# Choke hold left with sellers using MLS



## Jungle (Feb 17, 2010)

I read this article in today's Globe and Mail: 

"Canadian homeowners will be able to list their homes on the Multiple Listing Service for a flat fee, but they’ll still have to compensate any real estateagent who brings a buyer to their doorstep"

What if the seller offers less than typical 2.5% to the buyer's agent, or he/she may not bring the buyer to the door? For anyone that says, "sell your house privately then." It's not so easy. MLS has an unfair advantage and has basically put a choke hold on the ability to sell and buy homes. The issue is that their commissions are not worth the labour they give and now with this decision, it could lead to unethical actions from a greedy buyer's agent.


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## GeniusBoy27 (Jun 11, 2010)

This is going to be an interesting fight. However, nowhere does it say that the seller has to provide a "percentage" of sales. So it comes down to a contract fight, and perhaps the enforcement of the percentage will shift to the buyer?

Having information on comparables is invaluable ... and maybe worth that 2.5%


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## Four Pillars (Apr 5, 2009)

I think the issue of a seller compensating the buyer's agent (if they have one), has nothing to do with MLS. It has everything to do with the contract between the potential buyers and their agents. The buyers can't buy anything without compensating the buying agent according to the contract.

I believe up to now, it is common for a FSBO to pay the buyer's agent an agreed upon sum. I don't see why this won't continue.

Another interesting possibility is that perhaps the payment (or some of the payment) for the buying agent will shift to the buyers themselves? In my opinion, they should be paying their own agent.


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## Dana (Nov 17, 2009)

Four Pillars said:


> In my opinion, they should be paying their own agent.


+1


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## m3s (Apr 3, 2010)

You would think it would be wise to pay your own agent who is negotiating a price for you..

There must be a way to turn the incentive in your favor. If you get x price I'll pay you full commission or I'll accept that counteroffer if you only take x for commission

Which begs the question why use a buyer's agent in the first place


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## Berubeland (Sep 6, 2009)

A certified appraiser can give you comparables and it costs about $300 not 2.5%

You know what is kind of sad and funny about this whole deal? The initial fight that brought this on was between Realty Sellers (a discount Broker) and CREA. Now FSBO's get to post on the MLS. It's like a Greek Tragedy of errors.


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## Four Pillars (Apr 5, 2009)

mode3sour said:


> You would think it would be wise to pay your own agent who is negotiating a price for you..
> 
> There must be a way to turn the incentive in your favor. If you get x price I'll pay you full commission or I'll accept that counteroffer if you only take x for commission
> 
> *Which begs the question why use a buyer's agent in the first place*


The main benefits I can think of are:

- Expertise. Lots of buyers don't know sh*t about anything, so having someone help this can be beneficial.
- Comparables. Agents can look at the sold prices for houses in the area. This is very worthwhile.
- Access to houses. While it's not necessary, it's more convenient to have a buying agent who can book appointments.
[/LIST]


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## qmanrei (Oct 4, 2010)

Four Pillars said:


> The main benefits I can think of are:
> 
> - Expertise. Lots of buyers don't know sh*t about anything, so having someone help this can be beneficial.
> - Comparables. Agents can look at the sold prices for houses in the area. This is very worthwhile.
> ...


Funny enough if the MLS was more "open" to the public your second statement would be unnecessary. As we could all search for at least some basic comps. But I think that the agreement between the Competition Bureau and the Real Estate Boards does not go far enough in allowing access to the MLS.

And as for statement number 1 - that is highly dependent on the agent. 

Take Care


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## GeniusBoy27 (Jun 11, 2010)

In the US, the buyer pays for their agent. I see it evolving to that down the road.


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## Berubeland (Sep 6, 2009)

I think that agents should start offering fee for services. 

For instance I have an agent that sends me every single new multi-res listing. I wouldn't be upset if he wanted $20 per month for that and I suspect a lot of people would pay for that information. 

Or selling agents could be paid per showing and offer regardless of acceptance. In this way houses that spend a few days on the market are subsidizing the work that agents do on properties that don't sell or that stay on the market for ages. 

And if buyers want to be driven around in SUV's they should pay for that too. 

I even talked about this in one of my posts on Million Dollar Journey, that investors should pay agents for all offers they submit especially if they are "low ball" offers. Because there are many agents who don't want to have anything to do with investors looking for a deal.


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## Cal (Jun 17, 2009)

Would an individual listing on MLS (paying a flat fee to list) be able to post their contact info, just like a listing agent would? Then alot of buyers could simply contact directly.


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## the-royal-mail (Dec 11, 2009)

Sure cal. But then the real estate association would see a much-diminished incentive to keep the MLS website free and open. They would need to change the funding model for that website, which I'm sure costs a tremendous amout of money to maintain.

It almost sounds like you are describing the comfree format, which I believes charges sellers about $600 for listings, which include a spot on their website.


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## kcowan (Jul 1, 2010)

There have been many attempts to cut out the middle man in real estate. None have been successful so far. I think it relates to the infrequency of individual transactions.


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## Berubeland (Sep 6, 2009)

Sellers will not have their contact info posted but... they can post a link to a website. 

About the whole deal with the MLS website and how much it should cost...View it.ca maintains a site and a database and they charge 60$ for an ad per month this includes the cost of the professional photographer. 

The idea is that a for profit company like View It can run their website and pay staff and also make a profit. They also run a database with all previous listing and photographs. If they can do it can't the MLS?


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## qmanrei (Oct 4, 2010)

I have been investigating low cost selling options for a while. One place you can find a $109 MLS listing package is ihatecommission.com 

When looking for investment property in Whitby I came across a listing that used the service. It basically forwarded the email contact from the listing to the home owner, who then contacted me directly.

You can add contact information via "View Brochure" but it is not very likely that people will look there. Unless you ask people to review the brochure in your description


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## onomatopoeia (Apr 8, 2009)

I understand people's beef with agents and their high commission, but people who think that MLS should be free (or have a small fee) are crazy. It's their site, they built it. yeah, it probably doesnt cost them millions to maintain it, but they were the ones to gather the data and make it available to the public/realtors. One of the conditions of its use is that you use a realtor. It's their game, they can play it like that - no one is forced to use the service. The problem is that everyone wants to use the service because it's the best out there.

To tell you the truth if I were the CREA I'd tighten up the site - have it so that the front end just showed houses available and it's location and it would say - contact a realtor to view this house.


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## Jungle (Feb 17, 2010)

Fine but the 5% commission game needs to stop along with it.


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## wheel (Jun 22, 2010)

onomatopoeia said:


> I understand people's beef with agents and their high commission, but people who think that MLS should be free (or have a small fee) are crazy. It's their site, they built it. yeah, it probably doesnt cost them millions to maintain it, but they were the ones to gather the data and make it available to the public/realtors. One of the conditions of its use is that you use a realtor. It's their game, they can play it like that - no one is forced to use the service. The problem is that everyone wants to use the service because it's the best out there.
> 
> To tell you the truth if I were the CREA I'd tighten up the site - have it so that the front end just showed houses available and it's location and it would say - contact a realtor to view this house.


Not so. The reason they can charge high prices is because they've got a monopoly. And they've had a monopoly forever. 

When you're a monopoly the rules are different. Government needs to control them because market forces don't.

While you point out that no one is forced to use the service, the reality is just the opposite. There's no effective choice available.


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## m3s (Apr 3, 2010)

onomatopoeia said:


> I understand people's beef with agents and their high commission, but people who think that MLS should be free (or have a small fee) are crazy. It's their site, they built it. yeah, it probably doesnt cost them millions to maintain it, but they were the ones to gather the data and make it available to the public/realtors. One of the conditions of its use is that you use a realtor. It's their game, they can play it like that - no one is forced to use the service. The problem is that everyone wants to use the service because it's the best out there.
> 
> To tell you the truth if I were the CREA I'd tighten up the site - have it so that the front end just showed houses available and it's location and it would say - contact a realtor to view this house.


Web sites are not rocket science, it would be easy to make a better one. The problem is the agents would not show any listings from it and seeing as most buyers use agents no other site will gain enough exposure. It's a vicious cycle that gives them a choke hold on the market. You can't sell privately because agents won't show them and you have to use an agent to see the latest listings that mls hasn't opened to the public

I can't think of another industry like it. Many industries make business for themselves in corrupt ways or price fix but this really is a choke hold


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## Square Root (Jan 30, 2010)

onomatopoeia said:


> I understand people's beef with agents and their high commission, but people who think that MLS should be free (or have a small fee) are crazy. It's their site, they built it. yeah, it probably doesnt cost them millions to maintain it, but they were the ones to gather the data and make it available to the public/realtors. One of the conditions of its use is that you use a realtor. It's their game, they can play it like that - no one is forced to use the service. The problem is that everyone wants to use the service because it's the best out there.
> 
> To tell you the truth if I were the CREA I'd tighten up the site - have it so that the front end just showed houses available and it's location and it would say - contact a realtor to view this house.


The banks also built the ATM network but the competition bureau opened this up to outsiders. I think some of the issues are similar.


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## K-133 (Apr 30, 2010)

> In my opinion, they should be paying their own agent.


Makes perfect sense, though, it will come out of the sellers pocket one way or another. i.e. Reduced selling prices, or paying the agent yourself. 

In my opinion, the reduced asking price is much riskier to the seller. The agent essentially owns the rights to the buyer. As the seller, you have the option to reject that bid. I think that there is value added by the agent on this end, so they deserve compensation. A flat rate might make that bit of reality easier to swallow, and again, as the seller, you can make that clear in your advertisement (flat rate). Keep in mind though, that a flat rate also removes the advantage to you (the seller), of having someone who has the buyer's trust convincing them that the price is right.


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## andrewf (Mar 1, 2010)

K-133 said:


> Makes perfect sense, though, it will come out of the sellers pocket one way or another. i.e. Reduced selling prices, or paying the agent yourself.
> 
> In my opinion, the reduced asking price is much riskier to the seller. The agent essentially owns the rights to the buyer. As the seller, you have the option to reject that bid. I think that there is value added by the agent on this end, so they deserve compensation. A flat rate might make that bit of reality easier to swallow, and again, as the seller, you can make that clear in your advertisement (flat rate). Keep in mind though, that a flat rate also removes the advantage to you (the seller), of having someone who has the buyer's trust convincing them that the price is right.


I think if the buyer paid their agent, there might be more competition on rates. Also, it would make buying agents more likely to entertain FSBOs. Having the seller pay the buying agent is a conflict of interest and anticompetitive.


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## kcowan (Jul 1, 2010)

The internet has freed up many markets to competition. But they all have a great deal of flexibility. I can buy products from HK, AU, EU, etc. 

With real estate, the market is very narrow and that enables MLS to maintain its monopoly. I don't see that changing anytime soon.


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## Four Pillars (Apr 5, 2009)

andrewf said:


> I think if the buyer paid their agent, there might be more competition on rates. Also, it would make buying agents more likely to entertain FSBOs. Having the seller pay the buying agent is a *conflict of interest *and anticompetitive.


But that is exactly what happens now.

Of course, one could make the argument that since it's the buyer writing the cheque - they are actually paying for any agents involved.


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## K-133 (Apr 30, 2010)

andrewf said:


> I think if the buyer paid their agent, there might be more competition on rates. Also, it would make buying agents more likely to entertain FSBOs. Having the seller pay the buying agent is a conflict of interest and anticompetitive.


You make valid points. They don't discount the risks on the other end. If you're selling a $300,000 house, the buyer will have to come up with $7,500-$15,000. Meaning, they will be less likely to afford a $300,000 house, and the seller will therefore be forced to adjust to what the market can support. It doesn't matter who pays the fees - the costs will adjust accordingly. 

Logically, the seller will be 'paying' the fees either way. Having the seller pay the fees is simply a matter of simplicity to the system. As you add complexity, you add costs - don't kid yourself. 

When most Canadians have a difficult enough time coming up with 20% to avoid CMHC costs, $7,500 is a significant hit - not to mention the fact that this cost cannot be borrowed.

In my opinion, such a proposal is an unnecessary and risky strain to the system . A better direction, would be flat fee pricing to sell a house (perhaps by category of home) to help reduce the possibility of conflict of interest.


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## jamesbe (May 8, 2010)

The buyer already pays.

I listed my home through my Mom who is an agent. I am not paying her 2.5% but paying the selling broker 2.5%. If someone calls my Mom and says I want to buy this house and she double ends it, I can offer a increased discount and will accept a lower offer than I would if another agent brought the deal in. I'm saving the 2.5% on the buyer's side. I've told 3 prospective buyers this, buy through my mom I'll give you $10k off.


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## K-133 (Apr 30, 2010)

jamesbe said:


> The buyer already pays.
> 
> I listed my home through my Mom who is an agent. I am not paying her 2.5% but paying the selling broker 2.5%. If someone calls my Mom and says I want to buy this house and she double ends it, I can offer a increased discount and will accept a lower offer than I would if another agent brought the deal in. I'm saving the 2.5% on the buyer's side. I've told 3 prospective buyers this, buy through my mom I'll give you $10k off.


Good point. There are two lines in the contract for how much is paid out and to whom based upon two scenarios:

-a- Both a seller agent and a buyer agent are involved
-b- Only the selling agent is involved


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## the-royal-mail (Dec 11, 2009)

Isn't it illegal to cut out an agent in the manner described by james? I don't think you're allowed to steal or solicit clients away from other agents. It's one thing if it happens as a coincidence but I think there could be consequences for what you are suggesting.


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## andrewf (Mar 1, 2010)

K-133 said:


> You make valid points. They don't discount the risks on the other end. If you're selling a $300,000 house, the buyer will have to come up with $7,500-$15,000. Meaning, they will be less likely to afford a $300,000 house, and the seller will therefore be forced to adjust to what the market can support. It doesn't matter who pays the fees - the costs will adjust accordingly.
> 
> Logically, the seller will be 'paying' the fees either way. Having the seller pay the fees is simply a matter of simplicity to the system. As you add complexity, you add costs - don't kid yourself.
> 
> ...


Why can't you borrow to pay the buying agent? It's called a line of credit if you don't have the cash. If that extra LOC balance puts the mortgage out of the affordability range for you, you're overextending yourself anyway.

Flat fees make agents want to underprice houses to sell quickly. Even commissions don't protect sellers sufficiently. It's all about doing volume. After all, they have no skin in the game. A more logical move would be to set a market price minus a few percent, and pay the selling agent 33% of what they can get above that price. Then it is in their interest to find the right buying for the property and not just talk the seller down and get the sale.


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## K-133 (Apr 30, 2010)

andrewf said:


> Why can't you borrow to pay the buying agent? It's called a line of credit if you don't have the cash. If that extra LOC balance puts the mortgage out of the affordability range for you, you're overextending yourself anyway.
> 
> Flat fees make agents want to underprice houses to sell quickly. Even commissions don't protect sellers sufficiently. It's all about doing volume. After all, they have no skin in the game. A more logical move would be to set a market price minus a few percent, and pay the selling agent 33% of what they can get above that price. Then it is in their interest to find the right buying for the property and not just talk the seller down and get the sale.


That's a very creative idea - and seems to help balance your concern. Don't be so quick to paint all agents with the same brush though. Its true, that like some car salesman, its just about volume. There are those out there who care though - and it shows in their work.

The reality is, that it is in the best interest of the agent to do their best to fulfill the needs identified by the people they represent.


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## jamesbe (May 8, 2010)

the-royal-mail said:


> Isn't it illegal to cut out an agent in the manner described by james? I don't think you're allowed to steal or solicit clients away from other agents. It's one thing if it happens as a coincidence but I think there could be consequences for what you are suggesting.


Nobody said they are stealing or soliciting clients away from other agents. A lot of buyers do not have an agent they just see a house they like and they call the listing agent.

Also, it would only be "illegal" if the buyer has signed a buyer's agency contract with a realtor, otherwise it is fair game.


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## K-133 (Apr 30, 2010)

the-royal-mail said:


> Isn't it illegal to cut out an agent in the manner described by james? I don't think you're allowed to steal or solicit clients away from other agents. It's one thing if it happens as a coincidence but I think there could be consequences for what you are suggesting.


When you sign the contract with the selling agent there are two sections:

-1- The commission the selling agent gets, if the selling agent brings a buyer
-2- The commission the selling and buying agents gets, if another agent brings a buyer

This value is entered at the time of completing the contract.


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## andrewf (Mar 1, 2010)

All I'm saying is that incentives matter. The way agents are currently compensated, they are given the incentive to act contrary to their client's interests. A different compensation scheme could help to better align the interests of agent and client.

The seller paying the buying agent gives the buying agent incentive to show houses that offer high commission.

A flat commission or a commission on the entire sale amount gives little incentive to invest time to help the client get the best price. Their paycheque is about the same if the house goes for market price or 10% below.


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