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The dominant multiple listing service
It's a little device, wafer thin and about half the size of your finger that every realtor in Toronto has attached to a key chain.
It spits out constantly changing passwords that are used to guard access to one of the most precious resources the Canadian real estate industry owns -- MLS, or the multiple listing service. Every board in Canada has its own security system.
The Internet was supposed to make the real estate agent redundant. The theory was people would simply go online and find a home for sale. But even today, estimates are that at least 90% of all real estate transactions go through an agent connected to the MLS, which serves as the central system for real estate listings.
There is no question the publicly accessible site of the real estate industry is much better than it used to be at providing consumers with information. When the site first opened in 1996, listings were protected with such zeal that you could see a home but not the address.
The Canadian Real Estate Association owns the rights to the multiple listing service, which has been around since the 1950s. When an agent gets a listing, he or she collects data on the property and then puts it on the local board's system. CREA represents more than 97,000 real estate brokers, agents and salespeople working through 100 real estate Boards and Associations.
It's up to the seller to decide if he or she wants that listing to be made public. If the answer is yes, the data is uploaded to the national site, mls.ca or, as it is marketed these days, realtor.ca. CREA gravitated towards the realtor.ca site because it did not want to confuse consumers into thinking they were getting full access to the multiple listing service. It also did want to give up the name to major league soccer.
What's the difference between the public system and the private site that the agents guard so closely? For starters, the agents-only site has historical data that makes it much easier to get a sense of the value of the home. It also provides commission rates, tells you who the seller is and in most cases has superior search options.
"There is still so much more on the private site than the public site and why shouldn't there be? It's our site," one real estate veteran said.
How has MLS been able to stave off competition from for-sale-by-owner sites -- called FSBOs -- and other third-party sites on the Internet, when information is supposed to flow freely?
One answer is that the MLS has reached such a critical mass it is impossible, or simply not smart, to sell your home any other way. Sell it privately or through another Web site and there is a greater likelihood of missing out on potential buyers willing to pay a higher price.
The MLS has grown in dominance from having just $1-billion in sales in 1960. Sales through the system climbed to $7-billion by 1976, and by 1986 had soared to $30-billion. Last year, close to $131.9-billion of residential sales were listed through MLS.
The federal Competition Bureau has an open file looking into whether the MLS system has rules that violate the Competition Act. At one point, Stephen Moranis, the former owner of Realtysellers (Ontario) Ltd. sued the Toronto Real Estate Board (TREB) and Canadian Real Estate Association, alleging the two organizations were forcing the company to raise the price it charged home buyers and sellers. Realtysellers was offering at the time a program that allowed you to get an MLS listing for $695.
Last month, Mr. Moranis' mother, Sadie, a female trailblazer in the industry, passed away. According to sources, Mr. Moranis is now running her company, Prudential Sadie Moranis Realty, putting him on the side he once sued.
While his mother was a strong member of the real estate industry, who served as the first female Toronto Real Estate Board president, her early days in the business illustrate how closely-held things were 40 years ago.
Before realtors agreed to a central system to list all their properties, listings were called "exclusives" and were held by one shop, which would try to control who bought and sold a property so it could control both ends of the commission.
"Every company tried to sell in-house. This was before any sort of sophisticated technology," recalled Sherry Chris, a former LePage vice-president who is now chief executive of Better Homes and Gardens Real Estate, which plans to launch its brand in Canada this year.
Back in the early 1980s, the dominant player in Toronto was A. E. LePage, which in 1984 merged with the real estate arm of Royal Trust to form Royal LePage, and became the country's largest real estate brokerage.
Brokers like Ms. Moranis, who were outside the LePage umbrella, but had clients who wanted to buy LePage properties, were forced to make side deals with agents inside the company, trading commission.
The MLS system at the time hadn't really taken off. In CREA's own words: "Brokers tended to use it as a system of last resort to sell properties they couldn't sell on their own." Consumers generally had to pay a larger commission for an MLS-listed property.
One of the key changes to the Canadian landscape was the arrival of Re/Max.
The firm changed the rules on how commissions were split. Before Re/Max's arrival, half an agent's commission went to the brokerage. Re/Max soon let agents keep about 90% of their commission while charging them various fees.
Agents started migrating to Re/Max because of the better split. They were making more money and the resulting competition for listings led to lower commissions --and made listing on the MLS less expensive.
Michael Polzler is executive vice president of Re/Max Ontario-Atlantic Canada. His father, Frank, helped found the firm in Canada. Mr. Polzler said brokers have gotten used to consumers having access to more information, but concedes the public site does not provide as much information as the private site. "The brokers are seeing much more detail. But it's enough of a view for the average consumer," said Mr. Polzler.
Phil Soper, the chief executive of Royal LePage, said the information on MLS that is accessible to the public is restricted by government rules. "There has been a real tightening of privacy guidelines," he said, adding those guidelines are one reason historical sale prices on a property are not available to the public.
William Stynes, general manager of Quebec City-based ByTheOwner.com, said consumers can get that type of information on their own, but it takes some leg work.
"It's not just the system," said Mr. Stynes, explaining why MLS is the dominant place to list your home. He said it's the agents promoting the MLS as a way to sell your home that also make it a success. "There are 28,000 agents in Toronto promoting deals. We have four reps. promoting our site," said Mr. Stynes, adding his company is the largest FSBO operator in Canada.
Ultimately, he said, it is up to consumers to decide whether they want to list on the MLS system and pay a commission on the final sale price that ranges from 4% to 5%. "Everything is easier when someone else is doing it for you, but there is always a cost involved," said Mr. Stynes.
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