Tuesday, September 19, 2006

The Battle For Home Owners To Be Able To Sell Their Homes At A Discount Rate Is Heating Up

I have posted the entire article as Globe links tend to get removed. The battle for home owners to be able to sell their homes at a discount rate is heating up.

Realtors battle over access to listing service

Paul Waldie and Jane Gadd
Monday, September 18, 2006

A battle is brewing behind the scenes of Canada's booming real estate market that could change the way homes are sold in this country and hike fees consumers pay for some real estate agent services.

The dispute centres around the use of the Multiple Listing Service and it pits so-called full-service realtors against discount brokers who operate largely on-line and charge far lower commissions.

Full-service brokers want to tighten the rules governing how agents list homes on MLS. They say the system has been flooded with properties from discount brokers who provide few real estate services and simply list houses on MLS for a fee. They argue that has diluted the effectiveness of MLS and led to inaccurate information for buyers.

Discount brokers counter by saying their rivals are trying to change the rules in order to protect their lucrative commissions, typically 5 per cent of the sale price of a house. The discount agents argue they offer consumers an important choice about how to sell their home.

"The changes [to the MLS] will definitely hinder our business," said Ian Martin, chief executive officer of Vancouver's Erealty.ca, which charges a commission of 0.5 per cent on a sale. "But also it's going to end up costing the consumer, our clients, more money."

While the debate had raged largely among real estate agents, the Competition Bureau has entered the fray by expressing concern about the proposed changes, saying they could be anti-competitive.

The MLS system has been around for more than 50 years. It started as a way for agents to share information about homes for sale and it has become a key resource for realtors, buyers and sellers. Only real estate agents can list properties on MLS and local real estate boards operate the service in their market.

The debate about changing MLS access started in July when the Canadian Real Estate Association's board of directors proposed amendments to the rules governing listings. The 86,000-member group, which is dominated by full-service realtors, owns the MLS trademark.

At the time, the board said it was acting to protect the MLS trademark, which it said had become undermined by listings that "did not require sufficient realtor involvement in the transaction."

Under the board's proposals, agents would have to inspect a home before it could be listed and agree to work with other realtors throughout the sale process, including arranging compensation. The proposals will be voted on by delegates to a special assembly this week in Halifax.

The Competition Bureau has reviewed the proposals and in a letter to the CREA last month, the bureau said it had trouble understanding why they were needed given that the MLS trademark did not appear to be under threat. The bureau added that it has concerns about rules "that serve to exclude entry-only and limited-service listing from MLS or otherwise restrict the ability of consumers to obtain the variety of relationships that they want with a broker."

Many realtors say the proposed changes were aimed largely at companies such as Realtysellers, which operates mainly in Ontario and specializes in helping people sell their home themselves. For a fee of $695, Realtysellers will list a home for sale on MLS and direct inquiries to the seller. The seller then handles the sale and decides how much of a commission, if any, to pay the buyer's broker.David Pearce, a former long-time director of the Toronto Real Estate Board (TREB), says putting restrictions on MLS isn't good for competition. Mr. Pearce, who runs Re/Max Rouge River Realty, doesn't like flat-fee services that dump properties on to MLS, but he said consumers have a right to decide. "Just because I think it's a dumb business plan, why should I care?" he said. "Let [other realtors] do it."

Last month, the directors of the TREB voted to reject the CREA's proposed changes. In a letter to the association, TREB president Dorothy Mason said the proposals raise serious concerns and require more consultation. Directors of the Greater Montreal Real Estate Board have also asked to have the proposals withdrawn. However, many agents and real estate boards in Western Canada, where the market has been extremely strong, favour the proposed changes.

Bob Linney, a spokesman for the CREA, said the proposals are designed to protect the trademark. "It's entirely a trademark issue. It is not aimed at any one particular business model," he said. "Fees are always negotiable."

As for the Competition Bureau, Mr. Linney said the association has "an ongoing dialogue" with the bureau about a range of issues. It also has a legal opinion that says its proposed changes will not restrict competition.

Mr. Linney added that delegates will have the final say at the meeting in Halifax. "Nothing has been decided and we don't want to comment until it has been decided."

© The Globe and Mail

No comments: