A proposed class-action lawsuit alleges that some of Canada’s largest brokerages and real estate Association realtors are engaged in price-fixing to increase the commission.
Brokerages named in the lawsuit include Remax, Century 21, and iPro Realty Ltd., as well as the Canadian Real Estate Association and the Toronto Regional Real Estate Board.
The lawsuit claims that there is an agreement between brokerages in the Greater Toronto Area that applies to any individual listing on the Toronto Multiple Listing Service (MLS).
“When it comes to listing your home for sale, you usually sign an agreement with a listing brokerage,” broker and real estate commentator David Fleming told CTV’s Your Morning on Monday morning. “You pay a fee and then typically half or some portion of that fee is offered to the buyer agent as an inducement. So this suit is alleging that two and a half percent is the fix,” the suit said. Which is basically what forces people to do this.
Fleming explained that, on the MLS, “you’ll see a lot of two percent commissions through discount brokerages, half a percent to one percent. There are a lot that offer One Dollar, which is effectively a sale-by-owner, where you, as a buyer or agent, negotiate directly with the seller.
“So we’ll eventually see where the matter goes and I think there’s more to it than what meets the eye.”
Currently, a seller has to offer commission to the buyer’s brokerage. The buyer’s brokerage-commission-rule essentially forces the seller to offer the buyer’s brokerage the industry standard commission. If they don’t, lesser brokerages will show those homes to interested buyers.
“If you go back, say, sixty or seventy or eighty years, if you as a buyer wanted to buy a property you would physically walk into a brokerage and say, ‘What do you have for sale? ‘ If they had something you liked you would buy it through them — through the seller’s agent,” Fleming said.
“That was multiple representation, that was a conflict of interest, but that was standard. Now, if you want, say, to represent and you’ve hired an agent, they still only give you what you want under contract.” listing. So it’s anti-competitive, as we know it today. Eventually someone had the bright idea to say, ‘Why don’t we cooperate? We’re going to charge a buyer’s agent a brokerage commission to bring us a buyer, Let’s say why not pay half of our listing fee?’ And that’s the system that we have today where everybody cooperates and you have the MLS system.”
Fleming says the system works in Canada. “People just need to understand it,” he said.
“I’ll be honest, I don’t think it has much merit. [to the case] Just from what I see,” he said.
“There have been a lot of industry-level lawsuits over the years, but nothing has really been successful. But I’ll be interested to see what happens.”
CTV’s Your Morning contacted both the Toronto Regional Real Estate Board and the Canadian Real Estate Association. Both declined to comment as the matter is before the court.