The Canadian Real Estate Association (CREA), which owns the Multiple Listing Service (MLS), has rules preventing realtors from listing a home in the database for a flat fee. A homeowner simply wanting to list her home in the MLS and is willing to do the legwork to sell her home on her own cannot do so. Instead, she is forced to hire a registered realtor, who in turn is prohibited to simply list the home in the database for a flat fee. The realtor is bound to represent the seller throughout the sale process under the “minimum service” standards required by the CREA.

The Competition Bureau, a federal watchdog mandated with protecting and promoting competitive markets, is saying that it will challenge CREA’s rules because the “rules restrict the ability of consumers to choose the real estate services they want, forcing them to pay for services they do not need”. You can read the Bureau’s press release here.

It is not clear how long it will take for discount brokers to start offering services to simply list a home in the MLS. What is noteworthy though it that it has taken close to three years for the Competition Bureau to rule on CREA’s “minimum service” standards. If CREA creates additional road blocks, could this dispute drag on forever?

This article has 61 comments

  1. I sold my own house last year. I had my first offer in four days and sold the house thirteen days after putting a sign on my lawn. In total, I worked three hours and if I paid a real estate agent he/she would have made $3,500/hr.

    I don’t know why people are afraid to sell their own house. If you live in a high traffic area, potential buyers will see your house for sale when they are driving around your neighbourhood. If you are off the beaten path then you may require a real estate agent for exposure through their web site.

  2. Real estate agent

    I wonder how the Competition bureau employees would feel if at the end of the month they got a memo saying they were not going to get a pay cheque that month and had better like it! By our agency laws we have to represent our buyers but if a seller is not willing to pay a commission and the buyer won’t pay it ( most Canadian banks won’t allow buyers to add buyers Agent commission in the sale price for financing ) well hey we don’t get paid but that is Ok because the public has a right to pay nothing 🙂 . if that is case why are we paying these Competiton Bureau lawyers that come up with this hogwash

    It’s our database we make our livings selling our services and yet we are suposed to rollover and place ads up there for anyone who does not think they should have to pay us for for our service. There are a bunch of loosers out there that have nothing to offer but a discount and want to sit back and collect a paycheck for doing nothing and in addition their marketing campaigns undermine the value of other real estate agents.

    So in other words you have a business selling wigits and the competition bureau comes along and says hey you have to let this a guy set up a table in your store who sells cheap instructions on who to build wigits and sits there all day telling your clients that they are wasting their money if they buy your quality wigits.

    Welcome to the Canadian Competition bureau or should we call it anti common sense bureau.

  3. Real estate agent

    ETF2X how did you come up with your asking price. My guess is you used information provided by REALTORs® In my experience as a for sale by owner if you sold your house in four days you probably grossly under priced it and some shark scooped it on you.. In a super hot market sometimes for sale by owners can do OK but often get themselves in to trouble handling multiple offers. In a balanced or slow market a for sale by owner is going to end up selling for far less than they could have with proper representation.
    Real estate is not about marketing or lawn signs it is about skilled negotiating from a position of strong market knowledge and power.

    We always hear how much they saved we rarely hear what they lost in unrealized market value.

  4. I sold my house on the thirteenth day not the fourth day.

    To use your reasoning in a reverse manner, are you suggesting that people who sold their house on the same day it was listed with a real estate agent sold too low! If I sold my house on the thirteenth day and you are suggesting that I must have sold it that fast because I under-priced it then the same logic has to apply to those who sold on the first day even if they used a real estate agent.

    You said “In a balanced or slow market a for sale by owner is going to end up selling for far less than they could have with proper representation.” I say BS!

    I am not saying that real estate agents don’t serve a purpose. I recently bought land through an agent and have a commercial property listed with another agent. However, as per my first post, I don’t know why homeowners in a high visibility location wouldn’t consider selling their house without an agent.

  5. It appears Real Estate Agent is pretty passionate about this, as he should be. I just wish he or she would put their website link so you could see who it is you are talking to, there shouldn’t be anything to hide here.

    As for the competition bureau, I think they have a tough fight on their hands. The fact is there is plenty of competition to the MLS. Commfree, Welist, Kijiji, Facebook Marketplace, and the several hundred newspapers that exist across the country. There are a lot of ways to market a property without the use of a realtor. A realtor however, being a professional service, should have a certain minimum standard which they must abide by. The most effective way to do this is to create a minimum standard in order to access a proprietary system. I think CREA is well within their rights to do this in order to promote professionalism in the industry. Tearing apart this system would only encourage lack of professionalism in the industry, and would further induce realtor bashing by those who sell FSBO.

    What most who criticize realtors forget is that there is a lot more involved with using a realtor than just having your property information inputted and a sign put up. A good realtor is a good negotiator, will have knowledge that no amateur could possibly ascertain without years in the business (think that you know it all if you want, if you don’t do real estate full time and think you know how to properly sell a house then you are ignorant, there is simply too much to know to figure it all out in one transaction, take for example FSBO, if you had to look up that acronym that isn’t even relevant to the sale of a house, just think of all the other complicated important terms you are probably unaware of but that could cost you hundreds of thousands of dollars), and has the assurance of the brokerages, local boards, and regulators to back them up. Yes, this means if a realtor screws up and costs you say, $100,000 there is a simple remedy. If you screw up however, selling your own home, good luck with the legal battles. The cost of lawyers alone will likely make any possible positive outcome not worth the time and effort, and may even bankrupt you.

    Using a realtor is about more than just marketing, it is about using a professional service to do something the lay man is not qualified to do. They are your heart surgeon, your dentist, your optometrist, your certified financial planner, your car mechanic, and your airline pilot.

    Oh, and by the way, a realtor can charge whatever they want. They can charge $1 or $10,000, which makes the industry competitive. What the competition bureau is challenging is the minimum level of service. And to think, I thought the competition bureau was in the business of creating higher standards for consumers.

  6. real estate agents are overpaid

    Hey Real estate agent,

    If I want to buy instructions on how to build wigits then let me, don’t force me to buy your overpriced wigits because you think you give me great value. I want a choice. Some people don’t mind a little work and will build their own, others are lazy or need help and will pay a hefty fee to have them built.

    If real estate agents think they add that much value ie. they sell faster, get a better price, whatever it is, then they should not be afraid of competition from some smalltime homeowners selling themselves at supposed under market values.

  7. Please don’t tell me you are comparing real estate agents to a heart surgeon, dentist, optometrist, certified financial planner, car mechanic, or airline pilot. These are skilled professionals with a specific education, sometimes taking several years to get accepted and several years to complete. A real estate agent has taken a simple 6 month course which they simply paid for and only a complete idiot could fail, and if needed the idiot could just re-take it anyway.

  8. Let me tell you a story about a house sale we made a few years back.

    Initially we went to the Realtor who had sold us the house, and he offered to list it for $290K. That seemed a little low to us, given recent MLS listings in the neighborhood, so we had a few other Realtors come through who put the price between $225-240K.
    Now, at that time the market was pretty good, so we decided we would try to list it ourselves, with the help of Grapevine. Our plan was to give it two weeks, and if we were unsuccessful, we would list with an agent. Two interesting things happened- firstly, we sold the house for $330K after a week (suggesting little value added was likely forthcoming from the Realtors). Secondly, we had a nice young couple drop in who really were really interested in the house, but could not afford more than $290K. After chatting with them, it turned out they were working with the same Realtor who had lowballed us at the start! Clearly, he had a plan to sell the house on day one and collect both ends of the commission.
    If it were not for the Internet and MLS, we likely would have gone with the first Realtor, none the wiser. We would have walked away with $275K, rather than the $330K we ended up with.

    Realtors have managed to operate under protected market conditions far longer than any other industry. Kudos to them for surviving the information age as long as they have, but to take the example given above, when you can prove your widget is worth more, nobody will have a problem paying. I am sure there will continue to be a place for full service Realtors, but they will need to demonstrate meaningful productivity- ie, if they want a $15K commission, they will need to prove the house is selling for $20K more than it otherwise would have.

  9. Edit above

    That seemed a little low to us, given recent MLS listings in the neighborhood, so we had a few other Realtors come through who put the price between $325-340K

  10. I love real estate agents that use the “expert negotiation” line to support their profession and outrageous fees. What makes them expert negotiators? The best negotiator is the one who has the most to lose or gain out of the negotiations, and that is the actual buyer and/or seller. To realtor’s the final price really does not matter much since their commission is not affected much by the small price changes of negotiations. Let’s face it, most seller and buyer real estate agents work together to close the deal as quick as possible, so they can get their commission and get to the next deal. In fact the buyer is usually negotiating against their own buying agent who tells them they need to up their price, there are other offers, the seller is firm, blah blah! The seller agent on the other hand is telling the seller they eed to lower your asking price, they need to take this offer, your getting the most you can for this house, the market is poor, it may sit on the market for months, etc.! Trust me people, you can get more selling your own house if you are not lazy!

  11. Realtors get a bad rap but at the same time, the real estate industry doesn’t do itself any favours. I’m a PR consultant by trade and have been dying to see realtors show some leadership rather than wait for the regulators to do it for them. The writing was on the wall with this one.

    Industry efforts to convince the public of realtor “value” have been ineffective because people feel a serious disconnect between the size of the fee and the work performed. Look at the industry’s own marketing materials. On the B.C. Real Estate Association website, the answer to “Why use a Realtor?” is “they’re highly trained” and “they do things by the book.” This isn’t a compelling pitch in the slightest.

    Dual agency with a commission structure is a joke. If the agent represents both parties, the agent is incentivized to close the deal no matter the needs of the clients. Can you imagine a lawyer representing both sides in a single transaction?

  12. Canadian Capitalist

    To add to the comments above. We purchased our home through a buyer’s agent and I’m not sure what “expert negotiation” was involved. We made an initial offer, the seller countered etc. until we both agreed on the price. Sure, we had some help with what comparable properties in the area sold in the recent past but that’s the extent of “expert” negotiation help we had.

    However, I agree with Nolan that CREA could put up roadblocks by pointing to competing services such as Kijiji. I don’t think this fight is over by any means.

    Where I disagree with Nolan and agree with the Competition Bureau is that CREA’s restriction of MLS access to discount services constitutes a near monopoly. Reports indicate that 90% of homes are sold through MLS. Therefore, barring complete access to MLS does discourage competition from discounters. And CREA is using its near monopoly status to achieve it. There are plenty of examples where Government has stepped in to prevent abuse by monopolies. This is another such instance.

  13. most people are lazy and under the impression that RE agents are ‘pros’, very far from mother who can barely speak english sold her house last year privately..why can’t able people do the reason, laziness, instead they would rather pay 10’s of thousands to a ‘pro’.

    I applaud anyone who sold privately, we need to get rid of these middleman leachers called RE pro’s.

  14. I’m the last person who wants to defend the real estate industry, but why can’t a company or group of companies operate their own website/database the way they want?

    Why can’t other brokerages (ie discount) start their own competing websites?

  15. Oh, I like what four pillars said!

    Three things to add to my previous comment.

    1. Notice I said a good realtor, it is up to you to find one. The rules the Competition Bureau is fighting are designed to make realtors better, increasing standards. A good realtor who has been in the business for years will have as much education as any of those trades, the difference is it will be self directed. Now don’t go getting all wound up about comparing a surgeon to a realtor, I’m not saying all realtors have that type of education or will, I am saying they need to be more educated and minimum standards for access help that cause.

    2. There is a reason 90% of homes sold are done so on the MLS. Its because the MAJORITY understand that a good realtor is better suited to sell it. I bet you that 90% of homes sold on the internet listing services are also sold by realtors because wise people seek the advice of real estate professionals.

    3. Its not like there isn’t competition in the real estate industry. They don’t work for CREA they work for independent companies like Remax, Royal Lepage, MaxWell Realty, Exit Realty, Keller Williams, Coldwell Banker. That is a lot of companies for an industry that supposedly has no competition.

    Come on people, breaking down the system is not the way to make things better.

  16. The Realtor defense on this issue seems to be that they are professional, and that they offer a valuable service that cannot be compromised alternate service models.

    However, the truth is that the problem lies in the very model they have developed. While I know some agencies put an awful lot of effort into their sales, the fact is that Realtors can currently generate fees in the tens of thousands of dollars by doing very little work. This has created a situation that for every true professional Realtor, there are probably two or three individuals trying to make an easy buck. It is the easy money crowd that is harming public perception of the industry. It would probably be much to the advantage of an honest, hard working Realtor to have the competition lessened by allowing people to list directly on MLS without involving an ‘easy money’ cut rate agent. Hard working Realtors could then shine by exploiting inefficiencies created by the larger FSBO market, while those who survived just on the Realtor label and resultant access would disappear.

  17. Why can’t other brokerages (ie discount) start their own competing websites?

    Because the MLS is a monopoly. You can list your home for sale on Craigslist right now, for free. But very few potential buyers will know to look there, and buyer’s agents will refuse to look there. If you want your home seen by 90% of the buyers, you have to list it where 90% of the sales happen. It’s a self-perpetuating cycle. Over time the free alternatives would probably erode the MLS monopoly, but it would take decades.

  18. Canadian Capitalist

    @Four Pillars: I agree with Aleks. MLS is a monopoly and CREA is using its monopoly to dictate what realtors can (offer “minimum service”, an euphemism for full service) and cannot do (list a home for a flat fee). I feel the Government is entirely justified in stepping in.

  19. Nolan: “Come on people, breaking down the system is not the way to make things better.”

    They are not trying to breakdown the system, they are trying to open it up so one can purchase basic flat fee service? Or pay per fee services, not just the standard rip-off commission a seller is forced to pay to get on MLS.

    You as a broker/realtor could offer me a flat fee service to get on MLS, and perhaps offer some other services as I need them, market appraisal, advertising, comparables, showings, advice, legal forms etc. And I as the seller can choose want I want you to do and what I want to do. How is that not fair, please tell me? and how will that breakdown the system?

    It should actually clear out the system of those realtors who do nothing, and those that work will make money from their services. Sorry you will need to work for our money, and get paid what you are worth like most other lines of work.

  20. Greg,

    You just became a prime example of why people shouldn’t be able to do what you just described. People in general don’t have the expertise to pick the services they need or want, they don’t pay attention, and they make assumptions. That is why they need a realtor. Just think, you made an incorrect assumption because you thought you knew it all that I was a realtor, you were wrong.

    Now just think what an incorrect assumption could have cost you if you assumed something like the fact that you didn’t have to disclose that you had a water leak in your basement three years ago, and that it was fixed by a reputable company, and after you sold it the basement started leaking again. Not something you might think about, but it is something your realtor might. Or wait, maybe you don’t have to disclose that, I can’t remember. Better ask a realtor so you don’t get sued. hmmmm.

  21. Nolan,
    Issues of legal liability from real estate transactions are mostly taken on by the lawyers who close the deal, not by the real estate agents.

  22. “People in general don’t have the expertise to pick the services they need or want…”

    Indeed, but people should have the right to choose. This includes the right to make the so-called “wrong” choice. That’s the whole point of a free market!

    I’ll make an analogy to investing. When I invest, I go at it alone. Discount brokerage with no advisor. Without question, I lack the training and expertise of a financial professional. But I accept this risk. It’s my choice.

  23. Nolan, you are just talking nonsense. Agents work for their commission not the client – any “expertise” they might have gets shoved aside for their own gain.

    I don’t blame them – I blame the whole real estate brokerage system – if I were a real estate agent I would do the same thing.

  24. Andy,

    Respectfully you are absolutely incorrect. Where did you get this misconception? The only function of a Lawyer is the transfer of land and registration of documents. Funny enough most lawyers hate doing for sale by owners because the buyer and seller are usually uninformed. In fact, if there is ever a dispute, most lawyers will have to excuse themselves completely, or at least choose to. Then you have to pay big legal bills, don’t think that $700 covers you for anything other than getting them to do some paperwork.

    The lawyer takes on no liability with respect to the transaction, if they did they would have to charge realtor like fees. If you fail to disclose something, it is your ass not the lawyers. If you don’t understand something you can’t plead ignorance of law, again your ass on the line. If a realtor screws up on the other hand they become responsible as long as the client acts lawfully. Again, the job of the realtor is to make sure that the client doesn’t do something stupid. It is all about protection.

  25. Four Pillars – Everyone works for their own gain. People work for a salary, a realtor works for commission, heck you write about finance and reap the rewards of those little ads on your website.

    It is not fair for you to assume that all realtors are bad. I don’t assume that you don’t care about your readership because you sell ads, in fact I think you probably care very deeply about other peoples finances and making informed decisions. Sure there are those that do act unscrupulously, but there are also those that are extremely good at what they do and are worth every penny. You know that.

    Don’t generalize an entire industry over a few bad apples. Perhaps try to help, maybe write a post about how to find a realtor that is worth their pay, that would be more helpful than simply labeling the good with the bad.

    Anyways, that is all I have to say on this subject, I think I made my points. Everyone has the right to sell their property the way they want to. All I can say is buyer (or seller) beware.

  26. Canadian Capitalist

    @Nolan: Regarding your comment on a water leak in the basement. When we purchased our home, the disclosure form mentioned that there is no problem. When we did a home inspection we found that there was indeed a water leak in the basement. We adjusted the price to reflect the cost of the fix. And you know what? The seller listed the home through an agent and still made a “mistake” in the disclosure. To my knowledge, the selling agent didn’t pay for the mistake, the seller did. So, I don’t know where this claim that agents are liable comes from.

  27. The reason a lawyer is required for transfer of property is because they can execute a legally binding transfer. They are liable for their work, and perform to the best of their ability to avoid future legal disputes. Why do you think you need a lawyer to do this!?

    When closing, the lawyer will ask you about any concerns or encumbrances you have on the property, they will also do a title search to uncover any encumbrances that may exist. This would be the time the leak in question could be brought up, the lawyer would give an opinion that would bind her. Of course, if you fail to tell a lawyer about a concern you have, they are not going to assume responsibility later if it bites you (and neither will your Realtor).

    Lawyers do not mind doing for sale by owner for reasonable people. Makes little difference to them. They do however mildly resent the difference between the $600-700 fee they collect for actually executing the sale and the the real estate commission!

  28. There are agents that will let you list your house on MLS for a flat fee. There are at least three that I know of in Ottawa. You do the open houses, and the showings, but they handle the offers, as per their rules. The flat fee is around $500. We sold our home on Grapevine for more than 2 of the 4 agents were going to list it for, though it did take us a while.

    What gets me is that agents always promote how fast they can sell a property and give examples of properties sold in mere days. If an agent sells a house in a day or two, in my opinion the house is under priced and the agent provided a disservice to their client.


  29. My biggest beef with this is why we can’t get access to historical MLS information like you can get through redfin and zillow. I sincerely hope that this opens up in Canada as I don’t understand why this type of information is non-trivial for Canadians to obtain.

    I understand and appreciate the value added of a Real Estate agent for non-trivial transactions (i.e. low-traffic area, challenging properly, expensive, you work a lot and cannot deal with open houses, etc). But there’s no reason why we cannot have the open access to historical MLS transaction data like you can EASILY get in the US.

  30. I actually sold my house with an agent simply because my neighbourhood was a lesser-known new construction area and there just wasn’t the traffic you’d generally see. Additionally, a big thing about where we were living is that you get a lot of out-of-town transfers and they typically go through agents anyways so it really made sense for us to do this. We did sell our house within 72 hours with the agent and it was sold to a couple who had a buyers agent.

    Now we also used the same agents as our buyer’s agent. They forwarded us the MLS listings that got posted to the database in real-time and gave us their opinions of houses (that we took with a grain of salt as we do know they have a vested interest in selling us a house). Anyways, on a Thursday at 3:00 PM, our house (we currently live in) went on the MLS. It seemed like it was priced WAAAAYYY too low and was in a very prime area of the city (they were using an agent…so much for proper pricing!). We found out at 4:30 that they were accepting offers that night at 10:00 PM so we had a multiple offer situation and I can say that if it wasn’t for our agent, I don’t think we would have got our house. We later found out that our price was all of 2000$ above the next highest offer.

    I’m very much a DIYer but in this case, it felt as though having the agent help us on both sides of the transaction made sense to us. With our current house (nice place in a nice part of town that gets LOTS of traffic), I’m not so convinced the agent would add any value on the sales side.

    Just thought I’d balance out the arguments.

  31. Real estate agent

    First off the reason a I choose to remain anonymous is I would probably have CREA and the competition bureau all over me if I went public.

    The point I am trying to make is that the competition bureau is just driving the industry to the lowest level. While CREA is trying to maintain some sort of standard of service and accountability you can expect when buying a home listed on the MLS. Yes there are good and bad REALTORs but good or bad we are accountable for our actions and our careers are on the line everyday.

    What CREA is trying to stop is agents listing properties where they absolve themselves of all acountabilty for the listing information provided which totally undermines our database integrity. These listing are wild cards with no accountability on the part of the listing agent. The buyers agent can’t count on
    the information so they recieve, so they must verify everything because they now take on all of the accountability and liabilty for the listing information while at the same time are expected to work for next to nothing on the deal or even absorb a loss of expenses .

    The additional irritating thing about these discount low commission no comission companies is that their business model depends on their agents selling their buyer clients homes listed by full service agents that have negotiated a fair commission for buyers agents. We have one that lists for 2% offers 1% to buyers agents that sell the home. But then turns around and offers buyers that work with them 1% cash back and keep 2.5% for themselves. So their business model is totally parasitic on the backs of agents that can run a profitable business model .

    I have been in busines long enough to see many discount brokerages go out of business because the business model does not work but now we have the competition bureau proping them up and saying “oh those bad people what are they doing to you?

    When governments help businesses with bad business models survive at the detriment of businesses that show enterprise and good judgement our system is going to hell in a handbasket.

    CREA will probably spend milliions in lawyers fees defending a comon sense position against these Goverment baracudas with an unlimited legal purse of taxpayers money ……. Eventualy the deepest pockets will win and then they will go looking for another target perhaps your business
    …Who do you think pays in the long run …. you got it the taxpayers. That is what you should be upset about !

  32. Canadian Capitalist

    @Real Estate Agent: I don’t think anyone has a problem with CREA simply trying to maintain the integrity and correctness of the listings. What the Competition Bureau has a problem with is “minimum standard” requirements that force consumers to utilize the services of a realtor for the entire selling process whether the consumer wants it or not. You can’t seriously suggest that listing integrity is compromised if you don’t engage a broker for conducting showings, negotiation, closing process etc.

  33. Realtors at one time in history were a useful tool in buying/selling a new home. Afterall, access to information was not readily available. If a person was interested in buying a home, there was no way, other than a sign posted on a lawn, that they could see for themselves which houses were available. The MLS allowed realtors to pool the market and provide options otherwise unknown to the client. But much like every other industry, due to the internet, the power of knowledge has shifted from the suppliers to the consumers. Now a person can themselves see what is available complete with pictures. So if in the past, realtors provided unaccessible information (for the public), then why would they really be needed in an age where realtors no longer act as gatekeepers to the information? Anecdotally, when I looked at buying, all the agent did was tag along in showing me the open house, and didn’t know anymore than I did when I entered these places. Obviously, this is not indicative of all agents, but willing to bet the vast majority would fall under this type.

    While I do side with the CREA that there is a bit of ridiculousness in having to open up their own tool that they’ve developed to other brokers, CC’s point about monopoly is also valid. Microsoft had to repackage how they sold Windows products in Europe because of anti-competitive behaviour, so why should any other monopoly be exempt?

    At the end of the day, regardless of the realtor’s personal objective (pure or not), the system is structured so that there is an inherent conflict of interest even from the buyer’s agent side. Because an agent’s pay is based on closing a deal, they are not necessarily aligned with their client’s objective of getting the lowest price possible, since the system rewards the agent for getting the highest price possible – e.g. for a buyer’s agent to close the deal, a high offer provides a greater probability of closing the deal.

    The best arrangement for the real estate world would be to set it up the same way as in the financial world, where someone can pay a flat fee for the services of an independent advisor, who’s incentive is provide great service to continue receiving business from clients. See, while a bank’s advisor may be helpful, at the end of the day, they’re there to push the financial institutions products and may not necessarily align with the person they are supposedly helping.

  34. A very interesting debate.

    First off, I will point out that I know nothing. Merely observations, but…

    I would imagine that financial planners were up in arms when discount brokers started popping up, and DIY investing started to take off. Many still are vocal in the needs of having a financial planner. For some things, I agree. For others, I simply do my own research.

    After enough time goes by and the water calms, realators will probably realise there is still a good market for their services, or certain parts… the same way fee-based financial planners can be hired, or how banks have started catering to the DIY investor (e-series, d-series, ETFs etc.)

    A lot of the comments here remind me of situations I have seen within my own family. One member thought a realtor was working for her to get a good price, when in fact he was representing the seller. Another family member was lied to that an oil smell in the basement was due to a recent slip when filling the tank, when in fact it was a leak in the furnace.

    I’m sure many of you have read “Freakonomics”. There is very little financial incentive for a realtor to keep your house on the market longer than they have to. (If I remember correctly, Levitt says that holding out for a price $5000 higher would only translate into an increase of about $200 for the realtor.)

    If you haven’t read it, the best data is that realtors (on average) keep their own homes listed longer, and sell for a higher price.

    He also points out that they are able to protect their business by limiting information. Interesting. Seems to point right back to the original post.

    In his/her second post, Real estate agent guesses that a seller would have to use REALTORs® to obtain an asking price (implying that those who do are stealing a service)… There are other routes he/she hasn’t thought of, it seems. My parents bought property from my grandmother. The actual price isn’t important, as she of course gave a nice discount. But to start things off, they hired an surveyor/appraiser for a flat fee, and got the market value from that.

    I disagree with Nolan that simply having different companies is competition. In the grande scheme, it’s Game Theory, brother. To give an “A Beautiful Mind” comparison, they all know they should go after the brunettes, less they end up with nothing by trying for the blonde. It’s the same way the big banks work in tandem or cooperation on many things… Alpha, for example.

    Again, just thoughts and observations.

  35. I can’t wait for these new CREA minimum service rules to go into effect for MLS. Will having a digital camera and a spell checker become part of the minimum?


  36. Andy, when was the last time a lawyer spent more than 20 minutes with you on the sale or purchase of a property. They just want you to sign and get out. They don’t even prepare the paperwork, they have people for that.

    Yes you are right, they are responsible for dealing with encumbrances etc., all to do with the transfer of the land. However, they have absolutely nothing to do with the representations made by a seller or buyer, or with creating an executable and un-frustrated contract.

    There is virtually no liability in transferring land, they are just doing paperwork. This is exactly what people fail to understand, just because a lawyer is involved doesn’t mean they protect you. They are lawyers, they do everything they can to make sure they have no liabilities to anyone. That’s why they are smarter than you, because they aren’t dumb enough to take on the liability of someone trying to sell their own home.

    Go ask a lawyer, they will probably tell you exactly what I just did. They will also tell you that you should probably use a realtor. They will also probably tell you that they themselves would use a realtor. I’ll challenge you to find a lawyer who will take on the full liability of a sale. When you find one post their info here, I will use them for every real estate transaction I do for the rest of my life. I won’t be holding my breath waiting.

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  38. Wow…quite the run of posts! Good debate.

    My response will be short and to the point:
    How are real estate agents REALLY different than financial planners?
    Are they not providing a service based on their expertise? Doesn’t this service come at a cost to achieve a desired result?

    I very well could have sold our condo last year, without an agent, but:
    I did not have the time; I did not want to be involved with all the showings and I knew my agent had access/contacts to a host of prospective buyers as he was working as a dual agent.

    We live in a service society, if consumers want to go-it-alone or pay for a service, they are entitled to do so but consumers must be comfortable and live with the results or outcomes.

  39. @Financial Cents: The debate isn’t whether there should be real estate agents or not. A case can be made for the services that they do provide. However, the real point is whether an agent’s commission rate is worthwhile or not. Many will argue that the rate is too high for the service that they provide especially since they are no longer strong gatekeepers of info. Factor that in with an old stodgy selling structure that creates incentives not in line with buyers/sellers objectives, and this creates the disharmony that you are seeing. A flat fee service would be the best arrangement. The amount of work between a $300,000 home and a $1,500,000 home is about the same, yet because of commission the agent can walk away with an $18,000 fee, or a $90,000 fee.

  40. I never tire of watching Canadians believe that government will stop these grave business injustices.


    With financial advisors (which I am one) – there are good ones and many bad ones. The good ones are good because they add value above what they charge. The bad ones don’t… period.

    For financial services, I am glad that there are discount brokers out there that can give the consumers the option to go elsewhere. This choice is critical to ensuring I am adding value to those who do business with me. The advisors that don’t want the consumers to have choice are the bad ones. Simple.

    By the way, I have no problem with load funds offering their funds to discount brokers without trailers. Again, if I am adding more value than I am charging, my business will do fine. If I am not, then I deserve to lose the business. I am happy if any company offers that and I would never stop recommending them if they did. That said, I think it is misguided and wrong to force companies to offer that if that is not their target market for whatever reason.


    Same with real estate agents – there are good ones and many bad ones. Forget the benevolent government taking care of everything for us. People have to become better purchases of financial advisors and real estate agents.

    Most people never interview more than one agent…they pick, say, their Aunt Sally because she is in the family, she drops off a Christmas card each year, or she’ll be mad if you don’t use her. Aunt Sally sells very few homes a year so she needs the sale more than you do. Interview three agents, tell them they are competing against other agents, ask what commission they will charge and what they plan to spend in terms of advertising to market it. Maybe then you would here these same old comments about “I used an agent and got screwed”. Grow up and take care of yourself!

    I know lots of real agents in my town and am certainly confident in my abilities to do it myself… but I have used a particular agent on all but one transaction (a private sale between family) becuase he has always provided me with about value that is easily quantifyable to be about 3-4x what he was paid. He has also provided significant qualitative value on top of that. So I got a good agent, and I am happy with the transactions, anbd feel I won to the arrangement.

    If I get a bad agent because I am too stupid to figure out how to select one, then I deserve to get a bad deal.

    That is the way life works in every other area.

  41. I don’t really want to wade into this, my opinion is quite one-sided, however, I do want to point out an observation I have made during these types of discussions.

    A separation always seems to be made among GOOD vs. BAD RE agents. In these debates, buyers/sellers blame all agents, and agents blame bad agents or ill-informed buyers/sellers.

    Couldn’t agents simply use their CREA and weed out the bad ones. This action alone would result in better agents (more value for fees), happier clients. People may or may not be paying too much for the limited service, but at least that service WILL be better.

    Competition is overrated. Look at how good Windows and Internet Explorer are.

  42. @E,

    If you can afford a $1.5 M dollar home, you can afford to pay the real estate fees!

    @Rob – good points. Not all services are created equal and the value of services provided, whether it be RE brokers, FAs or other professionals, will always be a key factor in the decision-making process of consumers’ who choose or don’t choose to pay for those services. Value is something that is created by something or someone, it does not exist alone. I couldn’t agree with you more, like any trade, profession or vocation, there are “good ones” and “bad ones”.

    @CC – your post certainly stirred the pot (again)!

  43. Edit: It seems that in the time that I read and responded to comments, CC made a post on Freakonomics. His numbers should be taken over the ones I posted. I was going from memory.

    It seems, then, that realtors have less of an incentive than I stated ($125 on about $10 grand vs. $200 0n $5 grand) Food for thought.

    A Long Aside: not to pick on you, Nolan, but there are a couple of things I take further issue with.

    First, you stated that Greg made an “incorrect assumption” that you were a realtor, and that he “thought [he] knew it all that [you were] a realtor”…

    In fact, you have made an incorrect assumption in assuming that Greg was talking about you (Nolan) and himself (Greg). If you re-read his post, he used “you” and “I” in the general sense to make a point… much akin to an IF/AND statement, such as “If you were the realtor AND I were the seller…”

    If you doubt my grammar, than Greg’s post suggests that he is selling a property and that you are the agent. He made no mention of either.

    Second, I feel that you are trying to … control the flow of your personal information… shall we say.

    A prelude is that I have found incentives remarkably fascinating… well before I found Levitt & Dubner.

    Your have defended that you are not a realtor/agent, and that seems to be true after taking a look at your site. (What you failed to mention) however, is that it seems, from a semi-peruse of said site, that your incentives are very much in-lined with realtors, as they seem to be a certain (if not large) part of your business.

    I’m sorry… and correct me if I’m wrong… but to me, at least, the above fact seems to lessen any argument you (read Nolan, and to another extent, Real estate agent) have for the use of a realtor.

    Again, just observations on the above posts.

    p.s. The above being said, I do think Nolan’s site offers some great insights, observations, thoughts, and information.

  44. Canadian Capitalist

    @Nolan: I’m really curious. What sort of liability protection do you expect a selling agent to provide? In other words, what exactly can I expect to receive for the thousands of dollars in commissions?

    My understanding is by hiring a realtor, you get help in preparing your home for sale, the listing process, home showings, and closing negotiations. I really don’t know how a realtor is protecting you from liability.

    @Rob: Fair enough. I won’t argue that the government has a role in protecting us from all the bad agents out there. But I do want the choice of listing a home in the MLS for a flat fee instead of CREA deciding what consumers can or can’t do. If CREA did less than half the real estate transactions, we won’t be having this discussion at all.

  45. @Nolan & REA: I was wondering the exact same thing as CC, exactly what kind of liability are Realtors good for?

  46. With due respect to Nolan, lawyers pay a real estate insurance levy on top of their regular E & O insurance for a reason. Conveyancing is a high liability field for a lawyer. LawPro is the largest lawyers’ insurance company in Canada. It reports $20 million in real estate claims paid out annually in the 2005-2008 period. To put this in perspective, this is the second largest claim area for lawyers after litigation.

    To quote LawPro:

    “When we look at claims statistics for the last 10 years (1998 to 2008), we see that close to 40 per cent of real estate claims (2,419 claims) were attributed to a breakdown in lawyer/client communications. Moreover, communications issues in real estate claims during that period cost the insurance program $77.6 million – more than 41 per cent of real estate claims costs.

    The second largest cause of loss over the last 10 years in real estate claims is inadequate investigation of the facts: 26 per cent of real estate claims reported (1,582) and 23 per cent of real estate claims costs ($45 million) resulted from lawyers not adequately investigating the facts surrounding a transaction.”

    “Just doing paperwork” can be expensive to a lawyer (deductible is $5,000) and our insurer.

  47. Wow, I find the competition bureau way out of line. That’s like me designing a program where members pay me to use my service and than the competition bureau says i’m not being fair because i need to provide my proprietory service offer to everyone.

    Why don’t the cry babies design their own proprietory system and band real estate agents from any access? Nah, that would be too much work, a lot easier to cry a river and say capitialism is not fair.

  48. @Financial Coach
    Actually Financial Coach, you have it wrong, The Bureau is not asking CREA to provide the service to everyone, they are asking them to change the minimum service requirements of their own members to use the system. Right now CREA is telling their own members, ie. brokerages, agents, that they have to provide full service. This is in order to fend off the discounted simplistic flat fee services. You see there are some realistic and smart real estate brokerages and agents out there that realise the outrageous commission fee schedule and full service does not work for all consumers. This is why people are slowing turning more and more to FSBO. So they are trying to fill a niche where clients that want a flat fee for basic service can get on MLS. But the majority of the brokerages/agents (CREA members) out there are greedy, and realise this will end their gravy train of easy money, so CREA implememnts this minimum service standard so the flat fee guys are out! Nobody is telling CREA to open up their system to the public, you still have to be a member, they are just saying be fair to their own members so the market can be fair and competitive.

    Anyway, let’s face it this has been a long time coming and realtors have been scared of this for awhile. It has happened elsewhere in the world, and it will happen here. CREA and the Realtors should just embrance the change and start offering non-commission types of pay per service. Otherwise more and more people will eventually turn to the FSBO market. Who knows, maybe one day in a perfect world the FSBO market will take over and have a better system than MLS. Just imagine if all the FSBO companies/sites could get together and create a database. And who would want and probably demand access to that database? You got it the *! Realtors

  49. How stupid can you get

    So, from the comments of many people here, I’m understanding that some think it would make the real estate world better if there were lower standards. Is it just me or is that the stupidest thing I’ve ever heard?

    Why not just say what you mean . . .
    “you guys have a system that sells all the houses but I’m a greedy person and don’t want to pay for that system.”
    If that’s the case, then don’t pay for it. Sell your house some other way, any way you want. You just can’t have your cake and eat it too.

    Any industry should be allowed, and encouraged to maintain high professional standards. Does that mean that bad apples won’t get into the profession? no. Does that mean that someone without experience is as good as someone with experience? no. Does that mean we should lower our standards so that we have nothing to hold professionals to? duh. I’m guessing “no”.

    Maybe the real issue here is that people are pouting about feeling like something that was rightfully theirs is being stolen if they use a real estate agent. Well, if everyone else using the MLS service is using a real estate agent, and they’re all paying the fee that those agents choose to charge, then doesn’t that mean that all those house prices included the fee? If you want to post it on MLS and only pay a hundred bucks, then logically you should be charging that much less for your home. Or did you think buyers are idiots? Maybe you do, since you think that it would make sense for a buyer to take your greedy word that your house is a-ok and you haven’t covered up any issues.

    Inspections don’t uncovering everything, because the inspectors can’t tell you abhout what they don’t see. Lawyers can’t cover your butt on everything, because once a liability issue makes it to a lawyer, it’s too late and you’re already getting sued.

    What does help though, I would think, is having a professional look a seller in the eye and have them sign that they aren’t lying about the state of their house. If that professional does that enough times, they know when someone is lying, and they know what to look for in the house too, before you’ve paid an inspector $400 to use a second pair of eyes to look at the same thing.

    Even if they didn’t advertise, or do open houses, or use websites, or make sure the showings were done themselves under safe conditions that they are insured to handle, full time agents who actually make an honest living doing their jobs would be dealing with the purchase and sale of homes and all the unexpected crap that can happen, every day. This is the value that any professional offers. Experience. It’s each individual professional’s job also to convey that experience to their prospective clients. If you don’t trust them, don’t use them. No one’s forcing you.

    But the fact of the matter is that the MLS system is owned, was developed, is still maintained, and is still paid for on the back of the real agents doing a real job. If you don’t want that job done, go elsewhere and stop trying to use a back door way to get your hands on what doesn’t belong to you. As in all things in life, you can’t have your cake and eat it too (as the expression goes.) Go make your own flipping cake if you want it so bad! If you can’t make one that’s as good, don’t be a baby about it.

    Or maybe that would be too hard. After all, I’m sure that running a co-ordinated MLS system must be pretty complicated. Probably takes continuous monitoring of tens of thousands of agents and hundreds of thousands of homes. Not to mention the constant technology changes and upgrades, training on how to use the system, monitoring for hackers and discipline of people who abuse the system. Hmmmmmm, sounds like a lot of work, by a lot of people. Sounds expensive. Maybe that’s why it costs money to be a part of! Wow, I can’t believe I was too stupid to realize that before! Can you?

    To the competition bureau, stop being so incredibly obtuse. This isn’t about people not wanting an ad or an open house. It’s about people not wanting to pay for anything they think they could get for free if they cried loud enough. And about using back door tactics to get what you want. Just the kind of person you WOULDN’T want working as a real estate agent. And these are the people saying they have public interest at heart? Yeah, maybe the competition bureau thinks we’re stupid too.

  50. @Sam
    A little nitpicking here: “Can you imagine a lawyer representing both sides in a single transaction?”

    Actually, this can be done. I bought my house using the same lawyer as the seller (a member of the family) to make thing go faster. As long as there are no issues, this is perfectly acceptable. In the case of a dispute, both parties change lawyers.

  51. Regarding post #49 – it’s that precise reason why objectivity always wins in a debate over emotion. Passionate? Yes. But otherwise, an ineffective rant coming from the realtor camp. Too bad, these people are not taking the time to understand the debate.

  52. @E I agree, was totally thinking the same thing, it seems “How stupid can you get” has missed the point like several others in the realtor camp. Noone is asking CREA to let the the public get into MLS for free or even let them in at all. It’s some of your own paying members that want to offer a different fee structure, pay per service, as oppose to commission full service.

    @How stupid can you get: Please re-read what the Bureau is trying to accomplish; “Changing the minimum service requirements” to make it fair and competitive for all YOUR members. Then please re-read your post and correct your all the useless stuff you are ranting about.

    @Greg You really do make some great points, I think CREA and realtors need to take a good look at what the Bureau wants, and public perception, as it’s time for them to embrace some change, or it could hurt thm in the end.

  53. @How stupid can you get – here is a good post explaiing the debate for you;

    and this is interesting;

    it looks like some brokers/realtors like this hewie guy want to offer the discount flat fee services, but he can’t , shame on you CREA for not allowing fair competition for your own members! and shame on some of you other realtors for not listening to your clients/consumers and offering better choice of services due to your own greed! its too bad they have MLS in their pocket, otherwise all would be fair.

  54. Canadian Capitalist

    @How stupid can you get: I haven’t seen a single comment or demand asking for free access to MLS. Nobody is saying realtors have to work for free. All the public is asking for is CREA to allow registered realtors to offer a flat-fee model.

  55. @ Financial Coach – you’d be able to conduct business with your proprietary software as you see fit so long as you don’t become a dominant quasi-monopoly. When you become overly dominant and engage in anti-competitive practices, the governments step in for the public good. That’s why the EU is regulating Microsoft, the Cdn government used to regulate Bell Canada (in the old days of just land lines), etc.

    Union Gas and other utilities own, build and maintain the network of piping that brings natural gas into most urban homes. You could heat your home with alternatives such as fuel oil, electricity, wood, tanked propane, geothermal, etc. and you could call these other choices “competition” but Union Gas, Enbridge, etc. have dominant market positions and are hence regulated. If not, then they could simply jack their gas/transport rates up in the middle of winter and say “Don’t like it, go to the competition”. How would you like that after investing in a gas-fired furnace and water heater?

    In addition, there may be competition to CREA but there is also collusion within CREA in that many/most full-service agents will not deal with the discount channels.

  56. Pingback: Thicken My Wallet » Blog Archive » The top 3 myths of the Competition Bureau vs. CREA battle

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  59. What does a Realtor do?

    1) “Here is the dining area… that appears to be carpet… these stairs appear to go both up AND down.”

    2) tell you to see a lawyer to fill out all the paperwork.

    3) charge 5-7% for this “valuable” service.

    Realtors are useless. good riddance. ever hear of something called the Internet? Sell your own house unless you are a sheep.

  60. These MLS issues are worth several billion in annual real estate commission paid by the public. 70% of Canadians own homes plus most business owners own commercial property. So this debate is about whether we continue to pay out $25,000 each when we sell properties or use competitive alternatives.Most of us now pay an average of $25,000 plus GST/HST on real estate commission when we sell. That is a lot of money from our pockets. If you wondered what the Competition Bureau thinks is unfair and damaging about the way real estate boards run MLS, you should read the basic legal complaint and reply at this government of Canada web site. Share your views at –experience, views, jokes and video.

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