Photographs by Deddeda
From the moment Robert Peden chose to sell his Victoria home, he was adamant not one penny would go to a full-service real estate agent. Instead, Peden is doing what a small but growing number of Canadian homeowners have opted to do—handle the sale on his own. “I’m not prepared to pay full-service real estate commissions because they’re totally out of whack,” he says. “No realtor is worth that kind of money.”
Tough words. But Peden isn’t just any aggrieved home seller. Thirty years ago he worked as a real estate agent himself. And he’s disturbed by what he’s seen happen over that time. Then, as now, commissions amounted to about five to seven per cent of a home’s sale price. But because the typical 1970s house sold at a fraction of today’s eye-popping levels, real estate commissions were around $2,500. Today, with Peden’s home worth an estimated $460,000, the commissions might easily hit $25,000. Even after factoring in inflation, realtor’s fees have exploded in size, and it’s left him wondering: what exactly do real estate agents do now that they didn’t 30 years ago to warrant such a staggering increase in pay? “The problem with realtors today is they’re more order takers than salesmen,” he says. “Honest to God, I think a used car salesman works harder at selling a car and earns a fifth of what these people make.”
When it comes to Canada’s other favourite pastime, real estate, griping about realtors is right up there with gossiping about house prices at cocktail parties and picking out marble countertops. But in recent weeks, the backlash against real estate commissions has taken on a more urgent tone. The Canadian Competition Bureau has set its sights on the way realtors have, for decades, operated and charged for their services, and in February it filed charges with the Competition Tribunal claiming realtors are engaged in anti-competitive behaviour. The Canadian Real Estate Association (CREA) has fought back, labelling the accusations “fundamentally misconceived.” But however the battle plays out, don’t expect realtors to give up the outdated and expensive system for buying and selling homes without a fight. Critics call it a monopoly, and it’s made many in the industry very well off.
The crux of the competition bureau’s argument is simple, even if the process of untangling the alleged real estate monopoly is not. The dispute revolves around the control real estate boards exert over the multiple listing service, or MLS, the vast national storehouse of available properties. The system is owned and operated by CREA, and by some estimates 90 per cent of all home sales go through the MLS system, a stripped-down version of which is available to prospective home buyers on the Web. As it stands, only registered agents can list homes on the service, and because of that iron lock, the bureau says sellers are forced to pay for services they don’t need. The agency says the rules have also prevented agents from offering alternative pricing options to consumers based on lower levels of service.
CREA has attempted to head off a court battle with the bureau. Last month, its members voted to tweak some of its rules. Under the new terms, sellers can pay agents a flat fee of a few hundred dollars to list their homes on MLS, without having to hire the agent for the entire sale process. The group also modified rules that blocked sellers from posting their phone numbers alongside their listings. The new measures haven’t satisfied the competition watchdog, though, which is reportedly concerned that local real estate boards have also been granted powers to enact their own sets of regulations down the road. The worry is local boards could erect new roadblocks to competition from discount real estate brokers, and the bureau would then have to go after each board separately.
While the competition bureau has had an eye on the industry for decades, the current dispute stems in large part from the efforts of one man, Lawrence Dale, a Toronto real estate lawyer. Eight years ago, Dale and his cousin, Stephen Moranis, whose mother was the first female president of the Toronto Real Estate Board, launched Realtysellers after seeing the business potential for a discount brokerage. The idea was to allow clients to choose from a menu of different à la carte services, including flat-fee listings on MLS. “I saw the opportunity to be the Charles Schwab of the industry,” says Dale, who previously headed the company that bought the Toronto Blue Jays’ SkyDome stadium (now Rogers Centre) in 1999, and is the former owner of Toronto’s Chestnut Park Real Estate.
While Dale says he expected to encounter resistance from the industry, he claims he was not prepared for the all-out battle that followed. He is currently suing CREA and the Toronto Real Estate Board for implementing new rules that ultimately forced Realtysellers out of business in 2006 by requiring an agent who lists a home on MLS to remain the agent of the seller throughout the entire process. He says his case finally attracted the attention of the competition bureau, which argued in its application to the tribunal that the restrictions placed on the use of MLS “have virtually eliminated suppliers of fee-for-service real estate brokerage services in Canada.” For its part CREA said in court filings Realtysellers suspended operations because of impending disciplinary proceedings by the Real Estate Council of Ontario.
CREA declined to make anyone available to be interviewed, citing its ongoing legal battle. But the primary defence put forth by realtors who don’t want others gaining access to the rich store of data in the MLS system is: we built it, it’s ours. The database was established nearly half a century ago, and over the years the realtors’ association has spent tens of millions maintaining it.
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