Lawyer Lawrence Dale, who represented Fraser Beach, said the judge's decision effectively established that the industry's rules are restrictive. “In the United States, the government found that these identical rules were anti-competitive and the Department of Justice had them removed,” he said following the decision.
In another new model distinct from the likes of Housing123, Ottawa's Ziglu Real Estate Brokerage employs traditional real estate agents, but charges a flat fee to get someone's listing on MLS. The agents then take a barebones approach to the process, leaving the consumers to do the bulk of the legwork.
Ziglu charges half the commission of most realtors, and the company plans on dropping it altogether if the Competition Bureau gives consumers more access to MLS.
“We're obviously counting on the bureau to come through and allow people to order specific real estate services in the same way they'd order a pizza,” says Ziglu's founder, Gilles Ménard. “Right now we still have to represent the seller through the process, but we're expecting changes. Our whole business model is based on high volumes and low prices.”
A market too small?
There's a good reason the Canadian industry is fighting to keep its listings system exclusive, says Phil Soper, chief executive officer of Brookfield Real Estate Services, a subsidiary of Brookfield Asset Management Inc. that owns real estate brokerages Royal LePage Real Estate Services Ltd. in Canada and Real Living Real Estate LLP in the United States.
With a great database comes great responsibility, he says. An advantage of the traditional system is that anyone using MLS has an agent to help them through what can be a confusing process.
“Most of that information needs to be taken in the proper context and protected from mistakes,” he says. “With a central system, you are protecting the customer's listing – it is in the hands of people who constantly update their skills.
“Anyone who suggests that somehow organized real estate is protectionist, and created a model that others can't make a living at by charging lower fees, is saying something completely false,” he adds. “The problem is they can't attract high-performance salespeople and still make a buck – the best agents will make the best money and want to work where that is possible. The only reason someone would compete on price is because they can't compete on service.”
As well, there's a reason a high-traffic site such as Redfin has only just turned its first profit – there is little money to made offering cut-rate services. The model may not work in a market as small as Canada's, according to Mr. Soper.
“You look at something like Zillow and it can function with 0.2 per cent market share,” he says. “In Canada, you can't keep your doors open with numbers like that. It's like that in all our industries – we have a handful of real estate companies, a handful of banks. That's because just to exist, you need a pretty big chunk of market share.”
The upstarts disagree – and are anxiously watching the Competition Board for clarity on which services they can offer. Redfin considered entering Canada last year, Mr. Kelman says, but decided to wait until the regulatory issues were resolved. Meanwhile, Mr. McMullin wants to sell his tech services to the big brokerages, and Ziglu expects a crush of customers the minute it can start to hive off portions of a transaction.
Most people in the industry realize they are losing their monopoly on information. Royallepage.ca, long a leading real estate site in Canada, has fallen behind a site that only dabbles in listings – kijiji.ca, a free online classified service similar to Craigslist.
“Some in my industry feel that it will be a disaster if and when the rules change,” Mr. Soper says. “Yet as we debate, Kijiji grows in popularity. That doesn't mean the world doesn't need realtors – it means the world needs better agents who are trustworthy and knowledgeable and can walk them through what is usually one of the most financially significant transactions of their lives.”
Editor's note: An earlier online version of this story and the original newspaper version incorrectly stated that the industry won a court ruling against realtysellers.com. The court ruling was against Fraser Beach. This online version has been corrected.
