Canada's Housing Bubble

Oct 12, 2010 winnipegfreepress.com

Canadian Realtors believe homeowners get what they pay for when they hire agents to sell their homes at an average fee of five per cent of the sale price, or $15,000. But for every homeowner that thinks $15,000 is to too much for too little, there should soon be options that could lower fees to as little as $109.

A Sept. 30 agreement between the Canadian Competition Bureau and the Canadian Real Estate Association recently ended a dispute over the lack of fee options available to Canadians. The association's 98,000 members have exclusive use of multiple-listing services -- a directory of most houses for sale across Canada. The MLS's reach makes it a good tool to get buyers and sellers together, and so most sellers want to be listed on it. But the exclusivity also makes it easy to have uniform fee structures -- there is no alternative MLS, or at least not yet. The Competition Bureau, following the lead of U.S. regulators, demanded the industry create options so that homeowners could buy -- a la carte -- a range of estate services from a simple posting on MLS to the most prevalent option -- full services at an average Canadian cost of $15,000 and $12,000 in Manitoba. The association contended that it was and always had been an options-are-us industry -- it's just that sellers weren't demanding them.

Well, no more. Having said options were available, the association had little option but to agree that any Realtor who wants to offer discounts can do so and have access to MLS listings, and that rule will remain in place for at least 10 years.

The evidence indicates that Realtors have not much to fear from these developments. After the U.S. MLS listings were opened up to discounters, some 80 per cent of homeowners continued to buy the traditional package, even as fees rose on average from five per cent to 5.3 per cent. Selling a house can be stressful, as most homeowners know, and so, despite large differences in fees charged by traditional outfits and discounters, most opt for the expertise of professionally certified realtors. The same is expected to happen in Canada, at least over the near term.

The fact is, however, that discounters are out there and they expect their market share can only grow. One Ottawa discounter is offering to list properties on the MLS for $109. The homeowner is responsible for everything after that, which could mean they might lose a lot of money or fail to sell their property. But that's a risk any seller should be allowed to take in a free and competitive market.

Republished from the Winnipeg Free Press print edition October 12, 2010 A14