From todays star.
http://www.moneyville.ca/article/881476--discount-broker-offers-to-list-your-property-for-free
broker offers to list your property – for free
Lawrence Dale, founder of Realtysellers, is the man behind the complaint that resulted in a deal between the federal Competition Bureau and the Canadian Real Estate Association.
RICK EGLINTON/TORONTO STAR By Tony Wong | Wed Oct 27 2010
How low can you go to list a property on the Canadian Multiple Listing Service?
How about for free?
Discount real estate brokers have aggressively moved into the Canadian market in the wake of a federal Competition Bureau agreement that opens up the industry to lower fees. But it’s fair to say that the new offerings have hit a new high. Or make that low.
“This will be a game changer,” claims Lawrence Dale, founder of Toronto based Realtysellers Real Estate Inc. “There are no gimmicks. There are no extra fees. Free is free.”
Dale confirmed to the Star that his website realtysellers.ca will launch Wednesday, offering free listings to vendors in the Toronto area. Eventually the company plans a national roll-out.
Details of the launch of the brokerage had been under wraps until an agreement by the Competition Bureau and the Canadian Real Estate Association this week opened up the market. But it will likely be an eye-opener for the industry.
“Consumers have been wanting choice and they’re getting it,” said Dale.
The Competition Bureau deal protects the right of discount brokers such as Dale to simply post the listings of clients without having to offer a range of other services.
But when commissioner Melanie Aitken challenged the real estate industry to open up the market to discount brokers, she likely did not think it would happen this quickly, or go this far.
Discount services with various business models have been launching aggressively. One Ottawa-based company was offering listings for $109. But so far, no one has offered them for free.
“If people only want to list on the MLS and not use other services, we are more than happy to do that,” said Dale.
With more traffic on his website, Dale eventually hopes to bring clients to his other services, which include a 0.5 per cent listing fee for full-service representation.
The new entrant will not be without detractors from the full-service industry.
“I don’t think that business model will work – I don’t see how they will make money in the long run,” said Paul Swartz, a 30-year veteran broker with Sutton Group.
Swartz said private sellers typically end up turning to full service professionals when they realize how difficult it is to sell a home.
“I don’t think anything will really change,” he said. “People still want good service.”
Still, Dale said he will also be able to offer full service from experienced agents because of the volume of deals he expects his company to make.
“The average agent does maybe one deal every couple months. They have to charge higher fees to support that,” said Dale, who has also dabbled in traditional real estate as a co-founder of the group that at one point controlled high-end realtor Chestnut Park.
The back story behind Realtysellers though, is perhaps more interesting than the low pricing.
It was Dale’s bitter battle with the Toronto Real Estate Board and eventually the Canadian Real Estate Association that attracted the attention of the federal Competition Bureau.
The high-profile lawyer, who masterminded the buyout of the SkyDome (now called the Rogers Centre), accused the organizations of enacting rules that ran his original discount company, also called Realtysellers, out of business. The company shut its doors in 2006.
Dale eventually filed a formal complaint to the Competition Bureau, which started an investigation that led to the deal this week.
But it seems the worst nightmare of the established real estate industry is back – and with a vengeance.
The new company is a separate entity with different investors, but Dale said he kept the name because it still holds brand value. Stephen Moranis, a former president of the Toronto Real Estate Board, and a partner in the original company, is no longer involved.
Back then he was offering a listing on the MLS for $299. Now the stakes are much higher, and the market has been significantly changed.
The breakdown goes something like this: On a $400,000 home, a vendor might typically pay 5 per cent in total commissions, or $20,000.
Of that, 2.5 per cent or $10,000 would go to the listing agent, while the buyer’s agent would receive the same amount.
Under a plan offered by a discounter such as Realtysellers at 0.5 per cent for the listing agent, it would cost the vendor $2,000 to sell a $400,000 home. It’s up to the vendor how much he wants to pay the buyer’s agent.
Under new rules enacted by CREA this week, buyer’s agents who bring in a client must be paid at least a penny.
Queen’s University professor John Andrew said the entry of so many discounters, including Dale, likely means the ranks of marginal or under-performing full-service agents would be thinned out as the pickings get slimmer.
“The pressure is on for prices to come down, so some agents won’t be able to support themselves in that environment,” said Andrew, who predicts that discounters will rule the marketplace in the future.
So far that hasn’t been the case in the United States, where a lawsuit by the Justice Department against the National Association of Realtors resulted in a settlement in 2008 to open the market.
After two years, the NAR says that full-service brokers still make up more than 70 per cent of the market. However, industry insiders say it will take more than a couple of years to completely shift the market as consumers become more aware of their options
I think this guy is brilliant.
Whether you agree with him or not, he is first off the mark and I think will shock at how successful he will be. He will tap into so much pent up frustration with the R/E profession that people will list with him and I would bet will end up gladly paying him 0.5% if they are novices or if experienced and willing will just use a good lawyer to guide them.
I suspect that CREA will be amazed that 25% of all the business within 2 years will be done by this model. I agree with the professor that the marginal agents, part timers will now likely leave and it will actually benefit the full service full time agents and the discounters. I believe the ones in the middle will lose out. I believe that traditional real estate agents will be the last to appreciate how great and fast the "market" will drive commissions from the strastosphere and I would not be suprised to next see agents who bill by the hour like other professions.
