I sure have received some funny calls from a few consumers trying to understand exactly what has happened and what the Competition Bureau and CREA (Canadian Real Estate Association) have agreed on.
With the amount of different types of media trying to get our attention, It’s become challenging when there is no accountability from media sources to really state the facts and assist the general public by providing correct news. Since we’re close to the present events, I think its very necessary to really educate and clear up any misconceptions.
When I heard the news of a “settle”ment by CREA, I too had many questions. Is it a settle scenario? What’s the deal? How does this affect the real estate industry? How does this change the dynamic of a real estate transaction involving a Realtor?
The agreement, which is subject to approval by the member Board/Association at a special general meeting on October 24th, proposes the following:
- Does not give the public direct access to the MLS® system or to REALTOR.ca; the Membership Pillar has not changed and the MLS® system remains a member to member service;
- Does not require brokerages to change their business models;
- Does not impact the Compensation Pillar; and
- Does not impact the responsibility of members to ensure the accuracy of MLS® listing content.
The agreement specifies that CREA, along with Boards and Associations cannot prevent or discriminate against “mere postings” or against members who offer mere postings. CREA has always maintained its rules do no such thing.
So what has changed?
Brokerages that offered discount services to Sellers have always existed before this decision. Now, if these brokerages are licensed and members of RECO and TREB, they can provide their services on the MLS online with mere postings. These Brokerages offer minimum representation and minimum service. It’s important to be clear that a Seller cannot post a home on the MLS without a licensed Realtor. Do people really believe the MLS sells property? Consumers will quickly realize the MLS is nothing more than another advertising tool that happens to be on the internet but it doesn’t magically sell property.
What does this mean to Sellers?
If they want to represent themselves, they may now instruct their minimum service Realtor, to merely post their home on the MLS and allow another member to approach them, negotiate the real estate transaction and their own fee directly. This in no way means that the Buyer’s agent is interfering with a MLS listing agreement. The interesting point here is that the Buyer’s agent will be working for the best interest of the Buyer and has no fiduciary duty to the Seller. In the event the Seller refuses to compensate the Buyers agent, any offer will definitely be presented for less than the value to adjust for this and the Buyer will compensate the agent. I’m confident many lending institutions are now working to create ways to finance this as part of the closing costs.
So what is the Seller really saving?
Nothing and in essence are opening themselves to liability and the potential to leave a lot of money on the table. Most Private sellers and private Buyers that are in the market are looking to save the same Realtor fee. Someone has to give it up so who’s it going to be? Advertising on MLS with limited representation is only another form of advertising.
What does this mean for Buyers?
Nothing. Searching any type of consumer MLS web site will not show them which properties are mere postings and Realtor.ca will remain a secondary web site search tool for buyers.
What does this mean for agents?
A Realtor in a minimum representation scenario, is still 100% responsible for the accuracy of the information they post. They must still retain a trust account even if they need to pay a co-operating Realtor $1. They will still be required to administer the entire transaction. This type of Realtor will not be there to protect the client and only providing very limited representation. A full service Realtor will continue to provide outstanding value because its their career. For the full service Realtor, this is an amazing opportunity to find more property not readily available in the private world. A buyer “client” working with this full service Realtor will have more inventory to choose from and someone who’s experienced to negotiate on their behalf.
What happens from here?
Its business as usual. The industry hasn’t changed. What percentage of sales are For Sale By Owner? Under 10%. What do they do if they can’t sell? List with an agent. Sure there will be a little more leg work for the Realtor and more forms introduced to protect all parties involved. Especially the “you’re on your own because you’ve been explained limited representation” form. Most Sellers that try this Minimum Service route will convert when they realize just how difficult it is to sell and act as their own agent. I even didn’t sell my own house and I’m a Realtor of 22 years. Buyers will need to be educated of all their options, they will quickly realize that these sellers are at a tremendous disadvantage and having a Realtor assist them is even more beneficial.
These models and discount brokerages have always been here. Discounted services and Brokerages have always and will always exist. Agents have always been able to set their fee. When an agent offers a commission to a co-operating broker, do we ever know what the listing Realtor receives anyway?
After reviewing all the changes and the pitfalls associated with minimum representation options, there is absolutely no way we would consider or be anything less than Full Representation, Full Service Realtors and Brokerage. Why? Because our clients come 1st!
RE/MAX Ultimate Realty Inc., Brokerage