Lawyers jump into real estate listing battle

Posted on 17. May, 2010 by in News

Garry Marr, Financial Post
Published: Monday, May 17, 2010

TORONTO – Lawyers are the latest group trying to grab a piece of the $8-billion in annual residential property commissions, as the real estate industry deals with the impact of changing regulations.

A group of seven Ontario lawyers behind propertyshop.ca,which allows consumers to list their property on the site for a fee ranging from 1% to 1.5%, believe the landscape has changed dramatically because consumers listing with them can now also gain access to the Multiple Listing Service (MLS) for a nominal fee. Those fees contrast with an average 5% that consumers pay to real estate agents to handle a listing from beginning to end.

“There’s been a lot of chatter among lawyers [about competing],” says Michael Forcier, one of the lawyers behind the site owned by Lawyers Web Property Shop Ltd. “It has been talked about for years, but the problem has been the MLS.”

Changes now occurring in the industry are opening up access to the MLS rapidly. In February, the Commissioner of Competition filed an application with the Competition Tribunal saying the Canadian Real Estate Association’s restrictions on the MLS — responsible for about 90% of sales nationwide–were anti-competitive. CREA responded by making changes to its bylaws to allow more a la carte services, including letting consumers conduct a transaction with the agent providing only the listing.

Mr. Forcier’s group is now working with an agent with the Ottawa Real Estate Board who, for $109, will take the listings his group gets and upload them to the national site mls.caor realtor.ca.”You don’t want to talk to a realtor who will charge you 5%, you don’t want to deal with the FSBOs [for-sale-by-owner sites] who are not licensed, so you deal with a lawyer. We’ve been involved with deals since Confederation. We understand deals and we know how to negotiate deals,” Mr. Forcier said.

Consumers using his site would get access to a lawyer from the beginning to the end of a transaction and would get legal advice on areas such as disclosure rules and zoning bylaws.

Ontario lawyers are allowed to trade real estate under the Real Estate and Business Brokers Act.

“We do private deals all the time. This just means we have to organize it a bit,” said Mr. Forcier, who has managed only about 20 to 25 listings on his site, which is linked to 61 lawyers operating in Ontario. British Columbia lawyers are organizing a similar system in their province.

Lawrence Dale, the lawyer who at one point operated the discount broker Realtysellers Ltd., said legal fees have been dropping for years. “The legal profession has been hammered,” he said. “Twenty years ago they used to get a 1% tariff, so on a $500,000 deal they’d get $5,000. Today they’d be lucky to get $500.”

Mr. Dale said the legal fees on a property deal became a commoditized service much like what he says is happening to real estate. “No matter [what lawyer] you used, you knew you would get in and out of the market, so you said, ‘Give me the cheap one.’ Lawyers are looking for other opportunities,” he said.

John Andrew, director of the executive seminars on corporate and investment real estate at Queen’s University, said increased competition was to be expected in the wake of the competition commissioner’s application and the changes by CREA itself.

“We are in an environment of tremendous uncertainty, but it’s clear to all of the players that CREA is in the phase of relaxing its rules,” Mr. Andrew said. “We are going to see even more of these websites springing up, all kinds of alternatives models.

“A lot of them will fall by the wayside. It almost doesn’t matter what happens at the [tribunal] hearing. I think the writing is on the wall.”

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