Competition Bureau and the Canadian Real Estate Associations (“CREA”): More Private Deals on the Horizon?
Recently the Canadian Competition Bureau requested that CREA open up the Canadian real estate market by making the Multiple Listing Service (“MLS”) open to the public and thus allowing for greater public access to market properties.
CREA sets the real estate industry’s standards and practices, including setting commissions of five percent (5%) of a home’s total sale price, payable by the vendor and typically split with the buyer’s agent. CREA owns the MLS trademark reserving its exclusive use and currently only licensed brokerages who are members of CREA can list properties on the MLS. This means that in order for Vendors to havethe greatest market exposure, they must list their homes with a licensed brokerage.
The result being that brokerages dominate the real estate market making it extremely difficult for private individuals and discount brokerages not operating under the CREA regime to market and sell properties. Although today there are many internet web-sites wherein a person can list their home, including public forums such as Craigslist, MLS is still considered to provide the greatest market exposure.
Far from perfect, CREA does set some minimum necessary standards, practices and codes of conduct for realtors and brokerages, providing some measures of regulative security to the general public. The effect of loosening CREA’S hold on the market will also loosen regulations. A real estate transaction is nowhere near as simple as selling a car and a bad deal can involve a great deal of money and litigation.
It will be interesting to see what effect this will have on the real estate industry and whether the move towards a more open market drives down industry commissions as alternatives enter the market and become viable options for many. It will also be interesting to see if further government regulations are imposed for non-traditional brokerages as well as individuals dealing in real estate. These changes will likely lead to a heavier reliance on lawyers, as private sellers seek legal assistance for agreement drafting and advice. Even with legal fees taken into account, a private seller can often save a lot of deal of money by selling privately should he or she choose to undertake the often arduous task of selling his or her home.