Q&A: Discount broker on MLS real estate fight
Last Updated: Wednesday, February 10, 2010 | 2:27 PM ET
The real estate landscape could look very different in the future if the Competition Bureau succeeds in forcing the Canadian Real Estate Association to open up its Multiple Listings Service to discount agents, says a Vancouver real estate broker.
Steve Neil, the managing broker of the discount home-selling website Homebuyandsell.com, helped spur the Competition Bureau's action this week after he filed a complaint against CREA.
The Competition Bureau filed an application with the Competition Tribunal this week, saying CREA's rules are anti-competitive and limit consumer choice.
Neil spoke with Carol Off, host of CBC-Radio's As It Happens, Tuesday. Here's their conversation (edited for grammar).
Q. Mr. Neil, what prompted you to take on the real estate industry?
A. My career in real estate has mostly been in doing government consulting work, so as a result of that, I had a real estate licence and real estate knowledge. And I found it a bit offensive when it came to paying for commissions to sell my house, because it's not in justification with the service being rendered.
Q. So what did you decide you were going to do about that?
A. I thought about how the world has changed because of the internet, and how the internet had changed industries like the travel agencies and online stock brokerages, and how discount models were evolving in those businesses. And I just thought, gee, how would that apply to the real estate industry. And when I thought about that, I said the ideal thing would be if the consumer could get access to the MLS and buy it at a discount, just like buying an advertisement.
Q. So you set up a brokerage. What's the service you offer?
A. We basically sell MLS like a classified ad. We list properties on MLS. We charge people $299 to set the ad up, and then we charge them a weekly fee of $79, like buying a classified newspaper ad. And then when the property sells, we charge 0.25 per cent on the back end as a success fee.
Q. So what don't you do then?
A. Well, we don't hold open houses. We don't drive people around in our cars. Any advice that we give is given over the phone or by email. We don't do the full, full service that a regular real estate agent would do.
Q. And do real estate agents feel you're a complement to what they do or do they feel threatened by you?
A. Unfortunately, [real estate agents] feel very threatened by it, and they shouldn't, because the good ones will still be able to make a living, regardless, because they provide a value for a lot of people. I refer a lot of business to full-service agents because not everybody is cut out for this do-it-yourself type of model. The ones that really should feel threatened are the ones that are not providing value for service.
Q. What might change then, if the rules are altered and the federal Competition Bureau says that the Canadian Real Estate Association has too much control over the way the market operates.
A. If we fast-forward five years into the future, what you're going to find is there's going to be less realtors out there, because right now there's probably 100,000 realtors in Canada — licensed agents. In the future, the model might be more like the travel agents; there'll be less of them but they'll still exist, and many consumers will turn to discounted services like this to save money
A. This is the turning point here with the Competition Bureau. They've been investigating CREA for about three years. Now they've stepped forward and said, 'Yeah, these rules are anti-competitive and restrictive.' And they've tried to negotiate a settlement and they're going before the Competition Tribunal for judgment to finalize this.
Q. And you've had some run-ins with [CREA)].
A. Yes. One of the issues I've had with CREA, where I actually complained to the Competition Bureau, was when I started this company. I would list the sellers' contact information directly on the MLS website, and at first they allowed it, but once it became popular with the consumers, because consumers could now contact sellers directly and sometimes the agents may not get involved, they quickly changed the rules so that was not allowed. That's what prompted my complaint to the Competition Bureau.
Q. Are you alone in your battle to see this change?
A. No, I don't think so. I don't know who the other people are who have complained. I know that there are others, but I've never been given specific information of who the complainants are.
Q. And why does the Canadian Real Estate Association oppose this?
A. There are billions of dollars in commissions at stake, literally, in Canada. I think there's something like $5 billion in commissions paid out annually by consumers. That's a very, very large number. Their fear is that some of that is going to be taken away. The system actually works quite nicely right now. They would like to maintain the monopoly on that, which inflates the commissions that they charge.
Q. How does it work in the United States?
A. In the U.S., there's a similar MLS system to Canada, but it had run-ins with their own version of the Competition Bureau and things have changed somewhat there. I would say they're a couple of years ahead of where we're at, in that they've already had decisions ruled against what they call the National Association of Realtors there. And there's a number of discount models throughout every state in the United States that are operating.
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