The fight is over. The Competition Bureau and the Canadian Real Estate Association have settled their differences and disputes. Sellers will now be able to hire an agent to post their listing on MLS for a flat or minimal fee. Lots has been written explaining the concept, yet nothing clearly addresses the question of how this change will impact the landscape of Real Estate and what exactly it means for you.
In my view, the answer is: not very much. There have always been a multitude of options for sellers who wanted to sell privately, without a Broker’s involvement. Yet, only a small percentage (actually less than 3%) do so. It is not hard to figure why.
Why would most sellers choose that route?
Generally, to end up with a greater net profit by saving on the realtor’s fees.
Do they actually end up netting more by not using a professional?
It has already been proven many times that the answer is a resounding NO. Why? Very simple, lets take a look at some of the major reasons.
Who is actually saving: the seller or the buyer?
If all the services that an agent provides the buyer are absolutely free (searches, showings, info on the market and recent sales, negotiating the deal, financing, advice, legal protection and insurance against fraud and misrepresentation), what would motivate the buyer to do all the work themselves, to give up all the benefits of a free service, and to focus on the private seller only? They, just like the seller, are looking for savings. The commission a seller is trying to save is the same commission a buyer is looking to gain. Both parties, in actuality, are competing for the same savings.
How much are the real savings?
On a $500,000 home, the fees you would potentially save would be 2.5-3% and not the full 5% because you would still have to offer the buyer’s agent their standard fee. Otherwise, an agent has no interest or incentive to show a listing that pays nothing vs. one that will pay them 2.5%. In the case of selling without the listing agent’s services, you would save approx. $10,000-$12,000. If you got an offer of $490,000, chances are you would consider that a good offer, would you not? You see how quickly you just gave away $10,000? A good agent would help you recover that and more. He would provide all the necessary services and insurance, save you lots of time, and when all is said and done, you end up netting more, even after paying the fees. If you are considering buying services “a la carte”, in other words, one service at a time, you may actually end up paying more than if you paid on a commission basis. Also don’t forget, you will be paying for the service, regardless of whether your property sells or not. In the case of a traditional approach, you pay in the event of a successful sale only. An a la carte service could potentially transition into an itemized, time-based fee, very much the way lawyers operate today. And I will not begin to talk about your ability to access opinions, advice, information, time or attention of your realtor the way you do when you deal with a traditional, full-service broker.
Are you qualified to handle it? Do you have the years of experience it takes to acquire the expertise and to develop the skills involved in executing this type of transaction?
Pricing, market knowledge, processes, paperwork, marketing, attracting and qualifying buyers, negotiating the deal, to name just a few. It took me 30 years and thousands of hours of thought, study, practice, preparation, experimentation, creating systems. Would I do my own taxes? Defend myself in an audit with Revenue Canada? Fix my own car? Cut my own hair? Not a chance. Even though the options of doing it myself are there, I hire the professionals who have the tools, knowledge, well-honed skills and expertise to handle this for me. For example, I recently had a situation with the fire marshall at one of my buildings. I called a few technicians and got some evaluations. Based on their estimates, the cost of updating the system was well into the thousands. After several months of dealing with different technicians, I finally met with a professional, who did a thorough evaluation of the building and systems and explained all the applicable building code articles. As it turned out, the system that I have is actually more robust than what the building code requires for this type of building. Not only did he save me thousands of dollars, but the system the others were proposing to install was actually a downgrade from the current system. Yet again, experience has shown me, that the risk and consequences of omitting a few important details by not using a qualified professional, who knows the field, far outweigh any potential savings. I always have to remind myself and my clients: “It is always cheapest to hire the best”.
Are you an expert negotiator? Negotiations are where thousands of dollars change hands within minutes. Are the dollars flowing towards you or away from you?
Will you be negotiating from a position of strength, especially if the buyer has a lawyer or an agent drafting the contract and negotiating on their behalf and in their interest?
Who will drive the traffic through your home? Are you an expert marketer?
MLS is a start, not the end. There is a multitude of methods and techniques that a good agent would deploy to drive traffic through your home. Not only will it result in greater chance of selling but most likely will translate into a higher price.
Who will do the professional photography, virtual tours and slide shows? Who will distribute it to the proper channels to reach the maximum number of potential buyers? How “digitally savvy” are you? Most buyers start their searches on the Internet and if digital aspects of marketing are not utilized to their fullest, you will be missing an important part of the marketing process, exposure and potential buyers. Will you place it on the various Internet sites and social networks frequently visited by buyers? How will you handle inquiries from sign calls? Neighbours? Internet leads? How will you qualify them? How will you coordinate, line up and conduct the showings? As you can see, there is certainly a lot to consider before deciding to rely just on MLS alone.
Who covers your legal behind?
Do you have insurance? In today‘s litigious world, buyers are quick to sue. So much for the perceived savings should that occur. Agents pay and maintain insurance against any such claims and are insured against fraud and misrepresentation. Unrepresented sellers are well advised to hire a lawyer and use their services. However they should be prepared to pay all legal fees whether the property sells or not whereas the realtor’s fees, for the most part, are charged only upon a successful completion of the sale.
Is an agent simply an expense or a return on investment?
I believe that those who contemplate doing this themselves simply don’t see value in what a good agent will do for them. And often they have a valid point. But a good agent will pay for himself and then some. Just like a good lawyer, accountant or any other professional. And that is why it is so important to do proper diligence when selecting the agent who will be a great investment and not an expense to you. What is the true value that an agent should deliver, not only to justify their fees, but to actually be a profit centre for you? This is a longer discussion which I am happy to have with you whenever you are interested (416-315-4561)
My friend and successful realtor Richard Silver puts it this way:” As a REALTOR®, I see myself as a marketer and negotiator providing services for a fee. If some Sellers feel that they can manage that part on their own, then I wish them all the best. It has taken years to develop a successful marketing plan. Good REALTORS® make it look easy, we act as a buffer and try to keep a very difficult process as calm as possible. Like any service well done it has lead consumers to think that the process is easy. Some consumers see the transaction as the only time we work; They don’t see the hours of preparing the house for sale, research to get the proper asking price, months of showings with buyers to educate them, licensing, ongoing education and insurance; one of our biggest jobs these days is to make sure that Bona Fide clients are exposed to the property and that clients do not lose proper perspective when negotiating.”
In conclusion, are you wondering what to do with this new found-freedom and how to exploit it? Well, you are not alone. Let’s put a few things in perspective. It is important to understand the origins of this change. In the past, the public demanded access to the MLS listings and in response, the Real Estate Boards created the MLS.ca site. They took all the listings from the realtors systems and allowed the public full access to them. In the current situation, it was not the public that demanded the change, but one lawmaker. The public already had the option of selling without using a broker or having to pay the fees. The only difference is that those who are going at it alone will now have access to one more site, the MLS. What does it all mean for you? Not much. If you were not thinking of selling your own house, then this change really doesn’t have any meaning or any impact on you and having access to the MLS system does not change anything at all.
In this particular case, having more options is good for the consumer not necessarily in the freedom they have in doing it themselves, but in forcing realtors and brokers to offer greater value to their clients by upgrading the quality of services they provide. At the end of the day, competition allows great service providers to shine and this discussion is all about service.
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What’s New in the News: The Competition Bureau and CREA come to an agreement. What does it all mean to you?
The fight is over. The Competition Bureau and the Canadian Real Estate Association have settled their differences and disputes. Sellers will now be able to hire an agent to post their listing on MLS for a flat or minimal fee. Lots has been written explaining the concept, yet nothing clearly addresses the question of how this change will impact the landscape of Real Estate and what exactly it means for you.
In my view, the answer is: not very much. There have always been a multitude of options for sellers who wanted to sell privately, without a Broker’s involvement. Yet, only a small percentage (actually less than 3%) do so. It is not hard to figure why.
Why would most sellers choose that route?
Generally, to end up with a greater net profit by saving on the realtor’s fees.
Do they actually end up netting more by not using a professional?
It has already been proven many times that the answer is a resounding NO. Why? Very simple, lets take a look at some of the major reasons.
Who is actually saving: the seller or the buyer?
If all the services that an agent provides the buyer are absolutely free (searches, showings, info on the market and recent sales, negotiating the deal, financing, advice, legal protection and insurance against fraud and misrepresentation), what would motivate the buyer to do all the work themselves, to give up all the benefits of a free service, and to focus on the private seller only? They, just like the seller, are looking for savings. The commission a seller is trying to save is the same commission a buyer is looking to gain. Both parties, in actuality, are competing for the same savings.
How much are the real savings?
On a $500,000 home, the fees you would potentially save would be 2.5-3% and not the full 5% because you would still have to offer the buyer’s agent their standard fee. Otherwise, an agent has no interest or incentive to show a listing that pays nothing vs. one that will pay them 2.5%. In the case of selling without the listing agent’s services, you would save approx. $10,000-$12,000. If you got an offer of $490,000, chances are you would consider that a good offer, would you not? You see how quickly you just gave away $10,000? A good agent would help you recover that and more. He would provide all the necessary services and insurance, save you lots of time, and when all is said and done, you end up netting more, even after paying the fees. If you are considering buying services “a la carte”, in other words, one service at a time, you may actually end up paying more than if you paid on a commission basis. Also don’t forget, you will be paying for the service, regardless of whether your property sells or not. In the case of a traditional approach, you pay in the event of a successful sale only. An a la carte service could potentially transition into an itemized, time-based fee, very much the way lawyers operate today. And I will not begin to talk about your ability to access opinions, advice, information, time or attention of your realtor the way you do when you deal with a traditional, full-service broker.
Are you qualified to handle it? Do you have the years of experience it takes to acquire the expertise and to develop the skills involved in executing this type of transaction?
Pricing, market knowledge, processes, paperwork, marketing, attracting and qualifying buyers, negotiating the deal, to name just a few. It took me 30 years and thousands of hours of thought, study, practice, preparation, experimentation, creating systems. Would I do my own taxes? Defend myself in an audit with Revenue Canada? Fix my own car? Cut my own hair? Not a chance. Even though the options of doing it myself are there, I hire the professionals who have the tools, knowledge, well-honed skills and expertise to handle this for me. For example, I recently had a situation with the fire marshall at one of my buildings. I called a few technicians and got some evaluations. Based on their estimates, the cost of updating the system was well into the thousands. After several months of dealing with different technicians, I finally met with a professional, who did a thorough evaluation of the building and systems and explained all the applicable building code articles. As it turned out, the system that I have is actually more robust than what the building code requires for this type of building. Not only did he save me thousands of dollars, but the system the others were proposing to install was actually a downgrade from the current system. Yet again, experience has shown me, that the risk and consequences of omitting a few important details by not using a qualified professional, who knows the field, far outweigh any potential savings. I always have to remind myself and my clients: “It is always cheapest to hire the best”.
Are you an expert negotiator? Negotiations are where thousands of dollars change hands within minutes. Are the dollars flowing towards you or away from you?
Will you be negotiating from a position of strength, especially if the buyer has a lawyer or an agent drafting the contract and negotiating on their behalf and in their interest?
Who will drive the traffic through your home? Are you an expert marketer?
MLS is a start, not the end. There is a multitude of methods and techniques that a good agent would deploy to drive traffic through your home. Not only will it result in greater chance of selling but most likely will translate into a higher price.
Who will do the professional photography, virtual tours and slide shows? Who will distribute it to the proper channels to reach the maximum number of potential buyers? How “digitally savvy” are you? Most buyers start their searches on the Internet and if digital aspects of marketing are not utilized to their fullest, you will be missing an important part of the marketing process, exposure and potential buyers. Will you place it on the various Internet sites and social networks frequently visited by buyers? How will you handle inquiries from sign calls? Neighbours? Internet leads? How will you qualify them? How will you coordinate, line up and conduct the showings? As you can see, there is certainly a lot to consider before deciding to rely just on MLS alone.
Who covers your legal behind?
Do you have insurance? In today‘s litigious world, buyers are quick to sue. So much for the perceived savings should that occur. Agents pay and maintain insurance against any such claims and are insured against fraud and misrepresentation. Unrepresented sellers are well advised to hire a lawyer and use their services. However they should be prepared to pay all legal fees whether the property sells or not whereas the realtor’s fees, for the most part, are charged only upon a successful completion of the sale.
Is an agent simply an expense or a return on investment?
I believe that those who contemplate doing this themselves simply don’t see value in what a good agent will do for them. And often they have a valid point. But a good agent will pay for himself and then some. Just like a good lawyer, accountant or any other professional. And that is why it is so important to do proper diligence when selecting the agent who will be a great investment and not an expense to you. What is the true value that an agent should deliver, not only to justify their fees, but to actually be a profit centre for you? This is a longer discussion which I am happy to have with you whenever you are interested (416-315-4561)
My friend and successful realtor Richard Silver puts it this way:” As a REALTOR®, I see myself as a marketer and negotiator providing services for a fee. If some Sellers feel that they can manage that part on their own, then I wish them all the best. It has taken years to develop a successful marketing plan. Good REALTORS® make it look easy, we act as a buffer and try to keep a very difficult process as calm as possible. Like any service well done it has lead consumers to think that the process is easy. Some consumers see the transaction as the only time we work; They don’t see the hours of preparing the house for sale, research to get the proper asking price, months of showings with buyers to educate them, licensing, ongoing education and insurance; one of our biggest jobs these days is to make sure that Bona Fide clients are exposed to the property and that clients do not lose proper perspective when negotiating.”
In conclusion, are you wondering what to do with this new found-freedom and how to exploit it? Well, you are not alone. Let’s put a few things in perspective. It is important to understand the origins of this change. In the past, the public demanded access to the MLS listings and in response, the Real Estate Boards created the MLS.ca site. They took all the listings from the realtors systems and allowed the public full access to them. In the current situation, it was not the public that demanded the change, but one lawmaker. The public already had the option of selling without using a broker or having to pay the fees. The only difference is that those who are going at it alone will now have access to one more site, the MLS. What does it all mean for you? Not much. If you were not thinking of selling your own house, then this change really doesn’t have any meaning or any impact on you and having access to the MLS system does not change anything at all.
In this particular case, having more options is good for the consumer not necessarily in the freedom they have in doing it themselves, but in forcing realtors and brokers to offer greater value to their clients by upgrading the quality of services they provide. At the end of the day, competition allows great service providers to shine and this discussion is all about service.
Add your feedback and comments below!... We'd love to hear your thoughts on this topic.
Put Vlad's Seller's expertise to work for you!... If you're looking to sell your home, contact Vlad now to get it done right.
Know someone who is selling their home?... Use the link below to Share or Email this article so they too can benefit from this knowledge.
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