Canadian Real Estate Industry ripe for change

Last week the Financial Post’s Garry Marr pointed out How To Lose Money On Real Estate Moves and pegged hefty transaction costs as the reason Canadians don’t move more often.

Canadian homeowners will be happy to know that the Competition Bureau lodged a complaint last month challenging the rules imposed by the Canadian Real Estate Association (CREA). The Bureau called CREA anti-competitive and believes that they limit consumer choice and prevent innovation in the residential real estate market.

The Bureau’s challenge is against rules imposed by CREA on agents who list properties on the Multiple Listing Service (MLS) system. The overwhelming majority of real estate transactions in Canada make use of the MLS system, which includes important information available only to CREA members. Before listing a property on MLS, agents must agree to comply with CREA’s restrictions on the service options they provide to Canadian consumers.

Under CREA’s rules, agents are prohibited from offering consumers the option of simply paying a fee for an agent to list a home on the MLS system. Instead, all consumers looking to list a property on MLS must purchase a pre-determined set of additional services from a real estate agent, such as the presentation of offers and negotiation of a final deal.

CREA’s counter to the Competition Bureau’s offensive has been to forward Internet traffic from their MLS website over to REALTOR.ca. Why would they do that? The CREA is assuming that the government will argue by definition that the Multiple Listing Service is not multiple but actually singular in nature as non-realtors cannot post there, only realtors can. And protecting MLS as a trademark would most definitely prove more difficult than protecting REALTOR.ca.

In the United States the opening up of MLS data has resulted in greater competition and lower fees thanks to sites like like Zillow and Redfin that offer enhanced real estate listings. While we’re likely a couple years away from the Canadian real estate cartel being broken up, the next generation of young realtors is using the web to compete with old-school yard sign marketing tactics.

Vancouver’s Ian Watt is one such realtor. Watt’s social media strategy has made him the go-to guy in the downtown Vancouver condo market and has even garnered him a nomination at the North American Inman Conference for the Most Innovative Blog.

Watt is a real estate maverick and believes the younger web-enabled guard will take the reins from the old guard if the Competition Bureau is successful.

Seeing that change on the horizon, Watt has established CondoGo.com which offers ‘Discounted Real Estate Commissions with Full Service Marketing’. Watt’s unique CondoGo system is for sellers of condominium real estate only and is more than just a condo marketing strategy that leverage the web.

Watt’s system go so far as to assign a “Client Concierge” to each seller that is dedicated to selling your condo only. And get this, the concierge is not paid a commission but rather a base salary with incentives for client satisfaction, timeliness of the sale and other factors – none of which are correlated to the final sale price. What a novel idea.

Watt is fully aware that cutting commissions on the buyer’s side would only reduce the number of realtors willing to show their clients CondoGo properties, so the system keeps purchasing realtors happy with full commissions ensuring maximum exposure for CondoGo properties.

Only time will tell if opening up MLS will lower prices and provide more choice to consumers. Either way Watt believes there is a better way and his innovation will likely keep him on top of the market for some time.