There’s no evidence that the sales-by-owner model and lower-commission alternatives are making significant headway; there is no evidence they aren’t. No one’s certain.
But Mr. Soper’s not worried. The threat from technology? He points to other technological revolutions that haven’t panned out: “Grocery Gateway, we were going to have intelligent fridges…” The Competition Bureau’s efforts? “I’d say in the aftermath of it all, nothing’s changed,” he says.
He adds that most of the new ventures aren’t turning much, if any, profit. Part of the reason is that real estate services have low profit margins, he says. In order to cut commissions, you need high volumes.
“While we’ve looked at it, and while there has been a lot of interest at the low end for four or five years now, I don’t see anybody making money,” he says. “The full-service brokerage remains the most preferred model in the country, or at least the model with the highest level of satisfaction. We’re not investing in the alternative brokerage model any time soon.”
While the proportion of people who want to use alternative models has remained the same, the number of companies catering to them has risen, says Gurinder Sandhu, executive vice-president at Re/Max Ontario-Atlantic.
“So there’s less and less to go around for each one of those players.”
Will the stagnation of house price growth be the catalyst that ultimately changes that? With the new players raising their game and the Competition Bureau not backing down, Queen’s University professor Mr. Andrew, for one, believes that the commission revolution is still likely to occur.
“I think the full-service real estate agent who is charging full commission and providing the full host of services is probably going to become few and far between.”
AGENTS OF CHANGE
In addition to companies such as Propertyguys, Comfree and Quebec-based DuProprio, which cater to people who want to sell without a real estate agent, firms have been popping up with a variety of business models. Here’s a sampling:
A Toronto brokerage whose agents charge sellers a 1.5-per-cent commission, which the agency boasts is “a savings of at least $5,000 on a $500,000 house.” Realosophy recommends sellers pay the buyer’s agent 2.5 per cent, because otherwise fewer agents might bring clients to see the house. “In urban centres, this is a generation that uses things like wedding planners,” Realosophy’s John Pasalis said. “At the end of the day, people still need help.”
A new startup focusing on southwestern Ontario that allows agents to compete for business in an auction-style process, which the company says can save thousands of dollars in commissions.
A Canadian online service that markets itself as being akin to an online dating service, matching consumers with real estate agents throughout North America.
A Toronto-based service that employs real estate agents but it pays them differently. Rather than being commission-based, they are paid a salary plus a bonus that hinges on customer satisfaction as opposed to sales. TheRedPin.com still takes standard commissions from clients, but returns a portion in the form of rebates. It counts Onex Corp. founder Gerry Schwartz as a backer.
An online service for buyers and sellers, owned by Rogers Communications, that has recently obtained a brokerage licence, primarily so it can access more data. It is in the midst of rolling out its newest services across Canada, works with agents from all of the major brokerages, such as Royal LePage, but it is pressuring commissions by offering consumers a rebate of roughly 15 per cent of their commission. “This industry as a whole has been determined to control the speed of progress and innovation, and has been successful in slowing innovation,” said Lawrence Dale, group head of the real estate business at Zoocasa. “It’s as if progress is only permitted if it does not upset the status quo and is available to everyone.”