Wow, this is one that’s going to spark some debate. The Toronto Real Estate Board is facing some very heavy allegations after a U.S. expert on competition and antitrust issues released a report saying that TREB is engaging in practices that are harmful to homebuyers and consumers, and deny them the power of knowledge and the right of choice. If this is true, TREB, which is known as one of the holy grails of real estate here in Canada. But, seeing as how the Board is going to be facing a Competition Tribunal on Monday, it sounds like these are allegations that people must at least consider.
The report was released by Gregory Vistness, vice president of the consulting firm Charles River Associates in Washington; and it’s an astonishing 189 pages long. Mr. Vistnes was commissioned by the Competition Bureau to investigate TREB’s practice and in the report he argues many points and makes many accusations against the Toronto Real Estate Board.
“TREB has abused, and continues to abuse, its substantial market power and control of relevant market to reduce competition and protect its member brokers’ interest at the expense of consumers,” he starts off in the report.
It continues on to say, “TREB’s use of the MLS to control how, and even whether brokers can compete in the GTA raises serious competitiveness concerns.”
Essentially what Mr. Vistness is saying is that the Board is using their power within the GTA real estate market to control how much power goes up on MLS, and what can be seen by consumers and private real estate agents from small brokerages. This forces homebuyers to go to larger chain Realtors, limiting competitiveness in the Toronto market and giving the edge to the major players. This can be evidenced by the fact that of the $40 billion that was made in commissions on last year’s sales alone, the five biggest brokerages in the GTA accounted for raking in 70 per cent of that. ReMax and Royal LePage made up half of that 70 per cent on their own.
The report also says that until November of last year, TREB also prevented some smaller brokerages from accessing important information that should be available on MLS. That information would include things such as what a home had sold for previously, which would give homebuyers and Realtors a better idea of what the home is worth, and whether or not the owner is asking too much for it.
The presence of “VOWs,” Virtual Office Websites, also came into practice last year and TREB was very public about how they’d be good for the market and provide more people more access to important information. However, once the websites were up and running, TREB allegedly denied them access to much of MLS, supposedly preferring to give that information to the bigger brokerages.
In their defense, TREB has said that privacy concerns prevent them from posting all the information available about a property on MLS. Mr. Vistnes though, disagrees. Competition is necessary, he argues; and he’s not wrong. It’s important in any industry, but when it’s not present in any real estate market, it’s homebuyers that are going to pay the ultimate price – regardless of those broker commissions.
This is because if a Realtor wants to sell a home badly enough, or wants to leave a home on the market badly enough, they can do so simply by limiting the amount of information a homebuyer has.
For instance, if a homebuyer can’t see on MLS what a Realtor’s commissions are on homes, they might not be able to see that their Realtor is only taking them to see homes that have the highest commission attached to them. By opening MLS up and allowing buyers to see all that info, it provides for a more level playing field.
Keeping the fact hidden of when a home was last up on MLS can be another strategy used if homebuyers aren’t totally on the up and up about a home’s history. Theoretically, if a home sits on the market for too long, a Realtor could pull it from MLS, only to put it up as a new listing several days later. Buyers wouldn’t know the difference, and they may even give it priority for being “new,” when really it’s not. Unfortunately, this practice has become so common among brokerages in the past that it’s earned the term “gaming.”
Mr. Vistnes says that by opening MLS up to everyone, and allowing anyone to see that information, it would also prevent conflicts of interests – cases where one Realtor acts as the representative for both the buyer and the seller. According to the report, this happened in abut 10 per cent of real estate transactions in the GTA last year.
Other than stating privacy concerns, TREB hasn’t really given any real answer to the allegations. When publicly asked on Friday about the report Mr. Vistnes put on, the board declined to comment.
It is known that Chief Executive Officer of TREB, Don Richardson, will take the stand at the Competition Tribunal on Monday afternoon. Hopefully after that, further information will be disclosed and one way or another, Toronto homebuyers can feel more confident about the information they’re given once again.
What do you think? Is the Board abusing their power by limiting the amount of MLS information available? Or are they still providing a reliable, responsible service to people within the real market of the GTA, and this report has got it all wrong? Let us know by commenting in the section below or by Liking us on Facebook and joining in on the conversation there!
