Federal Competition Bureau says Canadian Real Estate Association (CREA) has anti-competitive rules and must change its ways

Slash realty fees: Competition Bureau. Canadians in the housing market will pay less in realty commissions and fees if the federal Competition Bureau has its way. In a landmark investigation, the bureau has concluded the Canadian Real Estate Association (CREA) has anticompetitive rules and must change its ways, according to documents obtained by the Toronto Star.

Details of a settlement have yet to be decided, but the bureau’s findings are expected to have a profound impact on the real estate industry — by permitting more innovative discount brokers into the market while allowing sellers to list their properties less expensively on the Multiple Listing Service (MLS).

With a membership of more than 96,000, Ottawa-based CREA is the largest real estate organization in Canada.

“The Bureau is concerned that CREA’s rules have restricted consumer choice and limited the scope of alternative business models,” says an internal memo by CREA president Dale Ripplinger. “Unfortunately, the Bureau seems to believe that CREA’s rules ….. create restrictions and barriers.”

The bureau launched its investigation in 2007. Consumers have complained in the past about high realtors’ fees and the need for more affordable services. A commission charged to the vendor of an average-priced $400,000 home in Toronto could be as much as 5 per cent, or $20,000.

“This is absolute, total vindication,” says Lawrence Dale, an owner of now-defunct Realtysellers, a Toronto-based discount broker that closed in 2006. “Once they’ve reached their settlement it means that the average guy on the street will be able to choose their real estate services and pay less for them.”

CREA executives met with the bureau Oct. 23 to hear the results, according to the letter.

“At that meeting the Bureau set out the conclusions of their inquiry and their proposed remedy,” says Ripplinger. “The Bureau’s position is that if CREA does not remove these restrictions, the Commissioner of Competition will initiate an application before the Competition Tribunal.”

Ripplinger says CREA decided not to go before the tribunal, which can administer penalties, but is pursuing a settlement agreement with the bureau.

According to Ripplinger, CREA rules that the Competition Bureau wants changed include these:

• Listing realtors must act as the agent of the seller.
• The listing realtor must receive and present all offers to the seller.
• No posting of property information is allowed on the Multiple Listing Service without an agent representing the seller for the term of the contract.

Changes to these rules would mean offers could be sent directly to the seller without the involvement of the listing agent, and consumers could probably have their listings posted on the MLS for a small fee.

Dale, along with partner Stephen Moranis, claim they were forced to shut down their company because of rules implemented in 2007 by the realtors’ association. Realtysellers offered a la carte real estate services, such as allowing consumers to post listings for a few hundred dollars on the MLS website, where more than 90 per cent of all home sales are made.

CREA owns the rights to the MLS.

While consumers have the option not to sell their home on the MLS, it is highly likely, because of the system’s market dominance, that they won’t get as many eyeballs on their property if they go elsewhere.

Realtysellers’ complaint to the Competition Bureau was likely one of the reasons regulators decided to investigate. The company is suing CREA and the Toronto Real Estate Board for $100 million.