Do real estate agents provide value?


Private sellers shaking up real estate industry, which guides homeowners through the sales process, has made its biggest gains on the East Coast.

Facing erosion of their business model, realtors are ratcheting up the rhetoric to protect their tur

Here is a third party comment on this article:


“There are good real estate agents who provide value. The problem is that the good ones are the exception rather than the rule. There are two basic problems:

1. The rate of  commission for what is done; and
2. The rules  that allow  the agent to  represent both the buyer and the seller (this one is practically criminal).

1. Rates of commission – take a house  in North Toronto  that sells for 1,500,000. At 5% this would  be $75,000.00. An agent would  have to add more than $75,000 worth of value to justify this. Very few do. Most of the value the agent provides is to get the property into the MLS system. That said, you no longer need an agent to accomplish this. (If you add both the Ontario and Toronto land transfer taxes, the costs to buy and sell  this house are approximately $125,000. The bottom line is that agents and taxes are contributing to property inflation. It’s time for agents to go or at the very least justify their value.)

2. The rules that govern real estate agents allow them to act for both the buyer and the seller. Under the common law, the agent owes a fiduciary duty to the client – in most cases the seller. But, by allowing the agent to act for the buyer at the same time, the real estate agent cannot and does not act in the best interests of the seller. Rather, the agent acts in the best interests of the agent (who could have known?).

It is the dream of every agent to both list and sell  a house (“double end” the transaction). Since, this can be done only by acting for both the buyer and the seller, it is clear  that that  it is the dream of every agent to NOT act in the best interests of the seller client.

It’s time for the agents to go.”


Charlottetown Globe and Mail Update Published on Wednesday, May. 19, 2010 7:50PM EDT Last updated on Thursday, May. 20, 2010 7:00AM EDT

Gordon Ives is the sort of customer who keeps real estate agents awake at night: a former customer.

Last year, after several years of trying to sell his Charlottetown home through an agent, the retired banker decided to change tack and find a buyer on his own. He calculated how much a conventional sale would cost him in commissions and sliced that much off his asking price. Four months later, it sold.

Net cost to him of selling it himself: zero. Net cost to the real estate industry: about $15,000 in lost commissions – and one client who is determined never to use an agent again.

“I hate to say this because I have some family members that are agents, but it’s really not that difficult to do if you’re comfortable dealing with people,” Mr. Ives says. “This is a wave that’s starting to build, and people have to realize that change is possible.”

Agents have long looked askance at people who wanted to sell their houses on their own, but those sellers were such a small part of the market that the industry rarely worried about them. That’s changing, and fast. Facing the erosion of their business model at the hands of a Competition Bureau that is intent on opening up the industry to new players, realtors are launching campaigns from coast to coast to discourage do-it-yourselfers and position themselves as the only sane way to sell a home.

The soft sell is being done on television, with an advertisement recently launched by the Canadian Real Estate Association that tries to show all the things an agent does to help – “Need staging advice? I do that too.” The hard sell is coming in other forms, as real estate boards ratchet up the rhetoric in a bid to win private sellers back.

In Nova Scotia, for example, homeowners who put their properties up for sale without the help of an agent can expect a scary letter to land in their mailbox, making sure they understand the hazards of going it alone. The letter, which comes from the Nova Scotia Association of Realtors, warns homeowners that they are “accepting with open arms increased risk of liability, threats to you and your family’s safety.”

“Realtors protect you and your family from any ill-intended strangers that will come in to your home under the pretense of wanting to buy,” the letter advises, before it goes on to warn of lower sale prices and longer sale times.

It’s a new position for the industry, which is used to having a near-monopoly on sales in Canada. It is widely accepted that about that 90 per cent of all home sales in Canada take place through the Multiple Listing Service maintained by the country’s real estate boards and CREA.

But that number is an educated guess, because there is no database that includes both houses sold by agents and those sold privately. And as technology makes selling on your own easier than ever, there’s little doubt that the estimate is increasingly out of date.

While selling privately has always been an option for anyone willing to try their luck after reading a few books, it has been aided by the emergence of services like, which launched in 1998.

The business is built on the assumption that every part of a real estate transaction can be handled by an industry professional for a flat fee. PropertyGuys helps link up sellers with appraisers who can set prices and lawyers who can handle paperwork. The time is right for owner-led sales to take more market share, argue the company’s founders, because technology makes it easier than ever to find information and compile databases that can help both buyers and sellers handle transactions without a lot of middlemen.

Starting out of his basement in Moncton, Ken LeBlanc built a national network of franchises that guide homeowners through the process of selling their homes. While the number of listings is minuscule (about 10,000) compared to what’s offered by real estate agents through their Multiple Listing Service (236,397 at the end of April), they say the proportion of listings that result in sales is about the same, at near 50 per cent.

“You’d be amazed how many people around the country still think it’s illegal to sell your house on your own,” he says.

For sellers, the fees range from a few hundred dollars to a few thousand, depending on the amount of hand-holding required, but it has been enough to push PropertyGuys to profitability. When they began selling franchises in 2005, the asking price was less than $5,000. Today, the top price is closer to $50,000, and the business has grown to include 110 franchises from coast to coast.

The biggest gains have come on the East Coast, though the company is also taking a larger share of Northern British Columbia. Ontario is a tougher market to penetrate, because the number of agents in large metro centres such as Toronto makes it initially difficult for franchises to stand out.

Kenny Singleton owns the PEI franchise, and has seen his business grow to the point that he handles about 30 per cent of all sales in Charlottetown. He’d be small player in any other part of the country – only 1,404 houses sold on the island last year. But on the island, it makes private sellers a force to be reckoned with.

His first year was the hardest. Almost every prospective customer “heard around town” that the franchise was on the brink of bankruptcy, he said. He has also had to fight for many of his listings – personal relationships run deep, and almost everyone is either related to or friends with someone who sells real estate professionally.

“That holds up for a while, but there comes a point where people realize that it doesn’t make sense to spend $20,000 to sell your house,” he said. “That’s a realization that hits people after a while, and we’ve been here a while.”

He’s convinced selling privately is a better model – and scoffs at the idea that agents will get you a better price. A house will sell at the point where buyers and sellers intersect on price. Anything else is just superficial, he says.

“If you’re looking for a two-bedroom house and I have a three-bedroom house, there’s no real estate agent in the world that will be able to close that sale,” he said. “Price is what matters, and once you agree on that, then it’s a very simple process.”

His optimism is based largely on demographics. Real estate agents on PEI tend to be middle aged or older, and growing out of touch with a younger generation that prefers online options and is more comfortable with the idea of private sales than their parents would have been.

“These kids aren’t going to use an agent,” he says. “That’s just the way this is going. The agents are older and the buyers are younger, and they’ve had the Internet their whole lives.”

Of course, real estate agents see things differently. It’s hardly a straightforward transaction, and there are significant perils to someone who makes a mistake.

“Some people don’t understand the services we provide and it’s important we help them get a better sense of the value we provide,” says Karen Edwards, president of the Nova Scotia Association of Realtors.

The problem with private sales is that you don’t know what you don’t know, says the president of the Prince Edward Island Real Estate Board. Jim Carragher insists a lot of his new business comes from private sales gone bad.

“I’m telling you that it is so terribly sad when I get that phone call at the 11th hour from someone who was trying to sell their home who suddenly realizes they have made a terrible mistake,” he says. “Their deal falls through, they already bought something unconditionally. I try to help, but I tell you sometimes it’s just too late to undo the damage.”

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