Competition Bureau takes on the real estate industry
By Stephanie Farrington • Bankrate.com

On February 8th, the Competition Bureau of Canada took its concerns about the Canadian Real Estate Association, or CREA, public. For a long time, there were rumblings about the bureau's concerns over the apparent monopoly CREA holds over the housing market.

What does this showdown mean for Canadians buying or selling a house? Read on to find out.

MLS not going public
First, the big picture. No matter what, this process will take a long time -- all parties involved say they expect it to be months, at least, before the case ends up before the Competition Tribunal. This means it could easily be a year before you see any real changes to the industry.

According to many published reports, much of the dispute seems to centre on CREA's Multiple Listing Service, or MLS, the system through which an estimated 90 per cent of all homes in Canada are sold. But according to key players, that is not the case.

"First of all, the MLS system is not going to be opened up to the public -- the Competition Bureau wasn't asking for that to happen," says Dale Ripplinger, CREA's president. "They told us where they thought we had problems, and we agreed that our rules could be clarified to be sure they are not anti-competitive, and so we're doing that."

"We absolutely respect their ownership of the list," says Greg Scott, senior communications adviser to the bureau. "We realize that real estate agents have invested significant time and money into this list, and we respect that."

As such, the Competition Bureau recognizes that the MLS is the property of CREA, and it's not on the table for discussion. So, for the foreseeable future, if you want to use the MLS to sell your house, you will still have to have a connection to CREA, likely through a real estate agent.

So, if the MLS is not the issue, what's all the fuss about?

Full-service fees
What concerns the Competition Bureau is the way Canadians pay the people who sell their homes.

Realtors work on commission. This means they absorb the costs of selling your home, including advertising, printing brochures, maintaining an office and all of the other costs of running a business. In exchange for those services, home sellers agree to give them a certain percentage of the gross sale price. Historically, this fee has been in the neighborhood of four to seven per cent of the first $100,000 and from one to three per cent of the remainder.

The real estate agent acts, literally, as a stand-in for you; he or she should know as much about the house as you do (but be less emotionally attached) and understand all of the legal requirements needed to write a binding contract of purchase and sale. Agents are required to serve the interests of the person paying them, and for the most part, that is the home seller.

The Competition Bureau objects to the way real estate agents contract their services, not the services themselves. "Agents have to provide a suite of services -- consumers can't just buy a listing on the (MLS)," explains Scott. As such, he says the Competition Bureau is concerned that Canadians contracting with a member of CREA are locked into a set of services that cannot be sold individually. "This is about is about providing real estate agents with more flexible options for themselves and for their customers."

More options for sellers
However, across the country, there are a variety of real estate companies that already offer consumers a range of services on an a la carte basis, from simply posting photos and descriptions of a property on a website to providing marketing tools such as signs and brochure templates, as well as advice on selling your home.

Craig Osborne, of Grapevine Home Marketing Consultants, in Ottawa, provides an independent listing service to people wanting to sell their own homes. "For us, working outside of the system, we're not a traditional real estate agent -- we're a home marketing company. We've developed our own footprint," he says.

"We send out a registered real estate agent to do the full write-up on your house and do the market comparison to help you with that -- that's our top package," explains Osborne. The agent who works with Grapevine declined to go on the record about the fee he charges for providing Grapevine clients with a market evaluation of their home because he felt it would be insensitive to his colleagues. However, he said he has taken pains not to break CREA's rules of professional conduct in doing so.

In addition to the growth of such real estate companies, an increasing number of discount brokerages, such as FlatFee495, in Calgary, and Letmelist.ca, in Ontario, offer the option of listing your house on the MLS for a flat fee. As such, according to Ripplinger, consumers already have lots of choice when it comes to buying and selling homes, either within or outside of the MLS system.

That would seem to suggest that the types of changes the Competition Bureau is looking for are already taking place in the market. In theory, there will be a discussion about legally required change before the Competition Tribunal, but in practice, it looks like the market is taking care of itself.

Stephanie Farrington is a writer living in Ottawa.