Realtors battle over new ‘exclusive’ selling rules

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Opponents of the Canadian Real Estate Association’s (CREA) new rules restricting the use of unlisted, so-called “exclusive” home sales are charging that the move is anti-competitive.

On Jan. 3, CREA brought in rules that sellers of properties marketed as “exclusive” – also known as “pocket” listings – must add those properties to the Multiple Listing Service within three days or face sanctions. Critics have decried the policy as an attack on a seller’s rights to choose how they sell their home and an abuse of CREA’s dominant position as a provider of MLS data.

“What we say is that when you have a competitor or industry association dictating what’s in the public interest – making choices for consumers – that raises a red flag,” said John Syme.

Mr. Syme was for six years the general counsel to the commissioner of competition at the Competition Bureau, spending 20 years inside the federal agency before opening his own competition law firm in 2019. “If you look at the Competition Act, section 1.1 says the goal is to enable competition to allow for greater product choice. This is literally thwarting that.”

Mr. Syme has taken an equity position with tech startup BrokerPocket Inc. to serve as an adviser. BrokerPocket is an online marketplace on off-market listings for everything from new home contract assignments, commercial real estate and exclusive listings for residential real estate. CREA’s rules effectively ended pocket listings, which was the second largest source of BrokerPocket’s business.

Mr. Syme said he has spoken to his former colleagues at the Competition Bureau about CREA’s new rules – “We know they are looking at it,” he said – but also said BrokerPocket hasn’t filed any legal complaints and isn’t looking to get into a court battle with CREA. “The Competition Bureau has some power. The hope is they will enforce something to make the playing field more fair.”

CREA’s policy also limits the use of “Coming Soon” signs posted on or near a home, applying the same three-day requirement to post a listing on MLS after a sign is planted. These three-day rules apply to all regional real estate boards in Canada. Provincially licensed realtors are not required to be members of regional real estate boards, but without membership they cannot access the MLS system that is critical to the buying and selling of residential real estate across the country.

“It was kind of like killing a fly with a sledgehammer,” said Ross Halloran, senior vice-president, sales at Sotheby’s International Realty Canada and founder of Halloran & Associates. “My first reaction was, CREA is trying to protect themselves. … CREA was starting to receive a lot of complaints from buyer agents and buyers that these new listings were coming out and they would never make it to MLS. We had some brokerages in Muskoka notorious for that.”

Nevertheless, Mr. Halloran was a believer and promoter of exclusive listings – he made use of a Sothebys platform called ICON to manage pocket listings that were not on MLS, particularly for his clients with high-priced cottages and country retreats of the Muskoka Lake area, a market where sellers and buyers are sometimes celebrities or public figures who put a premium on privacy in their financial dealings.

“Because I deal with a lot of affluent sellers, at least 50 per cent of the time we had people saying: ‘We don’t want looky-loos’”, Mr. Halloran said. However, he believes it’s still possible to sell homes with exclusives, it just requires more legwork and getting creative with tools such as a listing website only accessible by a single-use password.

“We don’t view it as a restraint of practice,” said CREA chief executive officer Janice Myers. “We believe the co-operation policy increases transparency,” she said. “We think it’s very pro-consumer and pro-realtor.”

Ms. Myers said exclusive listings “hurts confidence in the industry” and co-operation – in this case using the MLS the way CREA decrees – is part of the obligation of being a realtor. “It is a member-to-member co-operative selling system. This duty to co-operate is a fundamental part of being part of a trade association,” she said.

Mr. Syme notes that many times in the past competition authorities have raised issues with the way real estate boards have wielded control over member’s businesses.

“The boards, as you know, they are very powerful. They can suspend you, terminate your membership,” said Mr. Syme. “Are they going to have a reawakening? ‘Oh my goodness we didn’t realize this was anti-competitive!’ Is that going to happen? Based on past conduct they fought tooth and nail; went to the Federal Court of Appeal twice. They are protecting their turf.”

Mr. Syme said CREA and realtors would be best served by voluntarily walking back the rules governing “exclusive” sales.

“We’d like to resolve this consensually. … We’re not looking to get in a street fight with these guys,” he said.