Is it just me or does it seem like this year is just whipping by? It’s already November, the clocks get turned back soon, and the leaves are almost all gone. We’re just around the corner from X-mas and then into yet another new year. The Toronto income property market continues to challenge as there has been very little quality inventory around town with high enough rents to justify the sale prices. The ones that are decent do sell almost immediately and often for over-asking price. I fear that the days of good income properties in the core of the city for under half a million dollars may be behind us.
Members of the Canadian Real Estate Association approved CREA’s agreement with the competition regulator over access to the Multiple Listing Service last week.
“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best – help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” CREA president Georges Pahud said in a release.
The Competition Bureau was concerned that the MLS system unfairly restricts competition and restricts the freedom of choice for consumers, pushing up costs as a result. That’s because to list a property through MLS the consumer also had to accept and pay for a broad range of services from a real estate agent even if they don’t want them. The current system also does not allow us to put the Sellers contact information on the listing so that they may be contacted by buyers (or their agents) directly. In the upcoming weeks, this is all going to change.
So what does this mean for our business? Do-it-yourself sellers who list their property on the MLS will still have to offer buying agents a typical 2.5% commission if they want to sell their home at a good price. The majority of serious buyers will still be represented by their own agents, who will still need to be compensated. In essence these sellers realistically stand to save only on the listing portion of the commission. The media normally states this is 2.5%, but there are plenty of discount brokerages and agents that are listing homes for 1%. This means a total of 1% if the listing agent finds the buyer and 3.5% if another agent brings the buyer.
I believe that the hardest hit agents are going to be those that offer a minimal level of service to their clients, but still charge a full 5% to list properties on the MLS. Quite often it is the MLS that sells the property and not the listing agent. Further to my personal frustration, some listing agents make the same amount of money on a transaction as I do for only a few hours work where I have often spent many months with my buyers. These agents need to be forced to change how they do business.
Regardless of what option they choose private sellers with MLS access will need to demonstrate that they can price their home effectively, disclose all necessary issues and negotiate in good faith. More importantly, all the information that they enter onto the MLS system will have to be vetted by a licensed real estate practitioner to ensure the accuracy of listings and the integrity of the system.
Discount brokerages have existed in the Toronto marketplace before but haven’t fared too well. Yet the landscape is obviously changing. Under these new CREA guidelines, expect a proliferation of “flat fee” or “a la carte” services to be offered. I think that skilled agents will be able to their tailor their services to best fit the marketplace. Stay tuned to this folks as it will be very interesting to see how all of this impacts commissions over the long run.
I’d like to congratulate our new mayor-elect Rob Ford. This past election polarized a lot of folks in town, but I believe we have to support the people’s choice and wish him our best. If he is successful in repealing the municipal land transfer tax, I think that will be a very positive step forward for our business.