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Michael Hlinka: For real estate, transparency is the best policy

Money Talks is a business column from CBC radio.
By Michael Hlinka, CBC business columnist:

There's a good old-fashioned brouhaha going on right now between the Commissioner of Competition, Melanie Aitkin, and the Canadian Real Estate Association, or CREA for short.
 
In February, the Competition Bureau, which Ms. Aitken leads, filed charges against CREA.  It alleged that CREA's rules governing the multiple listing service, MLS, made it impossible for real estate agents to offer cheaper services to consumers.  This past Monday, CREA had its annual meeting and voted overwhelmingly to implement changes in how it does business. 
 
Not enough, however, at least according to Ms. Aitken. Now CREA is saying that it would rather take the fight to court than make any more compromises.
 
First things first. Let's understand how MLS has functioned over the past umpteen years.  If you want to sell your home, you find a real estate agent. The agent then lists the home on Realtor.ca, the MLS website.  Then the agent becomes the sole conduit through which offers are received. 
 
Typically, the compensation is between 4 and 5 per cent of the home's price, and then this commission is split between the seller's agent and the buyer's agent. 
 
We're talking about a lot of money here. Based on last year's sales across Canada of 465,000 units and an average sales price around $325,000 the total commissions may have been as much as $7.5 billion!
 
But that's not what seemed to irk the Commissioner of Competition. Rather, in her February complaint, Ms. Aitken seemed to be more upset with the fact that consumers were forced to use all of the agent's services, whether they needed them or not.
 
So CREA came out a few days ago and said:  How about this? Now we'll let a seller put their home on the market, using the MLS service, for a flat fee. Buyers, or agents for buyers, can then contact the seller directly, and they'll do their own negotiating. The sales agent is cut out of the process, at least if this is what the seller wants. So there's now real choice in the MLS system ... now are you satisfied?
 
The answer is no. Ms. Aitken actually came out and without explaining how, said that the new rules would make the process less competitive. Which led CREA to take its case to court. 
It seems to me that there's a simple compromise, and it should be built around the principle of "transparency." There should be a public website where consumers can get information about recent real estate transactions. All offers should be provided to both agent and seller simultaneously, keeping the home owner fully in the loop. 
 
These days, commissions are already negotiable - this should be prominently displayed on all contracts. After that, the Commissioner of Competition should butt out, and then let the market sort it out.

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