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.

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?

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.

For anyone interested: Here’s a copy of the infamous and shocking, “not-so-secret” letter from CREA president Dale Ripplinger.

“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.

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.

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.

“…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’.

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.

“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.

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.

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.

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.

“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.

“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.

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.

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.