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Simple answers to Complex Questions and Complex Answers to Simple Questions. In real life, I'm a Greater-Toronto (Canada) Realtor with RE/MAX Hallmark Realty Ltd, Brokerage. I first joined RE/MAX in 1983 and was first Registered to Trade in Real Estate in Ontario in 1974. Formerly known as "Two-Finger Ramblings of a Forensic Acuitant turned Community Synthesizer"

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Monday, November 02, 2009

Competition Bureau - Attacks MLS model - again

Robert Ede
Mon, Nov 2, 2009 at 1:38 PM
To: amclure@crea.ca, trebpres , moneill@bosleyrealestate.com, Ken McLachlan , Bob Linney -CREA- , Jim Flood -OREA- , orea@orea.com
Bcc: Steve & Pat Lowe , chas tanny , rGmailrobertede Ede
Dear amclure@crea.ca,

I have just now been alerted by TREB to the October 29/09 letter from CREA.
(appended below)

I will hope to craft a more detailed note to you prior to the to-be-announced meeting (this will be open to all members-Yes?)

My initial reaction to the Competition Bureau's assertions is to suggest that Real Estate Associations are charged with the responsibility of setting rules and regulations for their members behaviour to ensure the public can expect uniform, competent, informed and courteous service from Realtors in addition to the bare minimums of legal and fiduciary duties prescribed by their Province's Legislative Acts.

The rules that we follow (and rely on) are approved by the members individually, when we join, annually when we pay our dues and from time to time when bylaw changes are ratified - the Associations/Boards just administers these rules.

An attack on the rules (or an imposed major change to the foundational principles of these rules) is actually an attack on the individual members as of a community of practitioners NOT just an attack on the Associations/Boards or the MLS systems that are also administered on behalf of the members under rules & policies agreed to by these same members.

The idea that 21st Century real estate consumers are denied choice is made ludicrous by the recent developments on the Internet.

Every month a 'real estate service company" starts a new real estate listing service. Quite often it's a company that formerly offered advertising and/or service to the Real Estate industry that now wants to "participate" in the big money game of realty sales, without any pre-licensing, registration, regulation or government over-sight - they just want to collect consumer data to re-sell to the highest bidder (ie to registrants, lawyers, handymen, photographers, interior designers, decor/staging firms etc etc)

To me the consumer has no end of choice for bundled, unbundled, combined-with-this & not-combined-with-anything promotion and info-distribution options, systems, schemes & scams - BUT only one service (the MLS) exists where the bare minimums described above are ONLY described in writting, FULLY enforceable by law, compliance demanded as part of association membership and adherence expected by fellow-members!

The fact that some ne'er-do-wells want to try to "do virtually nothing" and therefore "charge somewhat less" is not a new "business model" as cited in the CREA summary of the Bureau's brief - it's a new and different business.

The fact that a few too-smart-for-its-own-good real estate brokerages want to try to "do almost nothing at all" and absolve themselves from all legal, fiduciary and the traditionally-built-in responsibilities for the transaction and then charge a (proportionately) huge fee for almost no work & virtually no responsibility or liability is NOT a business model - its a travesty of the spirit of the Real Estate and Business Brokers Act (in Ontario) and not much more than a get-rich-quick-scheme designed to skim a little cream off the top in a booming (or busted) realty market in exchange for no work.

That same Brokerage offering "unbundled services" similar to the options mentioned in the CREA that may refer Buyers & Buyer's rep's directly to the Seller (or less and fewer services in exchange for a reduced non-contingent fee or on-successful-completion commission ...) are borrowing the goodwill and professional standards cultivated by the National, Provincial and Local associations and Boards, maintained at great expense, inculcated into each practitioner from intro classes to FRI training AND assumed by the consumer to be inherent in the level of service offered by a registered Brokerage (under penalty of sanction, fine, loss/limitation of registration, monetary penalty, forced restitution etc etc) and them attempting to masquerade as the friend of the consumer with lower fees when in fact they plan to do almost none of the things EXPECTED by the consumer (I'd love to see the Seller and/or Buyer Representation Agreements they use)

This tiny minority of Brokerages are acting like spoiled-brats refused admission into the Baden-Powell Cub-Scouts because they want to follow their OWN rules instead of the adhering to the existing rules and principles.

They appeal to the Competition Bureau like crybabies who bring their big brother to fight their battles (in the name of the consumer) when in fact they are not offering the consumer ANYTHING new, improved, faster or better - just "less" service for (not necessarily proportionately) "less" money.

This is may be competition, but it's not a variation on the Realtor theme -- plain and simple -it's a "different business". Just like the websites offering "free listing" services to naive consumers (who after wasting time and often after paying the web provider for ancillary services -that come bundled with a Realtor) are in a "different business".

These "less for less" brokerages that have cried foul to the Competition Bureau want their cake and to eat it too. In reality they don't want to be Brokerages - they want to compete in the website, Listserv business BUT without the capital outlay for hardware systems, unique software, specialized employees etc etc by offering consumers the added benefit of "being registrants" which is fine, BUT further they want to offer a higher quality "List" (the MLS - the highest quality of Real Estate List - because of its standards for data integrity) in their attempt to compete with companies in the Internet Listserv business. Their competition claim should be against the mammoths of the Listserv industry, NOT the Real Estate Industry.

Microsoft, The Toronto Star, Rogers Cable etc etc have established/ are establishing (or buying-out start-ups) in the Real Estate Listing business - there is no end to the number or quality or short-gevity of the choices offered to the consumer.

Would Consumers be better served if the Canadian Senate didn't have property & net-worth qualifications?

Would the Consumer be better served if Judges didn't have to follow common law, statutory and Constitutional precedent?

Would the Consumer be better served if government agencies, bureaus and departments "did it their OWN way"?

Would Consumers be better served if government business contracts, grants and loans were extended to just about anyone in "a" business/industry - irrespective of whether they had the capacity and wherewithal to fulfill the contract? irrespective of if they planned to follow the terms of the grant's approval? and regardless of whether they planned to follow the established practices for that business/industry?

etc etc

We must impress upon the Competition Bureau that standards ARE standards. Our services cannot be unbundled without making a mockery of the "bundle".

Can we unbundle the "Bundle of Rights" regarding our Fee Simple Interest in Land? No - without the "Bundle" the "interest" is diminished and IS NOT the same thing.

The MLS Listing without the "bundle of responsibilities and liabilities" is NOT an MLS listing and this choice IS available to the consumer. Many registrants choose NOT to be REALTORS and as a result MLS is not directly available to their clients and customers, because the brokerage has opted out of the "bundle of duties, responsibilities and standards of business practice" (and therefore restrictions of freedom) that membership entails.


As earlier stated, everyone (REALTOR & Consumer alike) knows, expects, relies on and trusts they will receive a certain legal and fiduciary "bundle" when they contract for service with a provincially-sanctioned registrant AND they are assured of a larger "bundle" when they contract for services with a REALTOR (ie CREA/ OREA/ TREB members offer a different/larger package of service standards.

We must impress upon the Competition Bureau that without established norms the consumer will be easily duped into paying the wrong price (albeit lower) for something worth next to nothing.

May I close by remember a sign that was hanging in the first Baskin Robbins store I ever visited (read while waiting in the huge long lineup) "~There is always someone willing to charge less for an inferior product~"

Yours truly,


rce

PS I'd hate to be a RECO discipline official without standards of business practice and established National/Provincial/Board rules, regulations etc on our legal and fiduciary duties and without the self-imposed pride of doing a proper job, correctly, the "first time".

PPS I guess this is enough - probably little else to follow from me

Robert Ede,


October 29, 2009
To all real estate Boards and Associations,
There have been some events in the recent weeks that led to a discussion of the Competition
Bureau Inquiry at CREA’s Open Forum in Victoria last weekend. The following is a
summary of those events and the discussion that took place.
As you are all aware, CREA’s membership approved the “Interpretations” in 2007, which
deal with the acceptance of listings on Boards’ MLS® Systems. That same year, CREA was
served with a Section 11 Order, which is an investigatory order that required CREA to
produce, among other things, documents related to CREA’s rules and the operation of an
MLS® System. CREA has been involved in regular discussions with the Bureau, both before
and after the issuance of the Section 11 Order. The Bureau has now completed its inquiry
and CREA met with representatives of the Bureau about a week ago. At that meeting, the
Bureau set out the conclusions of the inquiry and their proposed remedy. Please note that
although we describe the Bureau’s position below, CREA does not agree with the Bureau’s
views.
The Bureau concluded that aspects of CREA’s Three Pillars of MLS® and the Interpretations
prevent innovative business models from offering unbundled real estate services and,
consequently, the Bureau is concerned that CREA’s rules have restricted consumer choice
and limited the scope of alternative business models. The Bureau has requested that CREA
remove all rules and Interpretations that prohibit or impede the ‘mere posting’ of property
information on MLS® systems. Specifically, the Bureau would like CREA to remove
Interpretations 1, 3, 6 and the Agency Pillar:
Section 17.1.1.1: Agency
A listing REALTOR® must act as agent for the seller to sell the property and
to assist the seller through the entire time of the listing contract.
Section 17.2.1: The listing REALTOR® shall receive and present all offers
and counter offers to the seller.
Section 17.2.3: The mere posting of property information in an MLS® system
is contrary to CREA’s Rules. A “mere posting” occurs when the listing
agreement relieves the listing member of any obligations under the Rules,
including the obligation that the listing REALTOR® must remain the agent of
the seller throughout the term of the listing contract.
#118513 2
Section 17.2.6: Only the listing REALTOR® name(s) and contact information
may appear on REALTOR.ca. The seller’s name or contact information shall
not appear on REALTOR.ca or in the public remarks section of the MLS®
system.
The other two Pillars, being membership and compensation, as well as Interpretations 2, 4, 5
and 7, will remain.
The Bureau’s position is that if CREA does not remove these restrictions, the Commissioner
of Competition will initiate an application before the Competition Tribunal, which is a quasijudicial
body that can issue administrative monetary penalties and prohibition orders.
CREA’s Board of Directors had to decide, under very short time constraints, whether to
pursue a settlement agreement or to litigate. After discussing the matter for several hours at
their meeting last Friday, the Board of Directors decided to pursue a settlement agreement
subject to member support.
CREA does not agree with the Bureau’s findings and conclusions, either as a matter of fact
or as a matter of law. The Bureau’s position is that the marketplace and competition should
dictate what business models exist - CREA agrees with that. Unfortunately, the Bureau
seems to believe that CREA’s rules, namely the Agency Pillar and Interpretations 1, 3, and 6,
create restrictions or barriers. CREA does not believe this is true. The Bureau’s position is
that if these restrictions were removed, there would be more competition.
The foreseen effects of such amendments are as follows:
1. Currently, Interpretation 1 only requires REALTORS® to receive and present offers
but does not identify the means to do this, i.e., by email, by fax, in person, etc.
Removing this Interpretation would mean that offers could be sent directly to the
seller without the involvement of the listing agent.
2. Interpretation 3 defines mere postings. Removing this Interpretation would mean that
REALTORS® could submit ‘mere postings’ to Boards’ MLS® Systems as long as
those listings comply with the remaining Interpretations (2, 4, 5 and 7).
3. Currently, Interpretation 6 means that sellers’ contact information cannot be included
in MLS® listings. What that means is that listing agents must be the first point of
contact for buyers’ agents. However, once contacted, listing agents can simply
provide buyers’ agents with sellers’ contact information and tell buyers’ agents to
deal directly with the seller. Removing Interpretation 6 would mean that buyers’
agents would be able to get sellers’ contact information directly from an MLS®
listings instead of having to contact the listing agent. We are still exploring the full
effect of deleting this Interpretation.
#118513 3
4. Even with the removal of the Agency Pillar, REALTORS® may still have agency
obligations as a matter of law and regulation. REALTORS® will still be obligated to
comply with provincial and federal law and regulation. REALTORS® would also
have to comply with Interpretations 2 and 4, which also relate to agency.
Our challenge is to understand the effect of the removing Interpretations 1, 3, 6 and the
Agency Pillar on the operation of a Board or Association’s MLS® System. Advice of
Boards, Associations, and members will be critical in arriving at an ultimate position on this
issue. Emails can be sent to amclure@crea.ca.
CREA is in the process of scheduling a briefing/feedback session for all Boards and
Associations in December to discuss this issue further; more detailed information will be
provided prior to that meeting. The time and location of the meeting will be communicated
to Boards and Associations in the next few days.
Sincerely,
Dale Ripplinger
CREA President

2 Comments:

Anonymous Anonymous said...

Wow, someone seems to have their back against a wall.

How arrogant to claim that no other listing service could match the MLS quality.

How patronizing to suggest that the CREA must protect the consumers from choice. As if we're too stupid to make a good educated choice. "Please CREA, save me from the savages that might charge less than 5% (or $15,000 on an average home)!"

Long live the Monopoly! Long live CREA!

7:08 pm  
Blogger Robert Ede said...

Arrogant?
truth is a defense. I stand by my comment on MLS's unsurpassed quality/integrity of data as truth - rce

Patronizing?
My point is that the discount/do-little-or-nothing-for-a fee Brokers who wish to use the MLS as a LISTSERV for their bid to compete with the big Private-for-Sale inline services are charging the $-value-conscious consumer MORE per unit of service (upfront)than conventional firms.
In addition the conventional firm charges fees payable ONLY on completion & ONLY after the Seller has accepted an offer that THEY approve (their net-of-commission proceeds having already been calculated).
ie If you're not happy with your net ... sign it back for more - it's up to the Buyer to decide to pay.

Further, the reality of todat is that 5% is the MAX fee anyone is paying (unless circumstances motivate the Seller to offer MORE incentive to the Lister or the Co-operating side).

There is tremendous downward pressure on Listing Side commission (many will take a Listing for 0.5% -1.5%) and some pressure on the Co-operating offer too (many listings offer 2.0-2.25%)

Many conventional Total commissions paid are in the 3.0-4.0% range.

'Tis a shame the anonymous option is the one you picked - I cannot ascertain the bias/agenda/preconception-of-facts opinion that you represent

8:01 am  

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