Sunday, October 3, 2010

MLS real estate deal 'may force out agents'

Fears for real estate sector already hit by declining sales

The Canadian Real Estate Association (CREA) has reached an agreement in principle with the Commissioner of Competition regarding the application before the Competition Tribunal, subject to the approval of CREA’s member boards at a Special General Meeting in St. John’s, Newfoundland on October 24, 2010.

If passed, the 10-year agreement would allow sellers to hire agents to put for-sale properties on the Multiple Listing Service for a fee and if they wish, the sellers could carry out the remainder of the sales process themselves.

Tsur Somerville, associate professor with the University of B.C.'s Centre for Urban Economics and Real Estate, said the agreement would create a legally binding document between the Canadian Real Estate Association and the Competition Bureau.

Somerville expects competition to give consumers more choice and, to some extent, more control.

Discount commission agents already exist, long before the Competitive Bureau take up the case against the real estate board. The freedom of choice over the level of service and commission are already in place in B.C. for a number of years, the agreement would be unlikely to affect this province's real estate market.

Real estate commissions currently ranges from 1% to 4% for the service of a full service agent. There could be new entrants that simply provide the paperwork function of the listing service. Home sellers who opt to pay for the listing service only will not have any agent representation for selling the home.

This then means that home buyers will have to pay their own realtor's commission if they want to buy a property that only pays for the listing service only. As a result, most buyers would prefer to look at property being marketed under the traditional model with sellers paying the commission.

Mistakes in the real estate business could be "hugely costly". There are many issues when not handled properly, could result in expensive letigation and costs. Beside such services as open houses, websites, checking municipal permits, a full service agent provides professional guidance and representation on proper property disclosure, oil tanks, permits, title searches, negotiating contracts and more.

Views about the impact of the Competition Bureau agreement vary. Some industry observers maintain that, because B.C. already permits alternative sales models, it is not going to have as dramatic an impact as many consumer advocates would have liked.

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