Sunday, August 01, 2010

CREA shuts down 1 cent MLS listings

In May Dawson Pereira launched a brokerage service touting “one cent” listings on the Multiple Listing Service. A former ReMax agent he was charging $600 to list property in the database, but if the home was sold within 10 days he refunded $599.99.

Excited people looking to save on the costs of listing in the MLS database started pouring in and his business was booming.

But on July 23rd the Toronto Real Estate Board and the Canadian Real Estate Association shut him down, saying he was in violation of regulations.

“I didn’t realize I was breaking any rules. I was just offering people an alternative, but they gave me a major hard time,” says Pereira. He was just one of many discount companies because CREA was accused of restricting competition by the federal Competition Bureau.

Except shutting him down implies they're just doing more of the same: Restricting competition. Their regulations appear to have been designed to prevent competition.

One of the regulations he violated was listing clients' contact info on the MLS website, allowing buyers to contact sellers directly without going through an agent... this is a big no-no according to CREA who makes their money off agent fees.

“They basically want everyone to contact an agent first so they can make their commission, but that doesn’t save the consumer anything,” said Pereira, who has been forced to terminate all listings and give refunds to existing customers.

The Competition Bureau this year managed to CREA to change some of its rules, but one of the rules CREA refused to change was regarding the seller's contact info appearing on the MLS websites.

That one regulation is now the subject of a court case between the Competition Commissioner Melanie Aitken and CREA.

“CREA’s rules were amended to clarify that a seller’s contact information can be included in the Realtor only (private) remarks section of a listing,” says CREA lawyer Catherine McKenna. “This means that a Realtor may direct buyers’ agents to contact the seller directly for appointments if the seller instructs the Realtor to this effect in writing.”

That means the seller’s name is still allowed on the MLS, but in a section accessible only to agents. (Which means CREA still gets a commission.)

This doesn't help sellers at all, says Georgetown resident David Fraser. He signed up with Pereira. Fraser says he could have saved $15,000+ in commissions on his home which was listed for $337,000. “The MLS has a lot more reach, but it doesn’t do you any good if no one can contact you directly,” says Fraser.

Pereira is also in trouble with CREA for using their MLS and REALTOR trademarks incorrectly. His websites and contained the words MLS and Realtor, but did not include their logos. Apparently they're also upset because the word "Realtor" appears in lower case in his domain name.

Pereira thinks the so-called changes in the real estate business may be an illusion. I agree, they made a few minor changes to keep the Competition Bureau happy, but they're still restricting the competition.

Its a bit like slowing down 10 kmph while speeding, but you're still doing 110 kmph anyway.

If sellers can save money by avoiding realtor fees and selling privately I say more power to them. There is no law saying they have to go through a realtor. Only CREA regulations require that and those regulations stifle competition in what is essentially a monopoly for Canadian home listings.

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