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Competition Bureau misguided about MLS

Posted by Jim Sparrow on Monday, May 3rd, 2010 at 9:02pm.

Competition Bureau misguided about Canadian MLS

Calgary Realtor(April 30 2010) Buying a home is a lot different than buying an airline ticket. Yet if you read the complaint by the Competition Bureau against the Canadian Real Estate Association (CREA), you would think it is that simple to buy or sell a home in Canada, by just using the Internet for support. Unfortunately, it is not that easy.

According to the Bureau, CREA and its member real estate boards effectively control the market in Canada, since 90 per cent of all residential home sales are completed using the Multiple Listing Service (MLS) systems, and consumers thus have no real choice in paying commissions, which, according to the bureau, is usually five per cent of the sale price. It is further claimed that the rules passed by CREA regarding use of these systems prevent anyone from offering different service models, thus eliminating choice for consumers. They would like every seller and buyer to have access to the MLS system, and be able to sell and buy properties themselves, without the services of a real estate salesperson.

No statistics are introduced by the bureau to support any of these claims. The fact is that there are other alternatives for Canadian consumers today, both within the MLS systems and outside it. There are many “For Sale by Owner” websites gaining market share across Canada, offering a flat fee service to sell your home. These include Com Free in Western Canada, Grape Vine in Ottawa and many others who participate in the National FSBO network.

Even within MLS, there is no set commission and consumers can negotiate directly with their salesperson. There are many examples across Canada where salespeople and brokerage companies charge less than five per cent commission, including flat fees.

Now that CREA has introduced changes that permit sellers to post their listings onto MLS through a realtor and not use an agent for any other service, we will see even more business models introduced by salespeople going forward, again offering more choice for consumers.

In my opinion, there is a real danger to consumers in trying to buy or sell their homes without the advice of a real estate professional. Sellers will not know how to qualify buyers who attempt to tour their home, will not understand how to properly price their home for sale and will not appreciate their obligations of disclosure of defects to unwary buyers. This will result in sellers not obtaining the maximum sale price for their homes and potentially involve them in unnecessary lawsuits from buyers.

Buyers will not know if the seller has any authority to sell the home, or whether the property is in fact in the process of being taken over by the bank. Deposits could thus be fraudulently misappropriated.

To try and understand the bureau’s position, let’s say a company bought a 100-acre lot and started selling cars, each one inspected by their certified technicians and advertised across Canada. The company was very successful. Buyers trusted them. Now a private car seller finds out that they cannot get nearly the price or exposure by selling by themselves. Should that person be able to go to the government and demand that he be put on the successful seller’s car lot, with the private seller’s name in the windshield, selling his own uncertified car to the public?

In a sense, this is what the bureau is asking regarding the MLS system, which has been built, paid for and maintained by REALTORS, to provide Canadians with the widest exposure, security and protection when buying or selling their home across Canada.

When you buy an airline ticket on the Internet, it costs you about $100 if you change your mind. If you make a mistake in the largest purchase decision of your life, it may cost you tens of thousands, and unnecessary legal headaches.

Now that there are new MLS rules in place, my advice to the bureau and CREA is to take some time to monitor developments over the next year, before rushing to trial, where only the lawyers win. I would be pleased to hear your own views on this very important subject.

Mark Weisleder is a lawyer, author, course developer and public speaker for the real estate industry who is an occasional contributor to Real Estate News. Visit him online at www.markweisleder.com. This article originally appeared in the Toronto Star and has been reproduced here in its entirety with the express written consent of the author.

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6 Responses to "Competition Bureau misguided about MLS"

Mike Wiseman wrote: Thanks for posting this Jim, I missed the article and it is great to see someone with a level head make an observation regarding the issue. It is ridiculous at best to bluntly state that there are no options when undergoing real estate transactions, even more so if the allegations are based on weak or misinterpreted data.

Posted on Monday, May 3rd, 2010 at 9:34pm.

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Posted on Monday, May 3rd, 2010 at 9:48pm.

Larry Hann wrote: I've seen that article a few times now and Mike makes some good points. I was a little disheartened when I saw he works for the industry. Only because a champion with no affiliation to realtors would have more credibility with the public. That being said, thanks for writing the article Mike, somebody needs to put this in perspective for the public.

On to another point - Ms. Aitkens is saying that Canadian realtors have to start offering services in the same way that they are now being offered in the States. I may be wrong on the following point: If an American lists their home with a realtor, they don't get to put their telephone number on the listing. I've spoken with Brits as well, its not done there either. Please correct me on this if I'm wrong.

Posted on Tuesday, May 4th, 2010 at 4:19am.

Madison homes wrote: @Larry Hann: In response to your question "If an American lists their home with a Realtor, they don't get to put their telephone number on the listing. Please correct me on this if I'm wrong." I do not know if this rule applies in all 50 states, however here in Wisconsin we Realtors have a fiduciary duty to follow the written instructions of our clients. In other words, if a seller wishes to include their phone number in the listing and be contacted directly by buyers, we must include that in the listing agreement and follow their instruction. In practice I know of no sellers doing this with the exception of sellers who have entered into limited service agreements with flat-fee MLS listing agents. In those cases the contract typically excludes providing any services other than a yard sign and the MLS listing. All prospective buyers and agents contact the owner directly in those cases to make inquiries, set up showings, submit offers, etc. Hope this helps.

Posted on Tuesday, May 4th, 2010 at 9:41am.

Calgary Mortgage Brokers wrote: I think that since Realtors built the MLS then they are completely entitled to use it for their purposes. If a consumer wants to use the MLS without paying a Realtor then they can build up a similar system if they want.

Posted on Thursday, September 2nd, 2010 at 1:54pm.

Jo Amick wrote: I totally agree with this post. Like you mentioned, "buyers will not know if the seller has any authority to sell the home, or whether the property is in fact in the process of being taken over by the bank." Thanks for sharing!

Posted on Saturday, August 13th, 2011 at 7:07pm.

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