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Realtor Cooperation Policy aims to boost transparency, sparks controversy over competition and seller’s rights

In January, the Canadian Real Estate Association (CREA)’s Realtor Cooperation Policy took effect. The policy mandates that realtors place publicly marketed residential property listings on MLS within the time frame their board or association states, which must be up to three days, unless an exemption applies.

“Publicly marketed” here refers to representing a listing to anyone not directly affiliated in a business capacity with the listing brokerage or office. It excludes direct, one-to-one communication with a person or agent.

Effectively, the policy ensures most existing listings end up on Realtor.ca rather than on different platforms.

 

The rationale: How and who the policy is meant to help

 

In a statement to REM, CREA says that the policy is ultimately meant to address the negative effects of limited exposure marketing tactics that can harm both sellers and buyers and which keep listings off MLS systems, such as the abuse of “Coming Soon to MLS” signage in front of homes that often didn’t end up getting listed publicly.

The association says, “We understand that some sellers don’t want their property listed publicly, and the policy does allow for this.” (There’s a disclosure and consent form for opting-out that notes sellers who choose not to publicly market their property may decline to place their listing on an MLS system if they complete the form.)

CREA says that more sellers on MLS systems means more choices for buyers, and ultimately more buyers for those sellers. “Cooperation between realtors makes MLS systems more efficient, valuable and effective for the industry and for clients. For example, competitive market analyses are more comprehensive if a majority of listings are posted to MLS systems.”

Although the change was supported by over 80 per cent of voting delegates from Canada’s boards and associations at CREA’s 2023 AGM, some in the industry find it problematic.

 

How things are playing out

 

Eric Skicki is the founder and CEO of BrokerPocket — which he describes as the largest real estate agent-only marketplace for off-market listings in the residential space in Canada. His company and those like it are deeply affected by the change.

The policy applies to all real estate agents who are CREA members (about 160,000). Skicki points out that CREA is a monopoly in itself and has almost complete control of all residential transactions in Canada. “There is no secondary player (or) secondary market with the exception of BrokerPocket.”

He says he’s spoken to numerous people in organized real estate leadership positions and learned that many aren’t interested in enforcing this rule. “They have zero incentive and zero interest. Some have even expressed that if enforced, they see this potentially as a liability to the board or brokerage,” he explains.

CREA says it continues to receive input from various sources regarding policy enforcement.

BrokerPocket believes in competition and consumer choice. It isn’t looking for a “carve out” from CREA’s policy just for itself. In a perfect world, the restrictions the policy places on competition would be removed to allow all competitors, including BrokerPocket, to compete freely, thereby giving realtors, and ultimately consumers, more product choices as well as competitive prices.

 

‘Sometimes, privacy triumphs (profit)’

 

Skicki feels there’s a misstep in CREA deciding how and where the public sells their homes. “I think they’re doing this with the intention of when someone sells their house, the only thing they’re seeking is profit.”

He explains that profit isn’t always the only driving force and that sometimes, privacy is a key consideration.

“An example of this would be a divorce case. If someone’s going through a divorce and they live in a nice neighbourhood, do they want a ‘For Sale’ sign? Do they want people Googling the house and seeing inside? Do they want open houses? (No), they probably want a discreet sale.”

A homeowner may not wish to publicly list their home for many other reasons, including physical or mental health concerns or convenience.

 

Lawyer involvement

 

To navigate competition law issues, BrokerPocket partnered with lawyer John Syme, who says he was surprised to learn about the policy and the restrictions it placed on realtors and their ability to offer clients various service options, including BrokerPocket.

For 20 years, Syme was in-house Department of Justice counsel to the Commissioner of Competition and the Competition Bureau. In that capacity, he was lead litigation counsel to the Commissioner in several precedent-setting cases, representing the Commissioner before the Competition Tribunal, as well as before the Federal Court, Federal Court of Appeal and the Supreme Court of Canada.

Since his 2019 retirement from the Department of Justice, Syme has provided competition law counsel to several private sector and government clients, along with training to a foreign national competition law enforcement authority.

He’s also co-counsel in two real estate industry class actions. “The focus of those cases are rules created and enforced by CREA and local real estate boards, like the Toronto Regional Real Estate Board (TRREB) … (the) rules place certain restrictions on brokerages and realtors,” he says.

“In the first of the two cases we filed, the defendants sought to have the case dismissed, claiming it was fatally flawed. We fought off that challenge, with the Federal Court ‘green lighting’ the case to continue. That Federal Court decision is now the subject of an ongoing appeal.”

Syme is currently providing legal counsel to BrokerPocket and has agreed to take an equity interest in the company. “I became involved for two reasons,” he explains. “When Eric reached out to me, I was impressed with his vision for BrokerPocket as a competitive tool to let realtors do their jobs more efficiently and serve their clients better. I also thought I could assist with the competition issues that, among other things, CREA’s Cooperation Policy appeared to raise.”

 

Background on pocket listings

 

Syme points out that pocket listings are not new — they’ve been part of the real estate market for many years. Traditionally, agents and brokerages communicated with one another about pocket listings through informal channels, like word of mouth and email. There was no comprehensive database or listing where realtors and brokerages could see what properties were available as pocket listings or market them to other agents and brokerages.

“This situation was disadvantageous to both residential real estate sellers and buyers and, by extension, their realtors. A seller who has chosen to offer their home by way of pocket listing might get a lower price for their property because some (perhaps many) buyers who might be interested in the property would never find out it was for sale. Buyers would be disadvantaged because they might never become aware of properties that would be of interest to them,” he notes.

 

Competition Bureau consultation

 

Syme explains the team has spoken with the Competition Bureau to disclose all facts and how there are multiple angles to consider. He points out the issue goes beyond how the policy affects companies like BrokerPocket — it also impacts competition between CREA’s members, which falls under restrictive practices, as well as the public and consumer choice.

Although the Bureau is governed by strict confidentiality rules and can’t disclose where its investigation stands, Syme indicates that he understands the investigation is ongoing and that, “The Commissioner has shown repeatedly that he will take enforcement action where necessary to address competition concerns.”

He also notes the recent settlement agreement the Commissioner entered into with the Yukon Real Estate Association to address Commissioner concerns with membership practices in the real estate sector. “We’re hoping the Commissioner/Bureau will consider taking action to address CREA’s Cooperation Policy,” he says.

Skicki emphasizes that BrokerPocket is not looking to pursue a legal case at this time. “We encourage dialogue and we’re seeking a peaceful resolution to this. We encourage (CREA) to do a member poll perhaps, to find out what the members want.”

 

Where do agents stand?

 

Skicki doesn’t believe the industry agrees with CREA having the right to dictate how people choose to sell their homes. “The agents we’ve talked to believe it’s not only legally wrong, (but) it’s also optically wrong. It sends the wrong message to the public that agents want more control, that agents want to somehow have this hidden agenda of making more money and more commissions and (are) trying to further entrap (the public).”

BrokerPocket has been speaking and having an open dialogue with realtors on the policy’s impact, including at a meeting held in February which Mark Jensen, broker owner and broker of record of The Jensen Team, helped to organize.

Jensen has been using BrokerPocket for nearly three years. He says, “(Their) offering equips us with a distinct advantage, enabling us to present our clients with homes they might not have discovered otherwise.”

There were about 15-20 realtors at the February meeting from different companies with different business models, all affected by CREA’s rule in various ways. Skicki highlights that most who attended and are speaking out about the issue are hesitant or afraid to have their name mentioned because they’re governed by CREA and their local board, both of which have the power to discipline members. 

The outcome of the meeting was to announce that BrokerPocket is “with the agents and going to be a voice for the agents.” Skicki says many people are reaching out to them. “We get a lot of inbound calls, we get a lot of questions, not only (about) how we’re conducting ourselves but what’s our opinion and (if) we think it’s fair.”

 

It’s about consumer choice and free competition

 

Jensen points out that the topic is crucial yet often misunderstood, with implications that can adversely affect consumers.

He asserts that in real estate, the concept of exclusivity holds tremendous worth. “While price is a key consideration, convenience often surpasses it in importance. It’s crucial to acknowledge that not every home is a perfect fit for traditional MLS marketing. Sellers should rightfully have a choice in determining how their properties are marketed.”

Realtors can approach each home’s promotion with a range of options for selling, including MLS and pocket listings. Jensen believes that emphasizing unique selling points only on MLS is not marketing.

“The preparation phase (painting, home renovations, staging, etc.) for optimal MLS exposure can span from weeks to months, so giving the client the option to list their house as an off-market ‘for sale’ could eliminate the inconvenience of this process and could potentially save them money. Now, these marketing avenues are being restricted.”

Jensen shares potential benefits to not implementing the policy that weren’t listed in CREA’s whitepaper, a study the association commissioned that helped lead to the creation of the policy:

  • May result in reduced exposure to tire kickers and (may) ensure your home is marketed to serious buyers
  • May result in reduced showings and save you time away from your home
  • May result in better offers and conditions as buyers appreciate exclusivity and are willing to pay a premium. The same reason Gucci, Prada and Rolex do not sell their products in Walmart
  • Sellers may prefer the option of convenience over price. Hence companies like Uber Eats, Carvana, etc.
  • May result in more privacy and keep random home viewers and potential thieves from viewing your home on mass distribution websites
  • Will result in not having the data of your home permanently available as far as price changes and days on market

He believes that not allowing a realtor to market their property will definitely affect the sale price. “That is the situation we’re in now. Can you imagine the car industry telling the public that they have to list their car for sale only on AutoTrader?”

Skicki highlights that BrokerPocket is pro-choice and believes it’s ultimately up to the consumer to choose how and when they sell their home, without CREA dictating where the listing goes. 

“I’m not anti-industry — I like the industry and I’m pro-organized real estate. I already expressed to a few CREA board members that I would be happy to work alongside them. I’m a former realtor and used to own a brokerage. I think agents provide an incredible amount of value.

I truly believe that once (consumers) actually look at the facts, (CREA) will reconsider, and this will either be abolished or they’ll look at having special exemptions for companies like BrokerPocket, which would in turn allow agents and the public to have more choice.”

He emphasizes it comes down to the public “not really (being) aware of what’s happening … The exclusions CREA presented I don’t think are justified or make much sense, and I think they further alienate their own members and ultimately the public.”

Further, Jensen points out the contradiction with part of the second point of CREA’s Pledge of Competition, which states: “A brokerage may offer any variety of services e.g. exclusive, open, MLS listings, etc. Boards and real estate associations accept MLS listings regardless of the price, commission rates or fees, or the division thereof.”

 

‘There’s a need for a B2B model — that’s what’s missing’

 

Skicki says CREA should be able to work together with the private sector and ultimately the public. “We’re coming at this in a spirit of collaboration and a spirit of finding the best solution for the industry and the public. We’re not trying to disrupt the industry or trying to do anything that will diminish the agent or somehow interfere with the mandate of CREA or realtor.ca. I think it’s time to recognize there’s a need for a B2B model — that’s what’s missing.” 

When REM asked CREA if it sees a need for this type of model too and if this would be a threat to the current model, its stance wasn’t clear: “Realtors cooperate and collaborate, making MLS systems more efficient, valuable and effective for the industry and for clients. It remains a business decision for brokerages or realtors to adopt or subscribe to other services.”

“There are numerous grounds that CREA’s up against, and I don’t feel that fighting this, even if they win, will gain them anything.”

 

– Eric Skicki, founder and CEO, BrokerPocket

 

Moving forward: The ask of CREA

 

Despite the challenges for BrokerPocket created by the Realtor Cooperation Policy, the company reminds its users of the policy and the agent’s requirement to comply with CREA’s rules when uploading a listing. BrokerPocket notes that it’s the only major national real estate portal in Canada that encourages CREA compliance. 

CREA says that the policy came into force in January and is still relatively new. “As we have throughout this process, we continue to work with boards and associations to help ensure they have the tools and information they need.”

Skicki acknowledges, “There’s still time to reverse course, open discussions and take appropriate measures not only to avoid legal repercussions, but also to be seen as progressive and pro-competitive. BrokerPocket remains prepared to engage constructively with CREA to find a mutually acceptable path forward.” 

 

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