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Changes in the delivery of real estate services by some realtors

Blog by Patricia Houlihan - Personal Real Estate Corporation | December 10th, 2010

Macrealty December 2010 Market Update

Many of you may have read in the media about how changes may be coming to the way SOME people sell real estate. First, let me assure you that Macdonald Realty, and of course our team, will continue to be full service real estate providers-so you will see no changes. However there may be a small percentage of realtors who will significantly downscale what they do and allow sellers to pick and choose the services they want...I think this is dangerous for the realtor AND will hurt the sellers' bottom line but various models of real estate sales may pop up.
Some have asked how this all arose.  From what I understand (don't quote me) the Competition Bureau has been unhappy with Realtors for quite some time. I am told because in some provinces the commission rate that many realtors charge is very high (ie. it can be more than double what most BC realtors seem to be charging) the Competition Bureau wants sellers to be able to buy only part of the services normally provided-again I think this is a bit dangerous but I don't think the Bureau really cares what I think!
One of the models that may be offered is described in the Macrealty newsletter below.  Again, we will not be offering anything other than what we always have-full service real estate. If you have any questions about the information below, or about the Competition Bureau decision, please feel free to contact me.

What is the Flat Fee (Mere Posting) Model?


With the recent Canadian Real Estate Association agreement with the competition bureau, there have been a number of questions about what Flat Fee models are and how they work.
Flat fee, or For Sale by Owner (FSBO), companies typically provide a kit to a seller that may include a sign and the ability to place a property on the MLS system, now known as a "MERE POSTING", for an up-front and non-refundable fee.
These companies allow a seller to "contract out" of other services provided by full-service agents. Of course, along with allowing sellers to contract out of these services, they also allow agents to contract out of their fiduciary responsibilities of disclosure, confidentiality, and agency. In addition, agents who merely post may not be able or willing to: qualify buyers, provide advice on the market, contracts, legal issues, questions about the house, or even how to deal with an offer. In these cases, sellers would be responsible for showing their own property, being knowledgeable about the market, understanding their legal responsibilities, and hiring a lawyer to draw up contracts, which can run thousands of dollars and are paid regardless of whether a transaction is completed. In addition, a seller, under this model, may not be covered by errors and omissions insurance, meaning that they would be fully liable for a litany of civil actions, many of which could potentially run hundreds of thousands of dollars.
This Flat Fee model and others such as discounted brokers, contrary to popular belief and media's reports, have always been allowed to exist in the BC real estate industry. However, the rest of the country has historically placed barriers or restrictions on alternative business models trying to use the MLS (multiple listing service) system as a selling tool. With the recent CREA agreement, the rest of Canada has adopted BC's progressive stance, which may have the effect of lowering the rest of Canada's commission rates (typically 5-6 % of the total selling price) to where they are now in BC. This is a good thing, and, as we can see from the BC example, will improve the industry's competitiveness. That said, despite having alternative models available to consumers for decades in BC, they still only represent less than 10% of the market, in part because sellers typically understand the important role a competent agent plays in effecting the successful sale of the most important asset in most people's lives.
To find out how using a full service broker can benefit you, please do not hesitate to contact me.

                                        (Click chart to see larger image)