CORRECTION: This article contained errors in describing real estate rules and real estate law in Canada. The Canadian Real Estate Association has a rule providing that "The listing Realtor shall be available to provide professional advice and counsel the seller on all offers and counteroffers unless otherwise directed by the seller in writing." Pierre Beauchamp, chief executive officer for CREA, said in a statement that the association has not seen anyone "point to anything in CREA’s rules, regulations or policies which could be considered a ‘restriction’ " on real estate companies that charge a flat fee, and that CREA’s rules "do not establish or affect legal rights" in real estate transactions. Inman News regrets the errors.
In March 2007 the Canadian Competition Bureau, the country’s equivalent of the U.S. Federal Trade Commission and U.S. Justice Department’s Antitrust Division, met with limited-service real estate brokers in the U.S.
The meetings were part of a bureau examination (see Inman News) that eyed passed and proposed multiple listing service-related restrictions on limited-service and flat-fee brokers and whether those restrictions limited competition within the real estate industry.
The Competition Bureau on March 16, 2007, served Canada’s Realtor trade group, the Canadian Real Estate Association, with a federal court order that sought documents and other information as a part of a formal investigation (see Inman News).
Crossing the border
Two years later, Competition Bureau officials are still asking questions and meeting with U.S. brokers.
Chris Ballard, broker and co-founder of Georgia-based Century 21 Clickit Inc., said he recently met with Canadian officials to discuss the impact the company’s limited-service and full-service flat-fee business model has had on consumer choices.
"(The bureau representatives) feel like their biggest hurdle that’s preventing change (within the real estate industry) is the national MLS rules and bylaws," Ballard said. "In our business, we receive and negotiate offers for clients, but many of the clients … want to more closely control the transaction (themselves)."
Bob Linney, spokesman for the Canadian Real Estate Association (CREA), said while there is one MLS system that operates under a national trademark, there are 109 MLS systems within the country that are locally owned and operated.
Canadian Realtor group responds
"There’s no restrictions on business models," Linney said.
Competition Bureau representatives were unable to comment on their recent meetings due to confidentiality requirements, according to a spokesperson.
Ballard said he is under the impression that bureau representatives met with other flat-fee brokerages during their latest U.S. visit.
"They’re not just doing an investigation, they’re laying the groundwork to open up the doors of commerce," Ballard said, adding that bureau representatives asked if he would serve as a potential witness should competition issues between the bureau and the CREA reach the judicial level.
Linney said he was not overly concerned when informed of the bureau’s recent trip. …CONTINUED
"They’ve been investigating a number of business models for a few years. This would be another model they’ve taken interest in," Linney said, adding he doesn’t expect anything significant to result from the meetings.
While bureau officials did not comment on what was discussed during their meeting in Georgia, Ballard said he explained to bureau representatives that his clients today are typically industry-savvy consumers who choose not to work with a traditional brokerage company.
"Ten years ago I spent a lot of time with each consumer explaining, step by step, how the business model worked and what they could expect to receive. Today it’s different — the consumer is much smarter," Ballard said, adding that he believes the flat-fee model makes sense to those consumers who do not favor a real estate commission rate based on the value of a home.
Broker discusses flat-fee brokerage
Also discussed during the meeting was the current business climate for flat-fee brokers.
Ballard said while his office experienced a decrease in business activity last year, it was less than what traditional brokerages witnessed, citing MLS figures that indicated business was down by an average of 34 percent for all brokerages while his company experienced a 22 percent drop in business.
"It’s (the flat-fee business model) going to be a growing segment of the overall real estate industry — it makes sense to a consumer," Ballard said.
He added that he informed Canadian bureau representatives of MLS-related legal issues he’s encountered in the U.S., such as MLS restrictions that prevent properties under certain types of listing agreements from being uploaded to Realtor.com.
Century 21 Clickit encountered an MLS that required a certain number of photos to accompany a property in order for that property to be listed within the MLS, Ballard also reported.
"With my business model I have different packets with different price points, and the price varies according to what’s included," Ballard said. "A low-price-point package may include three photos. I feel like that (the amount of photos with a listing) should be the consumer’s choice."
Clickit is currently fighting an MLS policy in South Carolina that requires members to have a brick-and-mortar office in the region.
The U.S. Justice Department is engaged in a legal battle with the Consolidated MLS in Columbia, S.C., over several allegedly restrictive policies, including a policy that allegedly banned members from operating out of a home office and required broker offices to be located within the MLS’s service area (see Inman News).
"I think it’s a matter of time before the firewalls (in Canada and the U.S.) are taken down," Ballard said.
Erik Pisor is a freelance writer in California.
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