I originally wrote about some possible pending changes coming to the current MLS system for my Chestermere Anchor Real Estate column back in December and suddenly other folks are starting to get on the bandwagon. I am including it below, along with another Don Campbell interview where he talks a bit more about what is going on. You need Flash installed to listen to the video, enjoy!
Do you think realtor’s commissions are excessive? Well a pending settlement between the Canadian Real Estate Association (CREA) and the Competition Bureau of Canada may change all of that.
Currently under CREA’s rules, a realtor licensed to work under their umbrella acts as the sales agent for the seller during the entire period of the listing contract on the Multiple Listing Service (MLS) system and will receive and present all offers that come in to the seller. For this service they are able to charge a commission which is usually 7% of the first $100,000 of the sale and 3% of everything above that price. The Competition Bureau finds this to be a rather restrictive model for consumers and limits the scope of alternative business models. In essence, they are saying that the MLS is a monopoly and consumers don’t have any other real options.
So what does this mean for someone selling his or her home in the near future? The settlement is still being worked on, but it appears the biggest upcoming change is the potential buyer’s agent will be able to negotiate directly with the homeowner and bypass the listing realtor. Since the listing realtor may be in the position of only posting the property on the service and not being required to provide any additional services, this could open up a whole bevy of new discount realtors and additional charges for add on services.
The majority of the top realtors these days have complete marketing programs to help increase exposure and traffic to the properties they have available for sale. This is all included in their commissions and is why they have become so successful. Unfortunately, many less successful realtors have very little knowledge in how to properly market properties and depend more on just getting the property listed so other realtors can bring buyers in.
With the potential changes, this could cut out many realtors from the full commissions they are accustomed to and depend on to operate. The most likely change is a new fixed fee just to list the property on the MLS and additional fees attached depending on the marketing and services attached by the listing realtor. How and what levels these services will be set at could open up an entirely new arena of competition for realtors.
We could see homeowners having to choose between full marketing plans, to partial marketing plans and everything in between. It may even lend itself to perhaps a la carte programs where someone could get charged per open house or per showing by the listing realtor. These of course are on the far end of the spectrum and by the time everything is settled between the two groups there may be agreed upon levels of performance that must be met or some type of tiered service program.
In whatever manner it eventually plays out it will definitely change the landscape for homeowners and buyers in the marketplace. More options, more potential pitfalls for inexperienced sellers or buyers and a new setting for increased competition amongst realtors.
The Don Campbell interview
Great post! Home owners currently do have the options to choose from a full service Realtor vs. some who will just post it on MLS and do minimal work for the client. Our commissions are very much so negotiable based on that fact. What CREA has the biggest objection to here is to allow the public to access the MLS listing website to market their properties. I am not sure what point of view you are representing, but how would you feel if someone were to sue you for you not allowing total strangers to post their comments to your website or blog? Your site is part of your assets that you worked on very hard over the past years to develop. Why should you or the Realtors allow others to have an input on their own developed website? If this is the case, why don’t we make it mandatory for chefs in a fancy restaurant to provide a copy of their famous recipe book for all of their clients so that they can do it themselves at home. Or even better… why don’t I bring my own condiments to the restaurant to get a 50% discount? It’s the Realtor’s website and it’s owned by them. If the public or any other organization wants to create a separate, competing real estate listing website, than I don’t believe that anyone is opposed to it.
The bottom line is that nobody is telling the home owners that they have to hire a full service Realtor. They have many other options such as welist.com, comfree.com, etc. where they only get a minimal amount of services. The truth is that a few incompetent Realtor in Ontario have decided to blow this issue out of proportion because they were unable to compete based on value, rather they have decided to offer crappy services to their clients for a minimum fee, yet they still want to be part of MLS. Why do they want to be part of the MLS community? Because it works and it’s a great system that brings buyers and sellers together!
Here is another thought – currently the MLS system offers great integrity by providing accurate data to establish real estate values. If we allow the general public to post inaccurate or misleading listings into that system, how will you be able to complete a reliable appraisal in the future or provide piece of mind to the buyer that the displayed property information is accurate? If anything, the general public should be thankful to Realtors for sponsoring such an organization to eliminate the “Wild West” type of mentality when it comes to real estate type of transactions.
Not too long ago, I was looking into buying some real estate in Europe. I quickly found out that neither is the buyer or the seller is truly being represented to during a transaction. As a buyer, I had to go through dozens of Realtor’s website to search for the property that I was looking for. Can you imagine how many hours and days of work that took during my holiday? As a buyer, I would have paid for someone to do all that legwork for me, but I couldn’t, yet here in Canada this all comes as a free service to the buyers with many other benefits when deciding to take on a Realtor. I guess all I am trying to say is that we are so blessed to have a system in place that took 20+ years to build and now a select group of people is trying to destroy it.
Hey Joe, most excellent reply. I have a couple of thoughts on this. It seems like every area of business has some discount group, whether it is car rentals, travel, stock trading or even selling your home. Of course, when you go discount, you get discount service. I think people who are looking for discount services should have an option, and these are groups like Comfree, We-list and For Sale signs. If they want to list on the MLS there are also options like 1% Realty. These groups will not go away and they will continue to put pressure on full service houses, those people that understand the value will continue to go full service, those who do not will go discount.
However, the MLS is a service created by the realtors, for themselves, that they allow “end users” to access. There is far more information buried inside the MLS that casual users are simply unaware of and may not even find of value. I believe they should be able to control their own world and decide who they allow in.
In my perfect world, I would find it fine for CREA to agree to allow homeowners to list their homes on the MLS, but I would want a fixed fee of say $500 to $1,000 for this service (to ensure the MLS maintains itself as a higher integrity sales listing service) and it has to go through a Realtor to fill in the actual listing to help maintain this integrity. The average homeowner has no idea how much marketing a professional realtor does to sell a property, from ads in the paper, to open houses to soliciting other realtors in their office and other offices. Also they don’t realize how much time realtors waste on tire kickers who then go buy a property from someone else.
If the client wants a la cart services these should be set up as a higher price per item than getting the whole package, perhaps seeing these broken out will provide more of an impact to them? My biggest beef with a majority of the realtors who approached us when we sold properties privately was the spiel of, if you list with us, we have 4,000 other realtors all working to help sell your home. I understand the listing game where the realtor with the most listings makes the most money, but as an entrepreneur who has a slight grasp of how things work, I don’t want 4,000 realtors selling my home, I want a great realtor who is selling my home and also has 4,000 other realtors stopping by.
On the other hand, if the Competition Bureau finds it unfair only realtors can list on the site publicly, I have no problem with them taking it offline and making it a private system. Then we will see who really starts to holler!