Why this year could be a pivitol one in real estate

Posted on 29. Sep, 2010 by in News

Sep 28, 2010 Bill McCarthy Burnaby Now

The year 2010 may well be regarded as a pivotal year for both the real estate markets and the real estate industry in our province and country.

By the end of this year, the real estate consumer may see and pay a significantly different fee and commission schedule to Realtors, one that may be based on either a standard commission (based upon a percentage of the sale price), and/or a fee for specific services.

The most significant development that is ongoing and may be resolved, one way or the other, before year’s end involves the Canadian Competition Bureau’s direct and unrelenting attack on how the Canadian Real Estate Association accepts and subsequently handles the listings of your property on their Multiple Listing Services (MLS).

The Competition Bureau is challenging the real estate association’s right to limit or restrict access to the MLS system. By extension, they are stating that the association’s “three pillars of agency” restrict competition and artificially create high commissions. In a nutshell, the Competition Bureau wants you, the consumer, to be able to have direct access to the MLS, and the exclusive right to select a range, or limitation of services from a Realtor.

For example if you want the exposure the MLS provides (90 per cent of all residential sales are off the MLS), you pay a fee. If you then want to sell your own home, go for it. If you want a Realtor to negotiate a sale, and document, then you pay for these services as well.

The way the Competition Bureau and critics of the real estate association see it, open up access to the MLS and you open up the entire residential market – and break the association’s current virtual monopoly and the remarkable consistency and high cost of real estate commissions. (For example, a standard real estate commission is seven per cent on the first $100,000 of the sale price and 2.5 per cent on the balance. In Canada the current average housing price is $330,000. The total commission payable would be $12,750. It is not uncommon in Greater Vancouver to pay $1,000,000 for a unit. A commission on this sale would be $29,500. Keep in mind that these are after-tax dollars.)

What do I think? While my own business focuses on commercial real estate, I am a member of the Canadian Real Estate Association and have been a licensed real estate agent for 25 years. I do not like the attacks on our MLS control – we Realtors created it and refined it at our costs. Cannot someone create another system(s) as has happened in the United States?

But I also believe that the real estate industry must continually strive to improve its standards and those of its individual realtors and brokerage firms. The best defense any real estate association member has is to be highly educated and informed, and be professional in every element of your service. There are some truly outstanding full-time professional Realtors, but there are also many part-time quasi-practitioners who impede the industry rather than serve it.

I would never recommend trying to complete a real estate transaction without the guidance of a true professional in whom you have a degree of trust.

I also believe that what you agree to pay this professional is between yourselves. The consumer always has the final say and choice in who they hire and what they pay them. But for the consumer to use this power, they have to be better informed about the market as well as being prepared to study, work and analyze options throughout the process. Better consumers lead to better Realtors.

William P. J. McCarthy is president and CEO of W. P. J. McCarthy & Co. Ltd., a Burnaby firm specializing in property management and development.

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