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October 22, 2010

1

Fly By Night or Doing It Right

by mark mclean

There has been a lot of press lately about the Competition Bureau’s complaint against organized real estate’s ownership of the MLS system. The head of the Bureau said that the real estate industry was anti-competitive and limited consumer choice. In an effort to address many of the Bureau’s complaints, The Canadian Real Estate Association made some minor revisions to their rules and regulations. Essentially, these changes clarified what has always been understood; Brokerages can charge whatever commission they want and offer whatever service the client wishes.

News of these changes spurred some real estate brokerages to embrace the discount philosophy and so started the race to the bottom. If one company can post your house on MLS for $799, another can do it for $599. Someone else will come along and offer to list it for $399 and yet another will offer to do it for $199. Soon it will be free. While I have only seen a few national brokerage companies offer discounted services, the market has been flooded with new companies all vying for a slice of the discount market.

As an experienced broker in a full service company, I understand the realities of what these new companies face. And let me be frank- The math just doesn’t work. It is nearly impossible to make a living listing homes for $199. First of all, you need to build a presence if you want any chance of success.  That means, an office (or your parent’s basement), secretary (your mom), website, advertising, computers, insurance, licence, etc, etc. Most importantly you need to list homes, lots of homes.

In my mind, I’m getting a picture of what many of these new companies look like and how they operate and I wonder what kind of protection the consumer is getting. Several weeks ago one of our agents sold a home that was listed by a new discount brokerage. The MLS listing offered the selling broker a $1 commission. Anything above that amount had to be negotiated between the owner and the selling agent. Well, we managed to negotiate a commission and the deal firmed up but by the time the home closed, the listing company was already out of business and we weren’t able to bill them the $1. Go figure.

There are a few of these types of stories floating around and if we, as an industry, are not careful, it will get worse. We should all be concerned that the loser in this race to the bottom will ultimately be the consumer. One of the main pillars established by Realtors, and overseen by the Real Estate Council of Ontario, is that of Agency. Simply put, agency is the public’s guarantee that they will be protected. Watering that down or taking it away completely will be a disaster.

I don’t object to discount brokerages but the reality is that you get what you pay for. The Competition Bureau may be hell bent on opening up the MLS system but it should not be done at the expense of the consumer, the very consumer it is meant to protect.

The views expressed here are those of the author and may not be the views of Bosley Real Estate Ltd.

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1 Comment Post a comment
  1. It’s not the discount brokerages that concern me Mark, it’s the discount mindset that seems to be spreading amongst agents in their efforts to compete. Yes, you are right, the consumer will suffer unfortunately.

    Reply

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