A detached home for sale at 97 Redwood Avenue in Toronto on Tuesday, April 7, 2015.Darren Calabrese/The Globe and Mail
The gossip among real estate agents across Canada this weekend is likely to be all about the fallout from the Competition Tribunal's move to undo the industry's virtual monopoly over key home sales data.
Out of earshot of their clients, that is.
The fear among brokers is that liberating this information will lead to the inevitable Uberization of the residential real estate business, and all that entails.
Gone will be the days of high fixed commissions and concentration of deals in the hands of relatively few larger brokers. And the door will be thrown wide open to online discount brokers and do-it-yourself house sellers.
Or not.
On Thursday, a tribunal sided with competition watchdog John Pecman in a long legal feud with the Toronto Real Estate Board (TREB) over access to the industry's Multiple Listing Service (MLS).
Full details of the decision aren't out yet, but it's expected the decision will force TREB to give online brokers access to key pieces of information, such as past and current sales prices of houses, the length of time properties have been on the market and real-time price changes.
The decision directly affects the Toronto real estate market. But because MLS is owned by the Canadian Real Estate Association – the national organization of brokers – it's likely to set a precedent for the rest of the country.
Industry fears may be overblown. It's been eight years since realtors in the United States settled a similar antitrust case, forcing them to share their sales data with Internet brokers.
At the time, the government argued that breaking up the closed MLS system would reduce transaction costs and drive down commissions, of typically 5 per cent to 6 per cent.
The experience since has been mixed. Yes, the settlement has democratized the data and allowed online database intermediaries, such as Zillow, to thrive.
But it turns out that most Americans still want the hand-holding experience of a real, in-the-flesh broker when they buy or sell a property.
One consequence of this devotion is that commissions have held up surprisingly well. On average, they've actually firmed up slightly since 2008.
The U.S. settlement put more power in the hands of buyers and sellers. And better knowledge on both sides of transactions invariably fosters more efficient markets.
But there is no evidence that it's undermined the real estate broker model, as the Internet has done to travel, taxis, books and parts of financial services. Inefficient intermediaries are being squeezed out all over the place.
So it suggests that perhaps there's something fundamentally different about buying and selling a house.
For one thing, most people buy (or sell) a house just a handful of times in a lifetime. And it's often the most valuable chunk of their accumulated wealth. So it's not a transaction that you want to mess up, with bad advice or none at all.
Move to a new city, and a good real estate agent can be your best friend, providing advice on everything from schools and shopping, to electricians and lawyers.
Knowledge is even more important on the selling end. There is a strong incentive for sellers to find the hottest agents, encouraging greater industry concentration.
Another reason that commissions have held up so well in the United States is that too many sellers are reluctant, and perhaps afraid, to negotiate. Brokers may be more willing to accept discounted commissions than you might imagine, particularly in a down market.
The way commissions are shared between the buying and selling agents may also inhibit competition. Agents have a greater incentive to show their clients houses where the seller's agent is offering a heftier commission. And they are probably less likely to steer buyers to houses being sold by homeowners without an agent.
At the end of the day, the significance of the Competition Tribunal ruling is that it gives buyers and sellers more information, and in theory, more power.
Discount brokers currently have a relatively small share of the market in most Canadian cities – perhaps 5 per cent. Giving these companies access to more MLS data should allow them to make inroads.
The U.S. experience suggests that disruptive change may still be years away in the real estate business.
If you want it to happen faster, haggle with your agent the next time you sell your house.