Blurb: The Canadian Real Estate Association’s Multiple Listing Service is the country’s premier property listing. But proposed rule changes could restrict sellers’ access. 

 

Will proposed MLS rule changes boost real estate agents fees? 

By Peter Diekmeyer • Bankrate.com

 For the past five years, Ian Martin has been working hard to become British Columbia’s home sellers’ best friend. For as little as 0.5% of a house’s selling price, Martin, the president of ERealty.ca will get a home seller’s property listed on the Canadian Real Estate Association’s Multiple Listing Service. In addition he provides them with online access to professional guidance from a licensed realtor as well as a slew of tools and forms.

 True, Martin’s do-it-yourself home-seller clients need to do the leg-work of showing their properties to prospective buyers, but the savings once they are sold are substantial. On a $500,000 home, Martin’s commission is just $2,500, compared to the $25,000 the seller would pay a typical real estate agent. Not surprisingly, the country’s real estate industry stakeholders are starting to get worried about operators like Martin and a slew of other players who are offering competitive business models. And lately they’ve started to do something about it.  

During the coming months, CREA members will be debating a slew of new rule changes and amendments that will make it substantially harder for Martin’s clients and other Canadians who want to sell their own homes. “In practice, the implementation of these rules will mean that listings which are in essence “For Sale by Owners,” cannot be posted on the board’s MLS system,” said Alan Tennant, the Canadian Real Estate Association’s president, in a letter to real estate board directors earlier this year.  

MLS: Canada’s premier property listing

That’s no idle threat. If you are thinking about buying a new home or selling your existing property, the chances are fairly good that that you will eventually get involved with the Canadian Real Estate’s Multiple Listing Service. The MLS as it is commonly known, is a hugely popular archive of existing homes for sale that are the inventories or the association’s brokers. According to Media Matrix, the MLS Web-site (MLS.ca) gets an impressive 2.98 million unique users per month.

 The problem is that Canada’s real estate professionals have been increasingly under the gun during the past few years. The advent of discount brokers has put severe pressure on the prices that real estate agents charge their customers. To make matters worse, with of the advent of the Internet, it is now possible for almost anyone with a PC to market properties online.

 Proposed changes and how they could boost prices

However by making it harder for individuals to get their properties listed on the MLS, Canada’s realtors, who own the database, will take away from them a crucial selling tool.  That’s because the changes are basically structured to ensure that any property sold via the MLS is done so with the participation of a real estate broker from a CREA member firm.

 Among the key elements for listing on the MLS defined in the proposed rule changes are guidelines for property inspection, posting of new listings, the structure of broker relationships with clients during the posting time as well as compensation sharing arrangements with other brokers.

 In ERealty.ca’s case, the biggest challenges would be overcoming the guidelines that require that all properties listed on the MLS be inspected first, in order to ensure that the information posted is accurate. Right now ERealty.ca’s clients provide the information about their properties on their own. According to Martin, getting an inspector involved in the process would increase costs, which eventually would have to be passed along to clients.

 Competition law versus trademark law

However CREA’s Tennant denied that the proposed rules would lead to higher fees. “The proposed amendments do not restrict or determine the fees of commissions that realtors may charge,” said Tennant in a written statement. “They are also flexible enough to permit a wide range of business models for real estate.”

 One of the biggest challenges facing any monopoly or quasi-monopoly position, such as CREA’s MLS service currently enjoys, is how to use its power, in a way that it does not attract the attention of regulatory authorities. As a result, CREA officials have preparing themselves for any reaction the proposed changes could generate from the Competition Bureau. The officials have held meetings with Competition Bureau personnel and have obtained legal advice to make sure they are on solid ground.

 As is policy with any issues that are before the Competition Bureau, Gregg Erwin, a senior competition law officer with the organization refused to comment on the MLS case. But he did say, that merely being a monopoly or initiating actions to boost prices are not in themselves violations of the Abuse of Dominant Position provisions of the Competition Act. For this to occur, CREA’s actions would have to be such that it was using its market power to stifle competition.

 But CREA spokesman Bon Linney, denied that this was the case. “Our primary goal here is to protect the MLS trademark and brand by ensuring that all listing meet certain standards,” said Linney. “We have built our reputation gradually and carefully over several decades. And we intend to make sure that it remains a good one.”

 Peter Diekmeyer (www.peterdiekmeyer.com) a freelance business and economics writer.

 

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