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Landmark deal to transform how Canadians buy, sell real estate
Limiting agent services may save sellers thousands
By Tim Shufelt And Theresa Tedesco,
National Post, with files from Garry Marr

In a development that could drastically change the way Canadians buy and sell their homes, the real estate industry has reached a landmark agreement with federal competition authorities.

The legally binding deal will allow for home sellers to pay for only those services they want from their real estate agents. Previously, under the rules established by the Canadian Real Estate Association (CREA), consumers had to opt for an entire slate of services, a practice the Competition Bureau deemed anti-competitive.

One of the most significant victories for the competition watchdog in the past decade, the settlement could save millions of Canadians thousands of dollars when they sell their homes. Instead of paying a full-service real estate agent up to 5% of the total sale value, a home seller can now pay a nominal fee for an agent to list the property on the Multiple Listing Service (MLS). According to Derek Holt, an economist with the Bank of Nova Scotia, the difference could mean $15,000 in pocketed savings for the owner of an average-priced Canadian home.

The deal caps more than four years of feuding between the industry and the federal watchdog. In February, the Competition Bureau formally challenged CREA's practices, claiming they "limit consumer choice" and prevent real estate agents from offering lower cost services to customers.

At the heart of the complaint was the MLS, which is owned by CREA and is responsible for about 90% of home sales in the country. The real estate group fired back, accusing the commissioner of tarnishing the reputation of the profession with unfounded condemnations of its practices. But many industry observers said the public relations war was unwinnable for CREA and that its days of rejecting "a la carte" services were numbered.

"Since challenging CREA's rules, the Bureau's goal has always been to achieve a long-term solution that would strengthen competition in the residential real estate brokerage services market," Melanie Aitken, commissioner of competition, said in a release.

Ms. Aitken said the agreement, which has yet to be ratified, will allow real estate agents to "offer the variety of services and prices that meet the needs of consumers."

Meanwhile, CREA maintained that, despite the agreement, its rules did not "prevent or restrict a broad range of business models," the association said in a release. "In CREA's view, the consent agreement reflects this reality and would avoid unnecessary and expensive litigation proceedings."

Lawrence Dale, a Toronto-based real estate lawyer who sued CREA, told the Post the industry association buckled in signing the consent agreement.

"It's a complete capitulation and acknowledgment that what was being done in the past was improper and that they've now agreed in a legally binding document that they won't do it again," he said late yesterday.

Mr. Dale, who launched a discount brokerage RealtySellers, claimed he was forced out of business in 2006 as a result of new rules implemented by CREA.

"This is precisely what I've been fighting for for the last decade," he said. "That the consumer and real estate agent get to decide the framework of their relationship without having CREA and their local boards say certain arrangements are not appropriate for MLS."

The consent agreement is an important victory for the regulator because it provides the bureau with a legally binding settlement that can be used against CREA if the association fails to act on the agreed terms.

The bureau had previously rejected CREA's proposed rule changes, insisting that a consent agreement is necessary to ensure a permanent solution.

Don Lawby, chief executive of Century 21 Ltd. conceded the real estate industry "looked like we were tying to hold onto a monopoly" but argued that was not the case.

Photo By: Razvan Marescu