One day in 2002, a self-professed computer nerd named Glenn Kelman scratched his head. Why was it, he wondered, that he could get more information about a $20 book for sale at Amazon.com than he could for a $500,000 home listed on the national Multiple Listing Service?
Later that year, Mr. Kelman founded Redfin.com. He describes the site as a cross between Century 21 and E*Trade. A more pointed description would be to call Seattle-based Redfin a dart aimed at the heart of the real estate industry. Internet-savvy companies like Redfin are breaking MLS's lock on listings data, which the industry uses to ensure that consumers buy and sell houses the traditional way: through real estate agents who are paid hefty commissions.
The move hasn't endeared Redfin to the real estate industry.
“I get death threats,” Mr. Kelman says. “I gave the finger to an industry that only exists to charge a commission on the most important buying decision you'll ever make. We save people money by automating most of the process.”
The battle to free real estate data is well advanced in the United States. Now, it is coming to a head in Canada as the technological attack on the old order is bolstered by both industry rebels and government: The federal Competition Bureau accuses the industry of dampening competition and consumer choice. To consumers whose houses often sell in a few days – but still net agents tens of thousands of dollars in commissions – Canada's real estate boom has made MLS's monopoly on information seem all the more anachronistic.
Like sectors such as travel and retailing before it, the multibillion-dollar Canadian real estate industry is finally facing a reckoning with the Internet's power to make data free and open.
The watchdog intervenes
“There is a lack of information and a lack of transparency in this industry that simply does not exist in any other industry,” says Bill McMullin, an industry dissident who owns Halifax-based ViewPoint Realty. “The real estate industry may be uncomfortable with this, but once you automate a lot of that data, you circumvent the need for a realtor. Things are changing, and they are changing quickly.”
In 2009, 465,251 homes changed hands on the Realtor.ca system, at an average price of $320,333. Owned by the Canadian Real Estate Association, the database amasses listings from Canada's 101 local real estate boards. Only registered real estate professionals can obtain key data such as selling prices, and only they may use the site to connect buyers and sellers.
CREA tightened its access policy in 2007, after rival real estate websites such as Toronto-based Housing123.com emerged. The interlopers downloaded data from MLS and enhanced it to draw consumers to their own services.
But the clampdown backfired, catching the attention of the federal Competition Bureau, which told the CREA that its rules “restricted consumer choice and limited the scope of alternative business models.” The bureau questions whether consumers should continue to be forced to employ a registered real estate agent to represent them throughout the entire listing and sale process on MLS, including the shepherding of all offers and counteroffers.
In a letter written last October, CREA said it hoped to resolve its differences with the Competition Bureau by Christmas. The bureau says it is willing to wait for a negotiated settlement, but it will move unilaterally if necessary. CREA says it needs more time to figure out what to do next.
“We've had a number of meetings with the bureau and are trying very hard to understand their concerns and come to a mutually acceptable solution,” says Katherine Kay, outside counsel for CREA.
Any resolution is apt to erode real estate agents' traditional gatekeeper status. One possible resolution would allow a seller's name and address to appear on a listing so they can be contacted directly by potential buyers. A bigger step would be to allow homeowners to list their homes on MLS for a small fee, then negotiate the sale of their homes without the help of an agent. As the process becomes commodified, consumers stand to benefit in lower transaction costs.
