Realtors earn their fees

"The President of the Canadian Real Estate Association, Georges Pahud, today welcomed the decision of delegates . . . to approve CREA's consent agreement with (Canada's) Commissioner of Competition regarding the case before the Competition Tribunal."

Oct. 24 media release

Affirming the commitment of the Canadian Real Estate Association "to a competitive real estate services market," the agreement followed protracted negotiations with the Competition Bureau of Canada which claimed CREA's Multiple Listing Service was a restrictive monopoly.

To outsiders like me, it is unclear why the competition bureau took this position with CREA -- a 100,000-member trade association -- when it seems to have no problem with, for example, the Canadian Bar Association; or when a variety of other services, notably the competitive For Sale By Owner group, have run their own online listing sites for many years.

Whether formally online, or arranged by citizens themselves, competitive opportunities to advertise properties for sale appear to be plentiful enough. Would-be sellers are not forced to use the MLS as the only game in town.

Whatever the competition bureau's reasoning, it seems CREA decided discretion was preferable to years of expensive legal battles it might not win.

Reading between the lines of the speech by CREA president and Vancouver associate broker, Georges Pahud, the agreement will allow property owners to pay a fee to a licensed Realtor to have their listings uploaded to the MLS site, and thence to sell the property themselves.

The idea will be attractive to those who have the knowledge and marketing talent to go it alone; they stand to save significant dollars on the sale of their homes.

For vendors without those skills, however, this route is fraught with risks.

District of North Vancouver Coun. Alan Nixon -- himself a 16-year licensed Realtor and managing real estate broker -- confirmed this to me in an email interview following the CREA announcement.

"[I believe] we have taken a dangerous step backward in time, to the days when homeowners and home buyers were left vulnerable to unscrupulous real estate investors and practitioners," was his opening salvo.

I might not have gone that far, but I do know that the thousands of dollars saved by taking a Realtor's commission out of the mix can end up looking like chump change when held up against a court-ordered liability award for non-disclosure of material problems with the property -- even when that non-disclosure was an innocent one.

Anyone who doubts the seriousness of those concerns needs only remember two events in the District of North Vancouver: the years of costly legal negotiations that followed the fatal landslide of a recently-purchased home on the ridge line of Berkley-Riverside, and an earlier slide in Lynn Valley which, even today, is causing problems in this season's rains.

"Most critically though, when receiving or negotiating the contract of purchase and sale, the unrepresented seller is vulnerable to entering into unenforceable contracts," Nixon continued.

His frustration was palpable when he said, "there is far more to the work of a professional Realtor than just sticking a sign in the lawn, having a fancy website and advertising the listing in the local media."

How true.

Licensed Realtors have learned contract law, the laws of agency, mortgage financing, principles of negotiation and municipal land law.

From my long-ago pre-licensing studies I still have the words, "It is a condition of this contract that . . ." ringing in my ears; and in its absence, legal fees can match or exceed the amount of the saved commission in the blink of an eye.

If the studies were tough then, they are doubly so now with the complexity of the Strata Property Law thrown in for good measure.

That's why, as Nixon explained, "All licensed Realtors have a minimum of one million dollars of errors and omissions insurance coverage.

"Our behaviours are regulated and governed by the very strict Real Estate Services Act of British Columbia which demands mandatory continuing education as a pre-condition of initial licensing and renewal of our licences.

"All deposits we receive must be placed in tightly regulated trust accounts that ensure sellers' and buyers' monies are protected."

Nixon believes one of the driving factors in this long-drawn-out affair may revolve around "the level of fees charged by Realtors for the services they provide."

If that was, indeed, the crux of the competition bureau's concerns, "that would be understandable in Ontario where a six per cent fee on the entire selling price was commonplace," he said.

"But here in B.C. it has been the practice to charge one percentage on, for example, the first $100,000 and a lower, graduated fee on the remainder."

Nevertheless, in a white-hot market, such as British Columbia experienced a few years ago and for a few months pre-HST this year, it can appear that Realtors rake in thousands of dollars for only a few hours work. In most years, however, and for most Realtors, easy money is an illusion.

Beyond all the legalese, when would-be vendors or buyers resent what they view as over-the-top commissions for their Realtor, they ignore other realities of the profession:

- the commission that must be split between the Realtor and his or her sponsoring company;

- the considerable cost of advertising, websites, and all those promotional flyers we toss in the blue box to be recycled;

- the time and gasoline spent trailing potential buyers from house to house, only to have the lead peter out weeks, even months later;

- the 12-hour days of negotiating back and forth between buyer and seller to reach a deal acceptable to both;

- the fact that a Realtor bears much of the responsibility for extracting disclosure from an all-too-often reluctant vendor;

- the advice, too often ignored, that a listing price is too high, or that a home inspection be a condition of the purchase; and, lastly that nemesis of many a good Realtor -- the dry months with nary a listing or a sale in sight.

As Nixon pointed out, for many years now, Lower Mainland Realtors have been free to charge a range of fees for differing levels of service.

"The new rules are not really new rules for the MLS system of the Real Estate Board of Greater Vancouver," he said. "The one proviso being that there would always be some level of fee paid to the listing and selling Realtors."

That seems fair enough.

There are good reasons why Realtors are required to undergo all their training and licensing, and why agents and Realtors are constrained as to what they must and must not do. So I see no reason why a hefty fee should not be charged for for-sale-by-owners subscribers to upload their listings to, and benefit from a service that, so far as I can tell, is wholly owned by a collective someone else -- the MLS.

In closing, Nixon believes British Columbians have been well-served by their member Realtors.

"We have offered a variety of professionally delivered services for varying levels of fees and, given the vast numbers of transactions each year, there have been very few incidents of fraud or incompetence," he concluded.

Time will tell whether member Realtors of the Canadian Real Estate Association will be as welcoming of the consent agreement as were Georges Pahud and the other delegates who voted their approval at the October meeting in Newfoundland.

By Elizabeth James, Special To North Shore News

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Ernie Arrizza

Ernie Arrizza

Sales Representative
CENTURY 21 Kelleher Real Estate Inc., Brokerage*
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