Once a week, the newspaper in my suburban Toronto community carries a 12- to 16-page real estate supplement and each of those pages is crammed with advertisements placed by local realtors.
If the realtors are to be believed, each of these homes is a gem and the underlying message to potential buyers is: Hurry, hurry, hurry. Put in an offer before it's too late.
Real estate agents make a lot of noise in their pursuit of buyers. They make plenty of noise in the hunt for sellers and new listings. They are noticeably quieter when it comes to the commissions they charge to sell a home. One never sees, for example, a commission-slashing spring or fall promotion from your local realtors or the big companies such as Re/Max, Royal LePage and Century 21.
The official line from the industry is that commissions are a matter to be negotiated privately between the homeowner and the agent. That serves the interests of the industry just fine. After all, who wants a public discussion or, heaven forbid, a debate about commissions.
As things stand, the agent can usually set a formula for the commission that totals between five and seven per cent of the selling price. Homeowners have to cough up or they can't sell through the multiple listing service (MLS). The industry wields this kind of power because it controls the MLS and four out of five Canadians use the service to sell their homes.
Up 'til recently, there wasn't much of an alternative market. That is changing, albeit slowly, and two things are working against the industry. First are the housing prices. When a typical family home sold for $30,000 or $40,000 or $50,000, a real estate fee of five to six per cent seemed like a hiccup.
In August of this year, the average price of a home in Canada was $305,823, according to the Canadian Real Estate Association, up from $275,114 a year earlier.
Now, do the math on those numbers. Six per cent of $305,823 is $18,349.
In other words, a typical couple could pay cash for a small car with the commission they pay to sell their home.
Add to all the other expenses associated with selling - land-transfer taxes, lawyer's fees, service charges for disconnecting utilities, the moving company's rates, etc. - and the hapless homeowners could have bought a small SUV.
It may be premature to suggest that Canadians are rising en masse in revolt against an industry that has had it too good for too long, but a growing number are saying enough is enough. They're selling on their own and the Internet is empowering them.
A number of web-based companies have sprung up in recent years to serve the so-called FSBO market - for sale by owner. One of the most effective is PropertyGuys.com, which was formed in 1998 in Moncton, N.B., by two newly minted university graduates, Ken LeBlanc and Jeremy Demont.
PropertyGuys.com has created an alternative to the MLS. It is another space in which homeowners can list their properties. It is a small venue - they expect to have 6,000 listings by yearend, versus the 71,010 on multiple listing services across the country in August. But in its promotional material, the company claims that its website receives 300,000 unique visits per month.
Compared with the real estate mainstream, listing with PropertyGuys.com is dirt cheap. A homeowner who writes the property description, takes the pictures and uploads them pays $299. Two other packages, at $649 and $999, are also available. In both cases, a company representative will pay a visit, take the photos and help write the description. The listing remains posted until the home sells, or the owner pulls it.
PropertyGuys.com is growing quickly and now has a presence from coast to coast. In 2001, the company sold its first franchise - they go for between $30,000 and $50,000 - and now has a total of 76 franchisees. By comparison, Tim Hortons had sold 40 and Subway 19 by the time they had been around for eight years.
Simon Jones is one of these franchisees and he says he is happy with his investment.
He acquired the rights to Lethbridge, Alta., 18 months ago after listing his home near Victoria, B.C., with Property Guys.com. The offering attracted three buyers and was sold in 24 hours.
Jones says that, as of the end of September, he was 40 per cent ahead of his projection in terms of listings. "It's a sign of the times," he adds. "People are waking up to the fact that there's a choice out there."
Real estate commissions, he says, are pushing a lot of homeowners to sell on their own. He believes that vendors should measure those fees as a portion of the capital gain on their homes, rather than the selling price.
"You invest in your home and you take all the risk," he says. "If your house has appreciated $60,000 in value and you pay $20,000 to sell it, 30 per cent of your profit vanishes into the pockets of the realtors. And what did they do to earn it?" (D'Arcy Jenish can be reached at jenish@businessedge.ca)
