Competition Bureau vs. TREB: Here's Why I side with TREB... And it's not for the reason you think!

Okay, it's obviously partially because I work in the industry and want to protect my career but, to be honest, there will always be a solid market for those who want to list and buy through a professional.  No, I have other concerns for what it means that the Competition Bureau is pushing to implement rules that will encourage more people to list on their own. 

For those who haven't been following the news, there has recently been more press about the lawsuit between the Competition Bureau and the Toronto Real Estate Board over access to information on the MLS service.  Frankly, as a real estate agent who may also be selling her condo soon, I don't necessarily want the entire world to have access to comments about the condition of my unit, when I am home and instructions for my pets but that's still not my main issue with the public being able to access this information and list on their own.

In an industry where we are taught to give the utmost attention to ethical conduct, detail and accuracy in our listings and diligent research, we also hear the horror stories of what can happen if something goes wrong.  We are trained to negotiate ethically and to also ensure that there is a proper paper trail of all conditions, waivers, amendments etc. to reduce any risk of a mistake.  We also answer to an ethics council which ensure that we behave ethically while practising real estate.  We also maintain insurance to protect us and our clients from errors and omissions.  Even with all these measures, errors occur occasionally and in real estate, when one closing often depends on funds from another, an error or misunderstanding can set off a chain reaction affecting people who have never even hear of the original culprit or their property.

Picture this: Person A has a firm deal to Purchase the home of Person B.  Person A waived their financing condition without speaking with their lender but as closing day approaches, they realize there may be a problem because the bank's appraisal of the property indicates that it is overvalued and Person A cannot fund the difference.  If Person A and Person B both have agents, likely the agents will be in touch regarding the problem and will either renegotiate the price to satisfy both parties, or negotiate who will keep the deposit and allow Person B to re-list immediately in order to mitigate the damages.  If there are no agents involved, things could get tricky.  What if Person A just sends a letter to Person B (or worse, what if they avoid the issue?) asking to be released from the deal?  How do they agree on what is fair?  What if Person B doesn't learn of this until closing day and they are now unable to close on the house they purchased from Person C?  As you can see, things get much more complicated without agents.

Without agents, how would a buyer ever know if an mls listing were accurate?  Who would hold the sellers accountable for errors and omissions or would buyers be forced to pursue legal action for every minor hiccup at closing?  In my experience, most buyers find it uncomfortable to view a house when the seller is home so how would they feel about negotiating directly over something so personal? 

Sure, buyers could still use agents but those agents would still expect to be paid and if sellers decided not to, that would fall on the buyers.  Nobody works for free.  And would those sellers really be saving money when they negotiate directly with a buyer's agent who is both a skilled negotiator and not emotionally invested?

What about the discount brokerages who post to MLS but leave sellers on their own for the rest?  Well, aside from the fact that I would need to deal with my own showings, many buyers don't want their agent to deal with someone whom they perceive to be cheap and difficult.  I've had many buyers not even want to look at these properties because they sense an ugly negotiaion may result.  There's also the question of how they respond to inquiries regarding their own listings.  If you have already paid a brokerage a flat rate fee to post a listing, how motivated are they to answer questions or even return phone calls about your home from people who find the listing on MLS?

To me, my home is my largest investment.  I don't object to people listing on their own but it would never consider listing my own home without the assistance of a Real Estate Agent.  Here's a video which outlines some of the many ways we can help:

DIY Real Estate & For Sale By Owner- Is It a Good Idea?

Now, I'm obviously a little biased where this topic is concerned since I make my living by assisting people in buying and selling homes.  Still, I plan to examine the title question as objectively as possible.

It seems we live in a society where Do-It-Yourself or DYI is becoming increasingly popular.  Our technology allows us to access professional (or amateur) resources from anywhere and it is easy to feel that we are all just a few weeks of Internet research away from being experts at other people's jobs.  I know I am also guilty of this and have gone to the doctor having already looked up some possible causes of my symptoms.  When I was having my will prepared, I recalled a legal article and asked to refine one of the clauses.  I have even speculated at a reason for the noise my AC was making to the repair person.  Am I an unusually annoying consumer?  Perhaps, but my point here is that we all do this to an extent and I find that many professionals respect a savvy consumer who asks educated questions.

But what about those consumers who actually take matters into their own hands and cut out the pros?  It's a matter of opinion.  We could probably cut our own hair, represent ourselves in court or install our own kitchens... but how many of us want to?  In fact, shows like Holmes on Homes show us the many pitfalls of attempting work without the right professionals.  So why do discount brokerages and listings for sale by owner exist?  Some sellers feel that the compensation paid to real estate professionals is too high and would rather try it on their own.

Are they correct?  Perhaps in some cases, they are.  However a good agent should serve as a market expert, assisting with staging, pricing and marketing their property, arranging showings (because an owner who is present for a showing is a huge deterrent for an interested buyer) and orchestrating maximum interest to ensure a good position for their clients during negotiations.  They should have a keen eye on the market and be able to advise their clients when to list, when to adjust the price and when to accept offers.  They should be familiar with clause wordings and be able to negotiate the best price and terms for their clients.  They should be available long after the sale to ensure that conditions are met and closing proceeds smoothly.  A very good agent remains in touch with clients and can act as an adviser with respect to renovations which pay off or tradespeople or professionals that may be required in the future.

So, when is it worth it to try to sell your home on your own?  In Toronto, with the average seller offering about 5% commission, which would mean 2.5% to their own agent and 2.5% to a buyer's agent, a smart seller will never cut the commission paid to a buyer's agent as they want their home to be attractive to agents who may have a buyer.  Of the 2.5% that they would pay their own agent, they should consider the costs of staging their home on their own, paying a discount brokerage to list their home on MLS, added legal fees since they would require a lawyer to review all offers and possibly multiple sign-backs, marketing expenses, the stress of negotiating offers,  the inconvenience of arranging showings and the expectation that homes sold without an agent are generally expected to sell for less and sit on the market longer.  I can confidently tell my clients that I can easily justify my compensation and they will more than likely make more money using me, than they would save on my commission. 

 

A recent Globe and Mail article discusses one couple's adventure with their own DIY listing.  It has long been an accepted fact in the real estate community (and even a source of easy leads for some agents) that for sale by owner properties or FSBOs don't sell.  Many of us even read about the FSBO company founder who sold his own property using a broker.

 

One would expect this FSBO theory to not apply to a HOT market like Toronto's, so I watched this listing to satisfy my own curiosity.  The owners were optimistic that they would have multiple offers on their offer date of June 14th.  I cannot confirm whether or not this was the case but it is now June 20th and the home is still listed.  I checked to see if it was overpriced but it actually seemed to be priced fairly low for the area with the lowest sale of a 3 bedroom, 2-3 storey, detached home this year in the district at $512,000, the highest at $911,000 and the majority of the 18 sales falling between the mid-$600,000's to the mid-$800,000's. 

In my opinion, there will always be some people who prefer to risk doing something themselves if it will save them a couple of bucks and it is wonderful that we all have the freedom to do so.  The question is: Are they even really saving any money?  Each case is different but I tend to doubt it.