access?
2. Right now, the Federal governement forces all Sellers and Buyers to provide legal identifcation prior to the sale or purchase of property. The intent was to expose and help to eliminate money laundering. I wonder if this will no longer be a requirement.
3. I wonder who will now establish property value for Sellers and Buyers or,……. will they do it themselves.
4. Will Sellers and Buyers now be able write their own offers?
5. Who will hold any deposit monies?
November 8th, 2009 at 6:10 PM
Hi John,
Great questions. Thanks.
First of all, the proposed changes to CREA’s rules and regulations have no effect on provincial legislation. As I see it, many of the CREA rules in question are fairly well covered in our Saskatchewan Real Estate Act. For instance, a seller’s brokerage is in an agency relationship when they enter into a listings agreement (there may be ways around that one). A mere “posting”of a listing appears to contravene at least one point of law. A seller’s agent is presently obliged to present all offers and counter-offers to his or her client. Of course, legislation is often about “interpretations” so I’m sure some of this law could be open to challenge, in which case the Saskatchewan Real Estate Commission, the Superintendent of Real Estate, an ultimately the courts may have to weigh in. If there is an appetite to give up some of the protections which exist for consumers in law we’ll have to work our way through bringing about some change, but right out of the chute the testers are likely to meet face to face with a real estate regulator. I expect that change will be on the slow side as it often is, at least in this business.
I guess I would point out that the challenges you’ve raised are faced and dealt with by private buyers and sellers on a daily basis so they’re certainly not insurmountable.
With respect to question 1, there is currently no legislation that would prevent an agreement where a buyer contacts the seller directly. Companies like Inovex, and Choice Realty have been offering “packages” with which the seller is responsible for showing the home. Some sellers will feel completely comfortable with that. Others won’t and will probably continue to utilize a Realtor in more of a full-service, or traditional way.
2, 4, 5 – Sellers wanting to utilize the MLS will still need a Realtor to get the property on the system. I believe our Real Estate Act would put the onus on the seller’s agent to look after those details, but theoretically, a seller’s agent could have an agreement with a seller that provides for a cancellation of the listing in the event that the seller found a buyer. In such an instance, as with a private sale, there is no Fintrac identification requirement. The buyer and seller may execute any offer that both agree to sign and they can handle the deposit any way they wish (seller may collect and hold it, they could agree to deposit in trust with a lawyer).
Regarding number 3, there are private services who will appraise the property for a fee. I’m sure in many cases, buyers feel comfortable coming up with a number just based on what they’ve seen along the way.
Just my thoughts off the top of my head.
Thanks again John.
January 12th, 2010 at 8:50 PM
Hi, I will be starting a new company that caters to buyers only offering a discount on the buying fee. How do I gain access to the properties with lock boxes? They have to allow me access if they are not anti-competive right?
January 12th, 2010 at 8:55 PM
This is directed towards Steven regarding his comment, Buying agents don’t work as hard as selling agents, they just ride the coattails. WRONG. Buying agents sometimes work a lot harder as they show the client up to 100 properties without a sale. Selling agents just sit and wait for the MLS system to sell the home. Meaning the Buying agents sells the home and finds the Buyer. The Listing agent rarely finds a Buyer.
Who Linked To This Post?