Buying a new house is a complicated, and expensive, proposition. The Competition Bureau's complaint that the Canadian Real Estate Association and its Multiple Listing Service system are anti-competitive is a welcome, pro-consumer move that could allow sufficiently brave buyers to take on more of the complication themselves, while reducing their expense.
Ninety per cent of all home resales go through the MLS, controlled by the local real estate boards that make up CREA. The problem is not this virtual monopoly per se, but, in the Bureau's words, that "consumers have been denied the benefits of competition in the supply of residential real estate brokerage services." To play in the MLS sandbox, brokers and agents have to play by CREA's rules. They can't just post a property to the real estate marketplace through the MLS. Potential buyers are directed to deal with the seller's agent, who must assist the seller throughout the entire process.
No one doubts that many brokers and agents provide good service. Given the level of responsibility that goes into the home purchasing decision, many find comfort in them.
But then there are those commissions. At the standard 6 per cent rate, a home sold at the average price of $337,410 would yield over $20,000 in agent commissions. That's a lot of money, and many consumers bristle at the cost.
Given how expensive homes are to begin with, who can blame them? Prices are rising at double-digit rates annually, and even broker and agents don't truly offer a full service in the home-buying process: lawyers, home inspectors, mortgage brokers and governments usually get a cut too.
A rival group could, in theory, build a competing system that reduces the MLS's dominance. But the MLS is a one-stop shop that works because of "network effects" described by the Bureau, its value increasing with every new property posted. Other industries that use a single playing field - like stock markets or telephone land lines - now allow many different players to offer different levels of service. But even under CREA's proposed changes (made in advance of the Bureau's complaint), local real estate boards could still veto agents who would prefer to offer fewer services in exchange for less money. Buyers and sellers who want to deal with each other directly through the MLS would still be largely out of luck.
Unless the parties settle, the Competition Tribunal will have to rule on the complaint. The basic principle should be clear. Yes, buying a home investment is the largest investment most consumers will ever make, but they should be able to choose how much help they want in the process.
