Ellen Roseman, for those not familiar with the name, pens a consumer advice column in the moneyville.ca section of the Toronto Star's Monday edition. Over the past several months, one of Ms. Roseman's favourite topics has been about REALTOR® services. I'm a regular reader who often finds her advice to be instructive even her article about Buyer's Agency which, although not completely factual at least attempted to portray her view as unbiased. Her May 23rd column however, "Cut-Price agents can now offer MLS® listings," is lacking in common sense leaving me to believe that Ms. Roseman is biased against REALTORS®.
In this column Ms. Roseman laments that most people haven't caught up with the news about the "momentus change in real estate sales," offers a poll by TitlePlus® that shows only 11% understand the changes and from there commences her promotion of lawyer services and private sale companies in order that sellers would pay less than a 5% commission. Roseman neglected to do what she as an advocate for consumers ought to do - offer unbiased advice as I will demonstrate:
Roseman: only 11% understand the changes...still about 70% see value in working with a real estate lawyer when going it alone.."
Rebuttal: These two percentages have nothing to do with each other. Firstly, in Ontario at least, buyers and sellers must utilize the services of a lawyer in order to finalize a home sale there is no other option. Secondly, private sellers either have the time and inclination to devote to the sale of their property or think they do, and it is doubtful that this fits most sellers - at least not mine. They also tend not to involve any complexities. Finally, not being able to afford more than a few hundred dollars is a factor that drives many to sell privately.
Roseman: Sellers pay propertyshop.ca a discount real estate service run by lawyers a listing fee of $380. For this they get a talking sign. For an additional $109 the above will list the property on the MLS System® via a discount Ottawa brokerage plus the lawyers will charge between 1 to 2% of the selling price to "help sellers negotiate contracts.
Rebuttal: There is a lot wrong with this in my opinion - baiting and steering is to be frank how I construe this and also an absurd notion that this saves money. I don't approve of it when REALTORS® bait and steer and I most certainly don't approve of it when it appears to me that the legal profession is doing it. What Roseman didn't say was that these lawyers use the cheap listing to attract sellers into using their legal services. That is, in order to get the cheap MLS® listing, the seller must engage their legal service. I am waiting for the Competition Bureau to weigh in on this since baiting and steering are illegal as well, I believe it infringes competitive practices. Roseman opened her article with an example of paying a typical 5% commission on a $350,000 property - $17,500. She assumes both buyer and seller brokerages get 2.5% each or $8,750. Let us compare:
All things being equal, the seller will pay the buyer's brokerage the 2.5%. Lawyer fees at 2% = $7,000, talking sign fee $380, listing fee $109 for a total of $16,239 a savings of $1,261. In the meantime, the lawyer has his clerk handle most of the details while the seller spends his own money on advertising and brochures and his own time taking calls, showing the property, dealing with the buyer's side. Additionally, the lawyer knows diddly about negotiating sale prices or even what your home may actually be worth, nor did the brokerage who listed your property because they haven't set foot inside. Incidentally, some lawyers love to say that agents think of them as deal killers. A reasonable question then is: are they now willing to kill the deal given they have placed themselves in the midst of negotiations, provided the listing brokerage and make their fee based on a commission percentage of the sale price -presumably only if it closes?
Roseman: PropertyGuys.com meanwhile will take your web listing for $400 and charge you $300 for an MLS® listing. You get a bunch of pictures, a virtual tour and not mentioned, a kit containing an off the rack sales agreement plus some clauses. Then the possibility of having to pay 2.5% to the buyer's agent.
Rebuttal: What Roseman didn't say was that as with the Ottawa brokerage, propertyguys uses or used to use a Hamilton based brokerage and are calling REALTORS® to find a replacement. Why on earth would anyone with a lick of sense pay a fsbo company $400 then turn around and pay an additional $300 for an MLS® listing if the argument in the first place was for private sellers to list on the MLS System®? There are numerous brokerages that offer the listing only service, sales can be posted for free on various web sites and sales agreements had for $15 at Staples and even free on the net.
CREA's argument against allowing private sellers on MLS® was to ensure the integrity of the information contained within the system. Specifically, the listing information and comparative sales prices are the staples that sellers, buyers and their agents rely on and exactly why the MLS System® is so valuable. Brokerages listing private sales are still required to verify and ensure that this information is correct and up to date at all times. I can tell you that this is now being compromised. When a brokerage in Ottawa or Hamilton lists a property outside their area not only have they likely not even verified the seller is who they say they are, they probably haven't set a big toe inside the front door either to ensure the information provided by the seller and or propertyguys is correct. In addition, not all private sellers are reporting the sale price or even the true sale price thereby threatening the reliability of the information. Consider the following:
Roseman: Quoting from PG's web site: "Our sellers are generally pretty honest and well-intentioned folks, but we can't guarantee the accuracy of the information on this page."
Rebuttal: Generally pretty honest? That's quite the disclaimer to beware of fraud isn't it? I can assure you that my sellers are who they say they are, that they must demonstrate integrity before I take their listing and that the information contained on the listing is correct and timely because it is verified visually and entered and updated by me personally. Propertyguys is warning you the buyer, that they couldn't care less who advertises a house for sale. They after all, would collect up-front, the non-refundable $400 plus the listing fee, via a valid credit card. It is then left to the buyer's interpretation as to whether or not this seller is 'generally pretty honest.'
Roseman: Quoting the president of propertyguys on real estate salespeople: "their commissions have risen sharply with house price inflation, making them an expensive option for some sellers."
Rebuttal: Roseman chose not to test this statement and by not doing so failed to mention that commissions were once a 7% standard, then a 6% standard and even though she assumes it is now a 5% standard, it has for many years been negotiable by the seller. Exactly how he figures a decrease of 2% translates into a sharp rise is a secret calculation known only to himself. Essentially he insults the public's intelligence by attempting to mislead them into believing that: 1) even a 5% commission on a house valued at $100,000, 20 years ago is not parity with 5% on that same house valued today at $400,000, 2) House values can rise sharply based on the very activity by REALTORS® which caused them to rise but commission fees have no right to do the same.
In my opinion, only a personal bias would cause Ms. Roseman who writes about personal finances and champions the consumer's fight against a few dollars in bank fees or hundreds to spurious gas suppliers, to write such a flawed article.
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