Its good to see that the Competition Bureau is going after the real-estate brokerage industry ( report). Those 5% to 7% commissions to sell a house always seemed rather exorbitant to me. Indeed, asI wrote in a column way back, a case can be made that the industry operates like a cartel thanks to the control real-estate boards have over access to the Multiple Listing Service (MLS). Specifically:
If a homeowner wishes the broadest exposure for their house, MLS is the way to go due to its size. But to list on it, they and their agent usually need to agree to abide by conditions that effectively restrict competition among brokers and help preserve commissions in the 5% to 7% range.
Some brokers have tried to give consumers a better deal in the past by simply offering a listing on MLS for a flat fee of $500 or $600. But the real-estate boards countered by introducing minimum service standards. Under this restriction, agents could no longer post a property on MLS unless they also represented the seller for the term of the contract effectively making a flat fee of $500 or $600 uneconomical since the selling broker now had to spend time and money acting like a full-service broker.
Lets hope the Competition Bureau wins its case. Next, Id like to see it go after a few of the other cartel-like arrangements that siphon off so much of the income and wealth of working Canadian citizens. Ive spouted off about some of them in previous columns, for example:
1. Lawyers: Another conspiracy against the laity?(law society restrictions) 2. Milking the Canadian consumer(supply quotaspropping up milk prices) 3. School for thought(restrictions on school choices) 4. A better deal for consumers(banks protected by ownership restrictions)