The Competition Board and Real Estate: The Rules

The Competition Board and Real Estate: The Rules

Friday, 10 December 2010 12:47

The Competition Board and Real Estate: The Rules

The Federal Competition Bureau recently handed down its ruling regarding the Real Estate Industry in Canada.  To understand why the FCB was even investigating and ruling on the industry you’ll need to know a little history.  A few years ago, the Toronto Real Estate Board ordered a Broker in that board to stop placing “mere listings” on that board’s MLS system.  The broker took offence and filed a complaint which eventually lead to the investigation of competition throughout the industry.  As a result of the investigation, the FCB had a number of concerns, all of which were met by the Canadian Real Estate Association...the main one being that “mere listings” were a legal and acceptable business model and were to be allowed on MLS systems.

Just so you know...in Alberta, and especially in Red Deer, on the Central Alberta Real Estate Association MLS system...”mere listings” have always been allowed.

A “mere listing” is one in which a Realtor places a home for sale on the MLS system, usually for an upfront low fee and turns almost all responsibility over to the owner/seller.  From that time on, the seller is on his/her own.  On the Red Deer board, our Realtors have the right to do this type of listing...except, the Realtor must verify the authenticity of the information on the home, and may have to assist the seller in forming a contract...if an offer is received.

You, as a for sale by owner, will NOT be allowed direct access to the MLS system anywhere.  The FCB upheld the integrity of that system by ensuring that only members (REALTORS) have access to the system.

Why is the system’s integrity important?  A huge percentage of appraisals, evaluations of property and statistics used by the Federal Government, Banks and other Lenders, Realtors, sellers, buyers, leaseholders, Insurance companies and a host of others rely on the information acquired, verified and filed into the system by accredited Realtors.  Turning the system into a wide open market would sully the information, rendering it useless.  If that were to happen simply getting a mortgage or other Real Estate backed finance would be much more difficult and expensive, no one would be able to determine property value...city assessors would have no accurate information base to assess your home for tax purposes...a multitude of problems and added costs in other areas would arise.  We all know what happens when added costs are a factor in business...the consumer pays more.

Currently Realtors in Red Deer are making business decisions...they are assessing their ability to offer this type of service.  There are a couple of companies doing a form of this type of service already...there were 3 last year, but one has already been unable to afford to renew their CARA dues and remain a member of the Red Deer board.  I do not know if anyone will opt for this...but I can tell you from experience...discount..do it for less...do it yourself businesses are not very profitable...history has proven time and again that while businesses start up offering something for nothing...they eventually fail..and leave the industry they were in.  All businesses have to make enough money to pay their bills, just as your household does...if you’re spending more than you’re bringing in...you know where you’re headed.

Remember..it is a law: Commission is always negotiable between the Realtor of choice and the Seller...it is not fixed in any way.  Every Realtor you talk to about commission is supposed to tell you that...some probably don’t...but they’re supposed to.

Oh and I know you’re about to bring up Walmart...discounting doesn’t work..right???  OK..Walmart makes it work...but remember...The Walton family is one of the RICHEST in the world now...all by buying in huge volumes...getting a lower per unit cost...and under selling the competition...so tell you what...if you own enough houses I’ll give you a Walmart of a deal!!!

FYI:  based on the sales recorded so far in 2010...with an average commission...(it is an assumption and not necessarily correct but required for this exercise)...working 40 hours per week (same as an average employee)...and assuming they are paying average expenses to be a Realtor...the average Realtor makes $12.91/hour to take home to the family.  And you wanted to cut their commission!! For shame!!

I have simplified the information here...it is much more complex (dealing with the Federal Government always is)...if you would like more detailed info please contact me and I will provide it for you.

This Guy Sells Homes!