By Mark Weisleder

The long-awaited decision of the Competition Tribunal concerning the dispute between the Competition Bureau and the Toronto Real Estate Board was released early in June. Here’s what you need to know.

What was the main result?

Lawyers keep getting richer. TREB was ordered to pay legal costs of close to $2 million to the government lawyers, since the Competition Bureau won this round. TREB has already said that it is appealing the decision. This case will likely not be finally decided until it goes to the Supreme Court of Canada. This means even more money to be made by the lawyers.



What does the decision mean?

What it means is that if the decision holds up, buyers in the Toronto board area will essentially be able to do a CMA or comparative market analysis by themselves, using information provided by what is referred to as virtual office websites run by real estate brokerages, provided that the buyer registers with a password. This will include properties that have been sold, with conditions having been waived, but will not include sales where conditions have not yet been waived.

Have the Competition Bureau decisions made a difference in the real estate industry?

Let’s back up. Five years ago, the Competition Bureau was of the opinion that if a seller could only get their property listed on an MLS system without paying a large listing commission, the property would sell by itself, thus reducing the amount that sellers would pay to list a home. This led to posting companies who permit a seller to post a property on to an MLS system for a fee, and then the seller for the most part conducts all showings and negotiations themselves.

After five years and perhaps the strongest market ever seen in the GTA, less than five per cent of homes are sold this way. This is even less than before the Internet changed the way buyers and seller search for properties. Result – as Shakespeare would say – the decision was “full of sound and fury, signifying nothing.”

Is this decision going to make any difference, once we obtain a final decision from the Supreme Court of Canada?

In my opinion, the answer is clearly no. For years I have been noting that in the U.S., in over half of the states, buyers have had access to sold prices and the result is that still over 80 per cent of all transactions in the U.S. are done with a Realtor. There is so much data on the Internet that in many ways, it is too much. And things change almost daily in markets such as the GTA.

There will never be a substitute for the knowledge of a local real estate salesperson and their negotiating skills. The more data a potential buyer has will of course be helpful, but it will not change the business going forward. Continue to offer clients value-added service and the referrals will keep on coming.

If you have any question related to the Competition Bureau decision and its impacts on the real estate business, do not hesitate to contact me.

4 COMMENTS

  1. Mark, regarding your subject article, the various paragraph headings, and some of your specific comments, as quoted:

    “What was the main result?”

    Yes, lawyer’s did or will make a lot of money, and maybe that’s the end game, but the significance of that fact needs to be put in perspective against what the practical consequences of the outcome will be over the fullness of time should TREB not prevail, in the end. The main result now is that the Tribunal is hedging on TREB making proposals in relation to the Tribunal’s narrative because said narrative has been presented for intellectual consumption as a decision. This is like waiting for a victim impact statement prior to sentencing, with the twist that TREB has been thrust into the dual role of both the accused and then the victim!

    “What does the decision mean?”

    The fact that consumers will have online access to sold data doesn’t equate to being able to do CMA’s — data is just data. At best, it is only theoretical that the average consumer could begin to complete a CMA, of any worthwhile consequence.

    “Have the Competition Bureau decisions made a difference in the real estate industry?”

    “This led to posting companies who permit a seller to post a property [mere posting] on to an MLS system for a fee, and then the seller for the most part conducts all showings and negotiations themselves.” and also, “After five years and perhaps the strongest market ever seen in the GTA, less than five per cent of homes are sold this way.”

    Mark, in the interests clarity I think we should state out loud that the type of listing contract you were talking about with your above mentioned comment was, in fact: “mere posting” listings. I feel that adding more context perhaps to your reference to “less than five percent” would have been helpful. For example: is 5% in reference to all residential sales, is it just a reference to the GTA, and if so what MLS Districts precisely have been included in the sample? Are you talking about the five year period to the year ending of 2015? Were the offered 5% statistic to pertain to all residential listings handled by TREB, as a, then, fairly large sampling, it may be more useful for statistical purposes — subject to confirmation of whether or not there was REALTOR/ Registrant involvement, on the Buying end or not.

    Mark, the main point about “mere posting” listing sales isn’t about how they effect the industry from a volume, percentage, market standpoint as that would be terribly short sighted. The main point or concern is how they effect the: image of the industry, the CREA trademark entities, and the integrity of the consumers experience. The big question is: to what extent do these consumers realize the listing has been taken on a “No Agency” basis, in terms of how this effects the listing REALTOR or Registrant’s obligations pursuant to the REALTOR Code of Ethics and related Standards of Business Practices? I’ve seen ample evidence where the listing agent of a “mere posting” type listing did not visit the property, yet listed it for sale despite not even having seen it, in person. The fact that you wouldn’t raise this important Agency related discussion here, to my mind, only further reinforces the likelihood that consumer’s are not being educated regarding the nature of the risk issues that are peculiar to these “mere posting” type listings!

    “Is this decision going to make any difference, once we obtain a final decision from the Supreme Court of Canada?”

    Mark, your “clearly no” answer to your above mentioned section and question, clearly basks in the shade of simplicity.

    TREB, like most Boards, has never publicly marketed their collective listings uniquely in a “Board” sense. This would have been facilitated instead through exposure on REALTOR.ca — which is typical for the industry. A full-blown VOW (virtual organization website) can take on the face of a Board like TREB because it can display such a Boards listings in their entirety and more. TREB has already expressed concern over a VOW’s potential ability to take on the face of a Board, and they did this with forbearance because at the point where a VOW goes public with all of a Board or Associations listings it represents a profound change to the status-quo that will not and can not go unnoticed. As a result, this can give the impression that the VOW is perhaps the ultimate authority due to this impression of unique stature. That said, what could be just one undesirable consequence of a consumer forming the wrong opinion regarding the status of a VOW (virtual organization website), one answer is: that the consumer wrongly believes that the Registrant’s or Practitioner’s who are promoted by the VOW brokerage are the ones who must be contacted in relation to the listings being displayed!

    Another potential issue relating to a VOW taking on the face of a Board or Association concerns whether or not a VOW brokerage would be inclined to disclose any issues with the VOW’s website, as it would relate to any potential technical glitches that might arise that would cause problems with the display of listings — particularly competitors listings! Should CREA have any technical problems with REALTOR.ca, they don’t have any reason not to communicate such issues to industry members. Conversely, a VOW brokerage would be in the position of communicating any website technical issues to brokerages that are their competitors, which they may be reluctant to do. Mark, people need to recognize and understand that the VOW’s under discussion are indeed: Virtual Organization Websites because they display listings beyond those that are listed with their own brokerage or office, and consequently, can effect the sale of a property that they have displayed, but don’t have listed for sale, for good or for bad.

    The advent of the Internet created an ideal competitive balance between: large, medium and smaller brokerages. It meant that a small, boutique, type brokerage could use the Internet and compete effectively against much larger competitors using basic, office oriented, website platforms. Full-blown VOW’s (virtual organization websites) create a problem for any brokerage business model that doesn’t have sufficient size or means (financial and or technical) to operate a VOW viably. Consequently, if VOW’s should prove out to create a “barrier for entrance” into the industry, it will not only be contrary to the general stated objectives of the Competition Bureau of Canada, but it will also be inconsistent with the position of the Competition Bureau that VOW’s are inherently about bringing down the costs for consumer’s of doing business with organized real estate!

    One simple truth is that the Competition Bureau of Canada, in its pleadings to the Tribunal, suggested to Canadians that there were inherent commission cost savings for consumers associated with using VOW’s. In order to make the aforesaid claim the Competition Bureau should have established that VOW’s inherently conform to the principle of “economies of scale” first. Not only was the Competition Bureau not entitled to project what the operator of a VOW may or may not seek to charge in a commission sense, the Competition Bureau ignored that full-blown VOW’s were not just office sites in terms of the scale of their business, (others continue to make this same mistake) and that consequently before a VOW might even reach the point of “economies of scale”, the additional costs associated with running a full-blown VOW would need to be satisfied. The Competition Bureau in its pleadings to the Tribunal not only presumed VOWs benefitted from the principle of “economies of scale” the Competition Bureau presumed (without evidence) that VOWs were so inherently cost effective that they surpassed “economies of scale” and generated such positive revenue for their operators that lower commission rates were virtually guaranteed! In order for VOW operators to be in the position to offer the kind of Commission savings, that have been promoted by the Competition Bureau within their pleadings — and why would they want to unless it was absolutely necessary — would it also not hold true that in a industry such as organized real estate that is grossly oversaturated with members that VOW’s would not only have to hurt some existing competitors, but would need to accomplish this to an extent where the figurative wall will rise up and thus represent a literal “barrier to entrance” into the real estate industry?

    Mark, if VOW’s prove in most markets to be the powerful prospecting tools that I believe their owners need them to be, they have the potential to profoundly shift the balance of things. In the world of organized real estate “advanced training” is a euphemism for prospecting, and in an oversaturated and hungry industry having the upper hand in the prospecting game is more or less huge.

    This isn’t about substituting the availability of data for a REALTOR’s expertise. The operators of VOW’s wouldn’t be wasting their time and money if they didn’t think a pot-of-gold was waiting for them at the end of the: real estate rainbow!

  2. This is a good conversation to have; the decision changes nothing.
    Realtors are chasing commission to be the lowest instead of seeking a way to provide full service and value. This is exactly why I invest in the internet SEO, video and now Matterport.

    The market will eventually slow. Then How will you market a home?

  3. To be a bit more accurate, TREB was ordered to pay the Commissioner’s legal costs of $215,000, $113,000 in respect of disbursements other than those relating to expert witnesses, and $1,500,000 in respect of disbursements relating to expert witnesses. Of course, TREB is also paying for its own lawyers and experts.

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