Our thoughts on the Competition Bureau and CREA

14 11 2009

There has been much confusion and misinformation in the media with regards to the Competition Bureau and it’s proposed settlement with the Canadian Real Estate Association. We would like to state our company position on the matter.

This is not a debate about commission nor competition. The marketplace has, and always will, take care of that. Consumers already have a choice about fee for service and whether they engage the services of a REALTOR® at all, so we put that argument aside.

This should also not be a debate about paving the way for innovative business models. Although that sounds like a tidy summation of this allegation of the Competition Bureau, this debate reaches well beyond such simplistic descriptors.

This debate is, and should be, about the mission which lies behind the 3 Pillars of the MLS® trademark and the accompanying 7 Interpretations, chiefly consumer protection and fiduciary duty to the principal. By leaving Interpretations 2 and 4 in place (to be available to provide advice and counsel, and be accountable for the accuracy of information submitted to the Board), the Competition Bureau demonstrates that Agency duty plays a role in consumer protection. However, by deleting Agency as a pillar, as well as Interpretations 1,3 and 6, (that the listing REALTOR® manage the offer and remain the agent of the seller throughout the term of the listing contract, and that the Seller’s contact information not be provided to the public), the Competition Bureau seems to imply that there can be a shortcut to providing fiduciary duty and protecting the consumer. We believe you can’t have it both ways.

Here is what that shortcut looks like: The only way to ensure protection of the consumer under these proposed changes is to rely upon the Cooperating Broker to act, absent a Listing Salesperson during negotiations, with an extra duty of care and due diligence, i.e. doing the Listing Salesperson’s job. This describes the typical ‘For Sale by Owner’ property that is sold by a REALTOR® who is put in the position of educating and protecting both Seller and Buyer. The proposed MLS® changes merely formalize and validate this shortcut if the responsibilities of the listing REALTOR® to manage the offer process and all of the steps toward closing date are removed.

We question why any REALTOR® would choose to put himself in the position of being liable for a transaction without being present for the contractual negotiations between the principals. In addition, why would a REALTOR® put a consumer in the position of risking personal and property safety by providing Seller’s info on a public database such that anybody could presumably make an appointment directly with that Seller? Is nobody concerned that a Seller might accept more than one offer on a property, or accept terms and conditions that are not in his best interest because he doesn’t understand the contract and attendant paperwork? The list of calamitous outcomes is potentially very long. To whom will the Seller complain when he finds himself in a legal mess, or is visited upon by a thief (or worse) because nobody is governing the showing process?

To the public and fellow REALTORS®, the MLS® system is a credible database; but it doesn’t end there. Others who rely on accurate information from this database are mortgage financing companies, insurance companies, MPAC and others. We strongly believe that the listing REALTOR® has a responsibility to be more than a flow-through of information and that the unbundling of real estate services will result in the erosion of this valuable database as a resource, not only for our industry but for our peripheral partners.

There is no lack of opportunity nor lack of tools available to the promoters of these changes to the MLS® model to create their own marketable system. Parallel systems can operate very well together in today’s marketplace, providing the consumer with as much choice as would be expected in any industry. More importantly, the consumer would know what he is getting when he engages with a REALTOR® under either system.

The defenders of these proposed changes suggest that the MLS® is merely a coveted marketing tool. We posit that this notion is both naïve and ill-informed. MLS® represents a community of professional REALTORS®, not simply an advertising service.

Our position is that, for the sake of consumer protection, the Pillars of the MLS® and its Interpretations should remain intact. They serve professional REALTORS® and the clients with whom they work very well, and work in tandem with the tenets of provincial and federal regulations under which REALTORS® must operate. There can be no contradictions. Real estate is a complicated, serious business and to suggest that the public would be well served under an MLS® system that allows for anything less than full service and all available mechanisms of fiduciary duty is mere folly.

In the marketplace today there is a forum for sellers who choose to represent their own interests and to operate without a nod to the principles of Agency Law such as disclosure and competence. The MLS® system operates with a mandate to uphold standards of business practice which are much more rigorous. We believe that, when a consumer chooses to engage the services of a REALTOR® under the MLS® system, there should be no compromise in standards of practice. It is these rigours that protect the parties to the transaction as well as the REALTORS® themselves from legal entanglement.
Let there be consumer choice, but let us be clear about what that choice is really about. Under the proposed changes to the rules of MLS®, the consumer would be choosing what level of protection they want, not simply the amount of commission they want to pay based on services provided because they can do that now. We believe it would be a grievous error to mandate compromise in consumer protection and dress it up as consumer choice.


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