An article about full-service realtors foaming at the mouth and advocating that discount brokers should not have access to MLS Canada prompted me to write this commentary. In the article, full- service brokers base their argument on the fact that MLS is currently the best selling tool available to realtors. And, since anyone can post a listing for a fee, full-service brokers are having trouble explaining their high commissions, as well as drumming up new business.
And, here is how my real estate “story” ties in with the article. Even before the thought of selling our house was on any kind of burner, including the back one, our phone and mail box was bombarded with offers from realtors promising us a superior service, unlimited hours of their time, access to numerous advertising venues, etc. Some even went as far as to claim, “Now that I’m here, all you have to do is pack!” I honestly thought that having so many realtors to choose from would be enough of a guarantee of good service. But, boy was I wrong!
When we eventually decided to sell our house, we hired a guy named Richard, (not his real name), because I insisted. I met Richard when he was a mortgage broker, and since he got me the sweetest deal of a mortgage then, I though he’d be just as good as my real estate agent now. I wish!
I should say that since I last dealt with Richard, he got out of the mortgage business, and moved from Toronto to Barrie, a picturesque town north of the city. While there was nothing wrong with Richard switching to real estate or moving to Barrie, there was plenty wrong with Richard helping me sell a house 100 km south from where he lives. That should have been the first tip off not to hire this guy.
The second came when we discussed Richard’s agent contract. Any conversation about a real estate agent’s commission starts with their claims that the industry average is five to six percent. Richard’s starting point was a commission of 4.5%. But, he decided to charge me less because I have pretty eyes and he has a good heart. (Yeah, right! This is where the competition part kicks in.) In addition, since we had two people fighting for the job, after a few calls back and forth, Richard won by lowering his commission down to four percent.
But, here’s the kicker. In the cooperating broker’s section of the contract, Richard put down two percent commission. A cooperating broker’s commission is the commission Richard would have to pay to an agent that brings in a buyer for my house. It is a common courtesy and a great incentive for prospective buyers’ agents to bring them to see your house. The only problem with this is that normally everyone expects the cooperating broker’s commission to be at least 2.5%. So, you see, Richard was not an altruist after all. Since we hired him to be our buying agent as well, and since he was very likely to get 2.5% back from the house we decide to buy, he would have still ended up with a 4.5% commission.
I confronted Richard about this, but he assured me that this was |not a big deal. He said that when a buyer wants a house, he wants a house, regardless what the cooperating broker gets for finding it. Well, this might be true in the sellers’ market. But, in the buyers’ market, which was the case when I was selling my house, it was the worst decision I could have made.
Not having 20/20 hindsight vision at the time, I signed the contract with Richard, tying myself to the guy for the next three months. During that time, his marketing plan consisted of posting the listing on MLS and preparing feature sheets that left much to be desired. He organized one agents’ open house, which completely tanked because this was not something usually done in my area. Of course, he wouldn’t know about it since he lives in Barrie. We also had one open house for general public, to which he couldn’t make it, but sent a fellow agent instead, who came late and had no interest to even familiarize himself with the house, much less find a buyer for it. I knew that about 15 families came to see the house only because that is how many business cards were left by their agents. And when it comes to feedback from house showings, well, don’t get me even started on that one.
After three weeks of sheer frustration, I decided we are wasting time with Richard. I told him to pull our listing off MLS. Most likely because he realized that he was not likely to sell a house in Toronto from Barrie, he didn’t even put up a fight. We both knew I wouldn’t be calling him back in three months time.
Eventually, I sold my house. The second full-service agent was marginally better. At least she knew the area, and it never even crossed her mind to offer less than 2.5% as cooperating broker commission. But, she didn’t sell my house either, at least not directly. It was, actually, the MLS service that sold my house. A family from Jamaica saw my house online. They wanted to move to Canada as landed immigrants and buy a nice house of a certain size and in their price range. Apparently, my house fit the description. They called a friend here in Toronto who hired an agent on their behalf. After only one showing, through which I walked their agent myself, we got an offer. The house was finally sold.
Thinking in retrospect of my experience with full-service realtors, their attempts to limit access to MLS to discount brokers just infuriated me. Times are changing, and MLS is becoming a powerful sale tool that may soon even replace real estate agents completely, be they full-service or discount. I cannot say that the world without real estate agents would sadden me. And, if they become obsolete because greed prevented them to change their act, well, it would serve them right!