Flat-fee commission firm aims to open range of services

Thursday, April 29th, 2010

Derrick Penner

So far, Surrey-based realtor Mayur Arora has one client and the hope of establishing a flat-fee based business in real estate services that capitalizes on the Canadian Real Estate Association’s relaxation of its rules for access to its proprietary Multiple Listing Service system.

“This has opened a door of opportunity for me to do this, and I really wanted to try,” Arora said in an interview. “That’s exactly where we’re at.”

At the least, Arora’s launch will help propel the debate over MLS that has raged since February when the federal Competition Bureau filed a complaint with the Competition Tribunal on charges that CREA was being restrictive about who can access the service and what other services consumers have to buy from realtors in order to sell properties through MLS.

Arora said he wants his company, One Flat Fee, to be a cheaper alternative on the seller’s side for listing and advertising properties.

For a flat $649, he will simply list a property on MLS, post an ad on its website and on free advertising sites such as Craigslist and Kijiji, then forward all contacts from prospective buyers directly to the sellers, who have to handle the rest of the process themselves.

Arora will increase the level of attention clients can receive with different packages of services ranging from $1,049 to $4,999, with the last step covering the handling of showings, negotiations and conveyances, but still with no commission on the sales side.

He added that if a buyer uses a realtor to handle his side of the purchase, the seller would still likely owe a commission.

Arora sees himself catering to the for-sale-by-owner crowd of people who want to try selling homes on their own, but previously had no ready access to list their homes on MLS without hiring a realtor to handle more of the sale process.

Access to MLS is important because more than 90 per cent of home sales in Canada are advertised and cleared through the service.

Arora thinks his One Flat Fee firm is a perfect platform for him since he is only a few months into his career, not a veteran with a vested interest in the more typical commission-based business structure for realtor fees.

Arora sees it as making real estate “more customer friendly,” allowing sellers to have more control.

“That’s exactly what the Competition Bureau wanted,” Arora said. “They wanted the opportunity for customers to handle parts of the transactions themselves, which they couldn’t do before. Basically if you had to sell a house, you had to hire a realtor if you wanted to be on MLS.”

Jake Moldowan, Real Estate Board of Greater Vancouver president, disputes that notion. While the debate has been going on, he said realtors have long been able to offer clients “mere listings” of their properties on MLS, and have done so in markets such as Calgary and Ottawa.

Ottawa-area realtor Joe Williams has been in the news recently for his offer to post simple listings on MLS for $109, which he says has made him the “most hated” person in Ottawa real estate.

Moldowan acknowledged that in the past a lot of realtors probably did not want to offer mere listings because it wasn’t seen as very lucrative considering their own overhead costs.

“I could go out tomorrow and advertise mere listings, but I don’t understand, personally, how my business model would work that way,” he said.

In addition, he said that despite the Competition Bureau’s accusation, realtors have always been free to negotiate what services they will provide to buyers and sellers as well as the fees they’ll pay.

Moldowan said all the dispute between CREA and the Competition Bureau has succeeded in doing is focus attention on realtor fees. CREA did not need to change any of its rules to appease the bureau’s concerns, he added; it merely had to make amendments to clarify its existing rules. Federal competition commissioner Melanie Aitken has already rejected those amendments and said she will continue with the bureau’s complaint to the Competition Tribunal.

However, Tsur Somerville, director of urban economics and real estate at UBC’s Sauder School of Business, believes CREA’s rule amendments have opened up a new range of choices for consumers, if the American experience is any example.

Somerville said full-service brokerage did not disappear when the U.S. MLS system was opened to consumers, but agents quickly began to offer a wide range of services.

Somerville added that if the American experience is any teacher, Canadians can also expect growth in the number of companies offering to sell them more information about land transactions and data beyond what MLS provides, information consumers are more willing to pay for if they aren’t paying out big commissions to realtors.

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