Buying or selling a house is a big deal.  Most people thus seek expert advice and assistance.  That advice comes mainly from real estate agents, who are represented by the Canadian Real Estate Association (CREA).  Until now, however, the system has been designed to serve agents, and the brokers who employ them, at the expense of consumers.  Studies suggest that the excess charges extorted by the industry may run into the billions.

This system has now — in theory — been broken up by an agreement between CREA and the Competition Bureau, which was approved by members of CREA over the weekend.  The 10-year settlement follows three years of discussions and several months of “intensive negotiations.”  CREA fought tooth and nail to keep its tight grip on fees, and tried to insert a weasel clause under which individual real estate boards might be able to pull out of any deal.  However, the two sides eventually reached an agreement in principle that, according to the bureau, “fully resolved the commissioner’s concerns.”

The CREA/Competition Bureau wrangle has focused on the ability of sellers to buy as much or as little service as they want when listing a home on the Multiple Listing Service, the MLS, where information is controlled by CREA.  They arguably agree to a restrictive system because they are ignorant of how the system works, are afraid of looking at alternatives, or believe the MLS will provide them with net benefits: that the price they will receive will be higher by an amount that more than covers total fees of 5% or so.

However, the notion that agents should charge $25,000 to bring together the willing buyer and seller of a $500,000 house has always seemed patently absurd.  Meanwhile, if buyers were simply able to see what’s available on the MLS, then they wouldn’t need a percentage-based agent at all, although they might need somebody to provide advice for a fee.

Indeed, some observers think that the industry will move toward a fee-for-service business rather than one based on commissions.

SOURCE: Financial Post

NB: – This blog is by Leo Lee AMP.  He is a licensed independent mortgage broker in Victoria, British Columbia, Canada.  Leo provides professional advice on real estate financing for residential, commercial and industrial properties.  Leo works for you, not the lenders. He is also an approved mortgage agent for the Tax Deductible Mortgage Plan (TDMP.  His blog and Web site are dedicated to providing the public useful and timely information on mortgages, interest rate, real estate, personal finance, money and the Canadian economy.