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Canadian real-estate rules challenged
by federal competition watchdog
Home buyers and sellers may soon be able to choose "a la carte" services from real estate agents if the Canadian Real Estate Association is forced to change its pricing structure, but the association says that's always been the case. Canada's Competition Bureau filed an application with the Competition Tribunal on Monday seeking to strike down the CREA's rules on the use of its Multiple Listing Service.
Those rules stifle competition because CREA uses its control of the MLS to force home sellers who want to list on the MLS to pay for a full package of services associated with buying, said Melanie Aitken, head of the competition bureau.
The Competition Bureau has been discussing the matter with the association since it enacted the rules in 2007 after receiving several complaints, but the CREA has not been willing to make changes to its practices, said Aitken.
But the CREA refuted that claim Monday and said after months of intense negotiation, it decided last week to go ahead with a proposed set of clarified rules that will be voted on by its members in March.
CREA said its rules have always been flexible enough to allow consumers a broad range of services and the proposal will not seek to change rules, but instead make clarifications that will address the bureau's concerns.
"CREA views the commissioner's decision as surprising and disappointing," said its president Dale Ripplinger.
"We do not agree with the bureau's position that certain CREA rules are anti-competitive, either as a matter of fact or as a matter of law. CREA's rules allow for innovative business models and provide a broad range of choice for consumers."
The CREA, which represents more than 98,000 real estate brokers, agents and salespeople, allows only its members to post homes for sale on its MLS database, where the vast majority of Canadian home sales take place.
Aitken said changes that would introduce more competition would benefit consumers, agents and the economy as a whole.
"This is all about providing choice to consumers, its up to them what they feel they want and need in the context of what is the most significant financial transaction most Canadians do," she said.
"Some want to play a real role in selling their house and they're prepared to do the leg work and they don't want to pay for somebody else to do it."
Under current rules, real estate agents must handle all details of the transaction, although there are some services that consumers might wish to do on their own, such as booking interviews to view the property or making an offer, according to Aitken. Agents must agree to offer all services whether consumers want or need them.
Aitken said if the bureau's challenge is successful it would drive down real estate transaction fees.
She added that in the United States, where many such restrictive rules have been lifted, fee prices had dropped significantly and now range from US$99 to $500, much lower than in Canada where fees average around five per cent of the selling price of the home.
Mark Argentino, a broker in the hot housing market of Mississauga, Ont., said the changes would diminish the agent's role as a gatekeeper, leaving uneducated consumers to take on overwhelming responsibility.
"(If) all I'm doing is putting it on the MLS for you then what's the point? You get no representation...but if you personally are shrewd and you have a lawyer and what not, it can be done."
He said while some consumers are fed up with the fees, they always have the option selling their homes privately, without the help of the MLS. But he believes if the bureau wins its challenge, most people would continue to use agents.
"We spend tens of thousands a year to get licensed and keep our license going...we provide a tremendous amount of value to the real estate transaction, it's not just like we're collecting our cheque."
The CREA doesn't stipulate how much brokers charge for commission, which hovers around five per cent on average.
Bill McMullin of Halifax's ViewPoint Realty who makes some MLS data available to customers on his website, is not threatened by the prospect of sellers and buyers navigating the sales process and believes most prefer to go through a professional.
"We bundle those services together because we feel that's what the market wants," he said.
"There's great flexibility within the current set of rules every industry has to have rules, if there's no rules its a free for all...its up to the innovators to be creative and to work within the rules."
The bureau's challenge comes on the same day the CREA forecast resales for homes will set a record in 2010, largely driven by activity in the first six months of this year.
In December, the Ontario Superior Court of Justice ruled against a veteran Toronto realtor, Fraser Beach whose access to the Multiple Listing Service was terminated in May of 2007 shortly after he launched a discount brokerage and made the data available to consumers.
The judge said the company's use of MLS data violated the standard agreement between brokers and real estate boards.
Source: The Canadian Press - ONLINE EDITION
February 9, 2010 in Competition Bureau / CREA | Permalink
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Comments
Very interesting Real estate blog. Hope it will always be alive! Thanks for this
Posted by: Jade Brickell | Sep 14, 2010 1:48:00 AM
brampton real estate
One of the greatest and most obvious reasons to consider buying a home is the interest rates. Interest rates today, are some of the lowest rates that we have seen in years. It is possible that they will go even lower. You may think that getting a home loan in order to take advantage of these rates is impossible. Although credit standards and loan approval may be higher than before, obtaining a loan is well within the reach of homebuyers with a good credit rating and a steady income that can support the monthly mortgage payments.
Posted by: torontohomeandhouse123 | Jun 11, 2010 4:29:50 AM
brampton real estate
One of the greatest and most obvious reasons to consider buying a home is the interest rates. Interest rates today, are some of the lowest rates that we have seen in years. It is possible that they will go even lower. You may think that getting a home loan in order to take advantage of these rates is impossible. Although credit standards and loan approval may be higher than before, obtaining a loan is well within the reach of homebuyers with a good credit rating and a steady income that can support the monthly mortgage payments.
Posted by: torontohomeandhouse123 | Jun 11, 2010 4:15:19 AM
I think a real estate broker deserves 5% only if he spends a fair budget in marketing the property. To just list a property and wait for a buyer is not being an agent, its just being a "lister" imo.
Posted by: Brett | Mar 6, 2010 8:56:09 PM
Dollarsign;
In response to your comments;
1/ Why would the seller sell their house to you for 5% less because there was no real estate agent involved? They want that 5% just as much as you do. Most brokers in my area do not charge that much to begin with, some are worth more than they are paid, others less.
2/ An appraisal is based on historical information, not the future, which is when a house will probably sell. In a rising market the appraised value will probably be too low, in a falling market it will be too high. The art and science is in determining the highest price the seller can get under the circumstances, not the appraised value, which may not reflect current market conditions.
3/ A buyer needs some representation, at least to draw up the offer. Have a lawyer draw up an offer and see how the offer works out. Get a mortgage commitment and a certified cheque drawn before the offer so the seller and agent see that you are serious and able, and make appropriate arrangements for the inspection. If it all works out you may have saved some money, if not keep looking and chalk the expenses up to experience. That is the way things will be at least some of the time when the changes go through; expect to pay up front with or without results if you want to pay less.
3/ I don't know what market area you are in, but I would suspect most agents would make some sort of deal to put the sale together, especially if you followed #2 above. If they are already giving the seller a great deal you may not see a commission rebate, but you might see a savings on the price paid.
4/ A realtor's efforts may be worth about 4 days pay plus expenses in some cases, but they will want to be paid no matter what happens on that basis. On average about 40% of homes for sale do not sell and probably an even higher percentage of prospective buyers do not buy when they say they are interested. Both of those groups will incur costs between hundreds and thousands of dollars without any results under a new system. Reasonable sellers and buyers should save some money. I say should, because under the proposed plan pricing will be up to the seller in many cases, and they may be way over or under the market so there will be a lot more "buyer and seller beware" concerns, both in pricing and pertinent details regarding the property.
Having looked at a fair bit of US real estate online over the past few years I have not noticed any listings with a "call the seller" directly element. I don't know where they are more typical, but it does not seem common based on my experience.
Posted by: greg | Feb 16, 2010 3:57:33 PM
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