Blog by Patricia Houlihan - Personal Real Estate Corporation | December 12th, 2010
Macrealty December 2010 Market Update
Many of you may have read in the media about how changes may be
coming to the way SOME people sell real estate. First, let me assure you
that Macdonald Realty, and of course our team, will continue to be full
service real estate providers-so you will see no changes. However there
may be a small percentage of realtors who will significantly downscale
what they do and allow sellers to pick and choose the services they
want...I think this is dangerous for the realtor AND will hurt the
sellers' bottom line but various models of real estate sales may pop up.
Some have asked how this all arose. From what I understand (don't
quote me) the Competition Bureau has been unhappy with Realtors for
quite some time. I am told because in some provinces the commission rate
that many realtors charge is very high (ie. it can be more than double
what most BC realtors seem to be charging) the Competition Bureau wants
sellers to be able to buy only part of the services normally
provided-again I think this is a bit dangerous but I don't think the
Bureau really cares what I think!
One of the models that may be offered is described in the Macrealty
newsletter below. Again, we will not be offering anything other than
what we always have-full service real estate. If you have any questions
about the information below, or about the Competition Bureau decision,
please feel free to contact me.
What is the Flat Fee (Mere Posting) Model?
With the recent Canadian Real Estate Association agreement with the
competition bureau, there have been a number of questions about what
Flat Fee models are and how they work.
Flat fee, or For Sale by Owner (FSBO), companies typically provide a
kit to a seller that may include a sign and the ability to place a
property on the MLS system, now known as a "MERE POSTING", for an
up-front and non-refundable fee.
These companies allow a seller to "contract out" of other services
provided by full-service agents. Of course, along with allowing sellers
to contract out of these services, they also allow agents to contract
out of their fiduciary responsibilities of disclosure, confidentiality,
and agency. In addition, agents who merely post may not be able or
willing to: qualify buyers, provide advice on the market, contracts,
legal issues, questions about the house, or even how to deal with an
offer. In these cases, sellers would be responsible for showing their
own property, being knowledgeable about the market, understanding their
legal responsibilities, and hiring a lawyer to draw up contracts, which
can run thousands of dollars and are paid regardless of whether a
transaction is completed. In addition, a seller, under this model, may
not be covered by errors and omissions insurance, meaning that they
would be fully liable for a litany of civil actions, many of which could
potentially run hundreds of thousands of dollars.
This Flat Fee model and others such as discounted brokers, contrary
to popular belief and media's reports, have always been allowed to
exist in the BC real estate industry. However, the rest of the country
has historically placed barriers or restrictions on alternative business
models trying to use the MLS (multiple listing service) system as a
selling tool. With the recent CREA agreement, the rest of Canada has
adopted BC's progressive stance, which may have the effect of lowering
the rest of Canada's commission rates (typically 5-6 % of the total
selling price) to where they are now in BC. This is a good thing, and,
as we can see from the BC example, will improve the industry's
competitiveness. That said, despite having alternative models available
to consumers for decades in BC, they still only represent less than 10%
of the market, in part because sellers typically understand the
important role a competent agent plays in effecting the successful sale
of the most important asset in most people's lives.
To find out how using a full service broker can benefit you, please do not hesitate to contact me.
(Click chart to see larger image)