Thursday, November 4, 2010

A Ground Level View of the changes to Organized Real Estate in Canada

So, by now we've all heard about the groundbreaking changes to the way organized Real Estate functions in Canada.  There have been many media reports on these fundamental changes, some have been accurate, and some have, of course, been extremely sensationalist - guess which stories get talked about more frequently?

I'm going to try to break down the changes into every-day terms, so that my clients, prospects, and colleagues can have a decent grasp on THE FACTS, and what this means for them.  I will do my best not to editorialize this Blog post - try to keep it fact based as much as I can!!  Keep in mind, these changes are all very new to all of us, even those of us involved in the Real Estate business, as we have been kept in the dark until very recently, due to the ongoing settlement between CREA and the Competition Bureau.

First off, let me dispel a common misconception.  Individual Sellers are NOT now able to post their listing on the MLS® system.  MLS® remains a member to member system. is the public portal to view listings that have been posted on the Member to Member MLS® system.  This has not changed.

What HAS changed is the minimum service that can be offered by a Real Estate Salesperson or Broker.

Previously, if you chose to LIST your house with a Real Estate Salesperson on the MLS® system, an Agency/Representation agreement was mandatory.  In short, this meant that by hiring a Realtor to list your home, you had no choice but to pay for a full service, including filling out listing documents, photographing, organizing showings, qualifying buyers, hosting open houses for agents and for the public, and negotiating offers to purchase your house.  This Representation agreement comes with fiduciary duties to the seller, which comes with its own set of responsibilities and consequences for improper behaviour.  (It is important to note that many Realtors have a different idea of what "full service" actually means, but that's a different topic altogether). 

What this settlement includes is a removal of the AGENCY PILLAR in the 3 pillars of the MLS® system.  This is where the misconceptions about "public listing on MLS®" comes from.

In short, Sellers now have the option of OPTING OUT of the Representation portion of our "Standard" listing forms.  Sellers wishing to utilize the MLS® must still use a licensed Real Estate Salesperson to put their listing on the system, however, they may retain the right to handle many services on their own.  They can handle all of their own showings, they are free to qualify their own buyers, host their own open houses, take their own pictures, market their own property, negotiate their own offers, and basically perform any of the duties that a Full Service Real Estate Salesperson would traditionally have handled. It is important to also note that in order to satisfy the requirements of MLS®, all listed properties must include a "C/B" (Co-broker commission amount).  This is what a Buyer Representative will be paid to negotiate a successful purchase on behalf of their Buyer client.  The settlement does not specify what amount this C/B needs to be.  That is up to the seller.

The tricky portion of this new settlement is that the Realtor who takes a "mere listing" may have waived his or her fiduciary duties to the seller, however they remain responsible for the accuracy of the information on the MLS® listing.  It remains to be seen whether problems arising out of a mere listing will result in litigation being brought against the Listing Agent (ie, will opting-out of Representation ACTUALLY relieve the listing agent of any responsibility should something go wrong).

I liken this to "slippery when wet" signs on the floor at mcDonalds.  They can put out the signs, but if someone falls and breaks a hip and dies, can you predict who may lose the pending lawsuit? 

One non-negotiable aspect of these changes is the fact that sellers wishing to have a "mere listing" on MLS® will not be able to post their contact information directly on the MLS® itself.  Links can be provided to external sites containing names and contact information, but this direct seller information will not be posted directly on the MLS® public site.  As mentioned above, MLS® remains a Member to Member service.

Another common misconception is that the system has been changed so that sellers can now post their house on MLS® for a Flat Fee.  Sellers always have been free to negotiate whatever listing agreement they chose, and as such this has ALWAYS been the case. Commission can be either a percentage of sale price, or a flat fee.  This has not changed.  As mentioned previously, this agent was not able to opt out of the Representation portion of the Listing Agreement, as this would have been contrary to the Rules of the MLS®.

As previously mentioned, this is all relatively new to me, and to every Real Estate Salesperson and Broker in Canada.  If this has caused any confusion, or if you have questions about this settlement, please don't hesitate to ask - I will do my best to answer in an honest, objective manner! 

I'm sure I will have more to say about this in the coming days and weeks, but I think that covers the changes on a really basic level.  

Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON

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