Radical changes coming for CREA

[housingrental]

What is a sensible level?
Some fee structure you`ve picked out of thin air?
Should there be a law restricting subway to only charging $2 / sub because you can buy the components for that at the supermarket? or you have the vague feeling that $6 is not sensible and they should be forced to charge $2?

How about - they can charge whatever they like - and you can choose which one you use, if any, and which alternate marketing strategies you choose to purchase and sell real estate if you don`t like them?


QUOTE (JDaley @ Feb 10 2010, 12:18 AM) Yes no doubt. However reducing commissions to more sensible levels through competition, lets say $1,000-$3,000/transaction would be equivalent to a tax cut, resulting in more activity in the market as a whole. Homeowners could spend that additional money in home improvements, furniture etc. Those realtors that outperform can charge higher fees e.g., > $5,000. Its equivalent to paying a good lawyer vs an average lawyer for services. Compare this to paying commissions of $40,000 on a $1M transaction.

 

[RCrein]

As in every field, there are many more inexperienced and/or untalented realtors than the relatively small number of both experienced AND talented few who are at the top of their profession. This certainly is reduced fewer still to those who are the best and focus on investment properties. These few deserve our appreciation and support.

That being said, real estate commissions have remained quite stable over the last few decades despite the fact that the appreciation of property values has far outstripped inflation. Added to the fact that technology has made access to information, preparation of offers and has greatly facilitated many aspects of being an agent, these factors, plus my own experience selling a couple of my own properties, suggest to me that real estate fees are too high by a good margin.

A few other posters here have referred to the book Freakonomics which presents a picture of a pretty high hourly rate for realtors given the number of hours worked on a particular sale. I suspect that the recruitment presentations for realtors also paint a pretty rosey picture of the income that is possible. It should be remembered that the fees must also pay for all the other unpaid hours worked. If there weren`t so many realtors competing for listings, perhaps the fewer better realtors would have more transactions and would find it easier to accept lower fees.

From what I have read, various real estate boards have made things very difficult for brokers/agents who have attempted to compete on price. I understand a flat fee service in Toronto went out of business because they were refused access to MLS. In Ottawa I know of one broker who offers a much lower flat fee for real estate services but I`m not sure how well they are doing. Suffice it to say that CREA and their respective member real estate boards have an entrenched position in the marketplace that serves as a significant barrier to new entrants who wish to compete with a different business model, that in this case happens to favour consumers with lower fees. This defacto monopoly has protected realtors and allowed much higher fees to be charged than an open market would support.

My understanding of the position of the government, is that they want CREA to unbundle MLS listing fees from the other services realtors offer. This is consistent with the unbundling of telephone, gas and hydro distribution infrastructures in Canada and antitrust judgements in the US.

If realtors are confident in the value of the services they provide they should not fear open access to MLS. If they fight tooth and nail, it suggests that they have been depending on control of MLS as barrier to competition. I suspect CREA will propose a partial solution to avoid government direction to fully open competition. I for one would welcome unbundled realty services. Fees would flow to a more equitable level and lower quality agents would move on to other careers.

 

[JimWhitelaw]

QUOTE (RCrein @ Feb 10 2010, 11:56 PM) My understanding of the position of the government, is that they want CREA to unbundle MLS listing fees from the other services realtors offer. This is consistent with the unbundling of telephone, gas and hydro distribution infrastructures in Canada and antitrust judgements in the US.

If realtors are confident in the value of the services they provide they should not fear open access to MLS. If they fight tooth and nail, it suggests that they have been depending on control of MLS as barrier to competition. I suspect CREA will propose a partial solution to avoid government direction to fully open competition. I for one would welcome unbundled realty services. Fees would flow to a more equitable level and lower quality agents would move on to other careers.
Thank you for this. I think this may be the clearest explanation of the situation that I`ve read so far and I think I agree with you regarding the flow of fees to better agents. I believe that good agents earn their commissions, but that it`s also a numbers game and so on the "easy" sales they look vastly over compensated, while it`s hard to see all the unpaid hours that go into the difficult ones.

For me a great agent is worth the money, but they are outnumbered by those that are mediocre or worse. The barrier to entry for the job is fairly low (though being successful is very hard) and some of the very visible agents tend to be flashy in a way that attracts salespeople better suited to hawking stereos to people who can`t afford them than being a part of a professional real estate business. A change that weeds them out certainly wouldn`t hurt consumers and would likely benefit those agents that do bring real value to the table. Excellent food for thought.

 

[RedlineBrett]

QUOTE (Pete6510 @ Feb 10 2010, 10:37 PM)
WOW, I'm surprised you kept going this far Brett!!!




I know I got suckered in. oh well live and learn. Some parts were good anyway.

 

[RedlineBrett]

QUOTE (RCrein @ Feb 10 2010, 11:56 PM) My understanding of the position of the government, is that they want CREA to unbundle MLS listing fees from the other services realtors offer. This is consistent with the unbundling of telephone, gas and hydro distribution infrastructures in Canada and antitrust judgements in the US.
If realtors are confident in the value of the services they provide they should not fear open access to MLS. If they fight tooth and nail, it suggests that they have been depending on control of MLS as barrier to competition. I suspect CREA will propose a partial solution to avoid government direction to fully open competition. I for one would welcome unbundled realty services. Fees would flow to a more equitable level and lower quality agents would move on to other careers.

Good post thanks for entering the discussion.

It would be important to know a little bit of background on the competition bureau


From the globe article I linked to earlier
Competition Bureau:
Led by Commissioner Melanie Aitken who was appointed last year. Her mandate is the "administration and enforcement of the Competition Act and three labelling statutes, the Consumer Packaging and Labelling Act, the Precious Metals Marking Act and the Textile Labelling Act. Under the Competition Act, the Commissioner can launch inquiries, challenge civil and merger matters before the Competition Tribunal, make recommendations on criminal matters to the Attorney General of Canada, and intervene as a competition advocate before federal and provincial bodies." It has been investigating CREA for three years.

and later

"When Ms. Aitken was appointed commissioner last summer, she promised to improve the bureau`s lacklustre record of challenging companies and organizations accused of anti-competitive conduct."

So there is a little bit of pressure on the CB to `do something about something` which is working it`s way out through this inquiry. Many have thought this sentiment was part of the reason they did not accept a settlement offer from CREA:

"CREA president Dale Ripplinger said the organization was close to striking a deal with the Bureau, which would have allowed buyers and sellers who use the MLS system to negotiate their own offers and would have made it possible for listings to be posted on MLS by an agent, who would then leave the rest of the process in the hands of the consumer."

So we`ll see how far the CB thinks they can push the issue especially considering its core argument is that it wants alternative business models to be allowed to offer MLS posting services only.

"CREA`s rules restricting the access to and use of the MLS system prevent or lessen competition in the market for residential real estate brokerage services by excluding competition from brokers and others wishing to offer a reduced set of services to their customers including "mere posting" or "MLS-only listing" services;

But even if the CB wins out the MLS is still owned and operated by CREA... so unless they get a ruling from the competition tribunal and ALSO a ruling from the federal board of appeal that directs CREA to always operate the MLS and do it in a certain way CREA holds the trump card.

Consumers seem to think it is their right to browse MLS.ca and that it will always be there... if the competition bureau goes too far (especially considering their settlement rejection) they may end up leaving consumers with less service and less choice and also have to start all over again fighting whatever alternative CREA comes up with.

 

[spark1]

QUOTE (RCrein @ Feb 11 2010, 12:56 AM) My understanding of the position of the government, is that they want CREA to unbundle MLS listing fees from the other services realtors offer. This is consistent with the unbundling of telephone, gas and hydro distribution infrastructures in Canada and antitrust judgements in the US.

If realtors are confident in the value of the services they provide they should not fear open access to MLS. If they fight tooth and nail, it suggests that they have been depending on control of MLS as barrier to competition. I suspect CREA will propose a partial solution to avoid government direction to fully open competition. I for one would welcome unbundled realty services. Fees would flow to a more equitable level and lower quality agents would move on to other careers.

good post. Thank you RCrein.

 

[JDaley]

QUOTE (RedlineBrett @ Feb 10 2010, 10:23 PM) ... I was going to continue going over this with you ...

No thanks, I don`t need a Realtors interpretation of the CB Complaint - its clearly set out.

 

[JDaley]

QUOTE (RCrein @ Feb 10 2010, 11:56 PM) My understanding of the position of the government, is that they want CREA to unbundle MLS listing fees from the other services realtors offer. This is consistent with the unbundling of telephone, gas and hydro distribution infrastructures in Canada and antitrust judgements in the US.

If realtors are confident in the value of the services they provide they should not fear open access to MLS. If they fight tooth and nail, it suggests that they have been depending on control of MLS as barrier to competition. I suspect CREA will propose a partial solution to avoid government direction to fully open competition. I for one would welcome unbundled realty services. Fees would flow to a more equitable level and lower quality agents would move on to other careers.

Exactly! The CREA will likely settle because the CREA can not and will not win. And despite the CREA`s claim that they have been working with the CB to resolve this, the CREA had not gone far enough. If I were a seller today and could wait for a year or two, I`d wait until this case was resolved - the savings could be large.

 

[EdRenkema]

QUOTE (JDaley @ Feb 11 2010, 08:54 AM) If I were a seller today and could wait for a year or two, I`d wait until this case was resolved - the savings could be large.Unless you saw a window of opportunity now and your realtor set the stage for a sale well above asking price and was negotiable on commision.
Ask me how I know this.
I`m also currently entrenched in a listing were the listing agent is double ending the deal and coercing me to accept an offer well below asking - so I don`t have to accept or counter the offer and I can fire my agent.
Where is the problem?

 

[wealthyboomer]

If I remember correctly, didn`t the US MLS just go through this same issue?
How did that turn out?
Are they still in business?
Did they take down their website?

 

[luckyluciano]

I have been a full time real estate salesperson for 24 years. I have sold over 1000 homes at mostly full commission.
I provide exceptional service and I earn my commission and am proud of what I do. I have Zero job security, everyday I start at Zero. Everyday I start the day unemployed more or less. I have Zero medical, dental, vacation pay, job security, or pension plan unless I pay for it. I work long stressfull hours away from my wife and kids.

Many are complaining about high fees. We are in a real estate bubble that is going to deflate or bust real soon,, this is not sustainable, normal or rational. When this happens, this site along with Real Estate agents will thin out. The real problem I see here is that there are too many part time agents with other side carreers. Most do not earn their living selling full time like I do.
If you feel the fees are too high, get your liscence, quite your current job and walk in my shoes....become an agent! I dare you, then we can talk. If you feel fees are to high and you should have access to my HOUSE that I have helped to build and pay for through my many years of sweat...well maybe I should be able to come into your HOUSE and sleep in one of your bedrooms and eat at your dinner table because my mortgage, expenses and the cost of food is too high. That`s what is next.

 

[JDaley]

QUOTE (luckyluciano @ Feb 11 2010, 02:11 PM) We are in a real estate bubble that is going to deflate or bust real soon,, this is not sustainable, normal or rational. When this happens, this site along with Real Estate agents will thin out. The real problem I see here is that there are too many part time agents with other side carreers. Most do not earn their living selling full time like I do.

I agree, we`re not far from a real estate bubble, but curious to know why you think we are, if you`d like to share your thoughts.

 

[JasonEtheridge]

QUOTE (luckyluciano @ Feb 11 2010, 04:11 PM) If you feel the fees are too high, get your liscence, quite your current job and walk in my shoes....become an agent! I dare you, then we can talk.

If I feel prices are too high, I`m going to look for another way to sell my house...not become an agent.
Hopefully we`ll all have access to mls sooner than later.

 

[luckyluciano]

Sorry, but MLS belongs to me and the thousands of others that have eaned and paid for it. It is a service we have developed for the benefit of the public and the realtors. If you want to participate in the MLS service you are going to have to pay your dues like the rest of us. Otherwise you can continue to whine and vote for the corrupt and socialistic governing bodies that we have been blessed with which are disquised as some fancy political party. Let`s all continue to drain from those who sweat and work 60-100 hours per week because we the unfortunate /lazy feel we deserve it and oh, what a great socialist country we shall have! We are almost already there, passed the tipping point where corrupt/inefficient governing bodies continue to use their creative energies to extract and remove more and more and more money from those who earn, to give it to those that work for government and those that will whine and benefit from further handouts in return for the all mighty vote. This socialistic trend has built such momentum in this country it has become disgusting beyond belief. If you want something, get off the couch, drop your addiction to hockey and go out and earn it like I do. I am sick and tired of paying for others who are flat out spoiled and lazy and who cry a sense of entitlement.
No one is stoping you from selling your own home or negotiating a lower commission. It happens everyday!
Get off your couch, do continuous open houses on the weekend, pay to expose our home on the many available competing websites, pay for your own advertising up front, answer your own calls from your advertising, show your own house, have strange unqualified people waltz through your house, be legally responsible for your own representation, endure your own stresses involved with the uncertainties of selling a house and you will have EARNED the right to SAVE THE FULL COMMISSION and brag about it.

Get to work, this is a free country.....or is it?

 

[EdRenkema]

http://www.financialpost.com/story.html?id=2552890
The Canadian Real Estate Association has proposed an overhaul of its rules in the wake of allegations by the federal competition watchdog that some of CREA`s practices are anti-competitive, according to internal documents obtained by the Financial Post.

The documents show the proposed amendments, which will be voted on on March 22, will ultimately give consumers some ability to decide how much they use a realtor on a transaction and allow consumers to conduct parts of a transaction without using a realtor.

http://www.financialpost.com/story.html?id=2550753
The Competition Bureau`s attempt to break up what it calls "anti-competitive" practices of the Canadian Real Estate Association could heat up the housing market even more because it will lead to lower commissions, says a Bay St. economist.

"The Competition Bureau`s efforts toward opening up the Multiple Listing Service to greater competition could well ultimately serve to negate the impact of potential mortgage rule changes unless they are more material than debated," says Derek Holt, an economist with the Bank of Nova Scotia.


Read more: http://www.financialpost.com/story.html?id...3#ixzz0fL4jyQK8
The Financial Post is now on Facebook. Join our fan community today.

 

[JamesB]

QUOTE (EdRenkema @ Feb 12 2010, 11:15 AM) "The Competition Bureau`s efforts toward opening up the Multiple Listing Service to greater competition could well ultimately serve to negate the impact of potential mortgage rule changes unless they are more material than debated," says Derek Holt, an economist with the Bank of Nova Scotia.

Read more: http://www.financialpost.com/story.html?id...3#ixzz0fL4jyQK8
The Financial Post is now on Facebook. Join our fan community today.

As an investor, (YES an investor, so please don’t jump on me for also being an agent) I would hate to see the minimum down payment move to 10% and the amortization period move to 25 years from 35 years. Under those conditions, I expect that I would not have been able to purchase the number of homes that I did last year, nor would I enjoy the cash flow that I do. That same cash flow is VERY necessary for me to keep my self looking good in the eyes of the banks I borrow money from.

I would also think that a reduction in the available amortization period would have some negative impact on home value appreciation as the number of buyers would likely go down (harder to qualify under a 25 year) and the number of sellers would likely go up. (Another thing I don’t like as an investor and I want to the homes I do own to go UP and UP and UP every year.)

My retirement plan is based on me owning a lot of real estate and having it grow.

 

[housingrental]

Hi James,



Isn't your situation a problem?



Your building a large leverage portfolio without a sufficient margin of safety for when things go wrong.



If 10% down and 25 year amortizations would have hampered your growth, than maybe your growing with significant risks of being wiped if things go wrong?



No one knows the future, and please don't misread this. I'm not pretending to. However reasonable scenario's exist where a few years out your current 2% interest rate 35 year amortization mortgage with 5% down is renewing with a 6.5% interest rate and a lender requiring additional funds from you or pulling your loan. If:



Rents don't move much

Your other expenses balloon or your hit with unexpected major issues to address

You don't have sufficient other assets to prop up your rental properties



You might be stuck with having your legs pulled out from you and being foreclosed - potential when asset values are lower - or forced to obtain financing for portions above 15% interest rates.




QUOTE (JamesB @ Feb 13 2010, 08:12 AM)
As an investor, (YES an investor, so please don't jump on me for also being an agent) I would hate to see the minimum down payment move to 10% and the amortization period move to 25 years from 35 years. Under those conditions, I expect that I would not have been able to purchase the number of homes that I did last year, nor would I enjoy the cash flow that I do. That same cash flow is VERY necessary for me to keep my self looking good in the eyes of the banks I borrow money from.



I would also think that a reduction in the available amortization period would have some negative impact on home value appreciation as the number of buyers would likely go down (harder to qualify under a 25 year) and the number of sellers would likely go up. (Another thing I don't like as an investor and I want to the homes I do own to go UP and UP and UP every year.)



My retirement plan is based on me owning a lot of real estate and having it grow.

 

[luckyluciano]

Stimulation is only a temporary strategy. It`s very plausible that we will return to 30 or 25 year amortizations. Keeping low interest rates will be necessary if the BOC does not want the credit junkies to suffer withdrawl and so as to not have the Canadian dollar soar, as this will cause businesses with huge operating LOCs to fold laying off thousands and cause many to lose their homes. Changing mortgage rules is the lesser of two evils. I expect a combination of changes to mortgage rules followed by eventual increases in rates for the necessary recipe for tightening of the money supply.
Sorry for contributing on the sidetracking of this thread. It`s supposed to be on the Competition bureau witch hunt.

 

[housingrental]

Hi Lucky

I think sidetracking this thread is better than keeping it on topic
What follow out are you expecting from your proposed scenario?



QUOTE (luckyluciano @ Feb 13 2010, 05:04 PM) Stimulation is only a temporary strategy. It`s very plausible that we will return to 30 or 25 year amortizations. Keeping low interest rates will be necessary if the BOC does not want the credit junkies to suffer withdrawl and so as to not have the Canadian dollar soar, as this will cause businesses with huge operating LOCs to fold laying off thousands and cause many to lose their homes. Changing mortgage rules is the lesser of two evils. I expect a combination of changes to mortgage rules followed by eventual increases in rates for the necessary recipe for tightening of the money supply.
Sorry for contributing on the sidetracking of this thread. It`s supposed to be on the Competition bureau witch hunt.

 

[Rickson9]

Solid post lucky. Although it is somewhat of a paradox, I support sales people (since my wife and I work in sales) and understand how hard successful sales people work to earn their pay, but I also support investors who are looking to minimize their costs.

QUOTE (luckyluciano @ Feb 11 2010, 04:11 PM) We are in a real estate bubble that is going to deflate or bust real soon,, this is not sustainable, normal or rational.

I really really hope this comes true!

Best regards.