A proposed class-action lawsuit alleges that some of Canada鈥檚 largest brokerages and associations are engaged in price-fixing to inflate Realtor commissions.
Brokerages named in the lawsuit include ReMax, Century 21, and IproRealtyLtd., as well as the Canadian Real Estate Association and the Toronto Regional Real Estate Board.
The lawsuit claims that there is an agreement, among brokerages in the Greater Toronto Area, which applies to any individual listing on the Toronto Multiple Listing Service (MLS).
鈥淲hen it comes to listing your home for sale, you typically sign an agreement with a listing brokerage,鈥� broker and real estate commentator David Fleming told CTV鈥檚 Your Morning on Monday Morning. 鈥淵ou pay a fee and then usually half or some of that fee is offered as an inducement to a buyer agent. So this suit is alleging that there is a fix of two and a half per cent, which is what the suit said, that basically forces people to offer that.鈥�
Fleming explained that, on MLS, 鈥測ou鈥檒l see a lot of two per cent commissions, a lot of half a per cent to one per cent through discount brokerages. There鈥檚 a lot that offer one dollar, which is effectively a for-sale-by-owner, where you as a buyer or agent have to negotiate directly with the seller.鈥�
鈥淪o we鈥檒l see ultimately where the case goes and I think there鈥檚 more to this than what meets the eye.鈥�
Currently, a seller has to make an offer of commission to the buyer鈥檚 brokerage. The buyer鈥檚 brokerage-commission-rule essentially forces a seller to offer the industry standard commission to the buyer brokerages. If they don鈥檛, then fewer brokerages will show that home to interested buyers.
鈥淚f you go back, say, sixty or seventy or eighty years, if you as a buyer wanted to purchase a property you would physically walk into a brokerage and say, 鈥榃hat do you have for sale?鈥� If they had something that you liked you would buy it through them 鈥� through the seller鈥檚 agent,鈥� Fleming said.
鈥淭hat was multiple representation, it was a conflict of interest, but that was the standard. Now, if you wanted, let鈥檚 say, to have representation and you hired an agent, they would still only show you their listings under contract. So that鈥檚 anti-competitive, as we would know it today. Eventually someone had the bright idea to say, 鈥榳hy don鈥檛 we co-operate? Why don鈥檛 we offer a brokerage commission, say half of our listing fee, to a buyer agent for bringing us a buyer?鈥� And that鈥檚 the system that we have today where everybody co-operates and you have the MLS system.鈥�
Fleming maintains that the system works in Canada. 鈥淧eople just need to understand it,鈥� he added.
鈥淚鈥檒l be honest, I don鈥檛 think there鈥檚 a lot of merit [to the case] just from what I see,鈥� he said.
鈥淭here have been a lot of lawsuits at the industry level over the years, but nothing has really been successful. But I鈥檒l be interested to see what happens.鈥�
CTV鈥檚 Your Morning reached out to both Toronto Regional Real Estate Board and the Canadian Real Estate Association. Both of them declined to comment as this issue is before the courts.
