Real estate commissions could fall as new competition heats up

For years, real estate agents have enjoyed a strong market where high housing prices have translated into fat commissions.

But the landscape is getting crowded. More and more agents are vying for your business. And the traditional industry may be in for a shake-up.A cooling housing market, legal battles and a powerful federal agency are allcircling.

It could all lead to cheaper deals when duelling agents and services drop their prices to win your business.

How low will agents go?

Penny Thoms makes it clear shes not a discount agent. The RE/MAX realtor offers the full package from open houses to marketing. But she recently signed up with a new Toronto-based service, feeDuck, where, via a virtual auction, she will try to underbid other agents to sell a clients home for the lowest commission.

Warren Mascarenhas, the companys vice-president of finance, describes feeDuck as a negotiation platform in cyberspace where clients, free of charge, can wheel and deal with agents without leaving the house.An eBay meets Priceline kind of thing, he says. The site has just launched but already its attracted 100 realtors.

Typically in Toronto, agentscharge about fiveper cent commission. So why would Thoms sign up for a service where she might make less?

The real estate market is getting more and more competitive so [feeDuck] is another avenue to pick up leads, she says.

And if the overall market slows, the fight over fees could increaseeven more.

• Calgary home sales down 25% from November to December: CREA

Agents, agents everywhere

The Canadian Real Estate Association (CREA) includes more than 100,000 real estate brokers, agents and salespeople. The Toronto Real Estate Board (TREB) boasts the largest local association with more than 40,000 members, a jump of about 29 per cent since 2011. During that time, home sales have only grown by fourper cent.

Thoms says rising housing prices have convinced some that real estate is a great way to cash in. After all, according to a report released by Sotheby's International Realty last week, home sales worth over $1 million are booming in Canada's big cities. Fiveper cent commission on a million-dollar home would net $50,000.

Its almost like everybody knows somebody whos a realtor, says Thoms. I think theres a misnomer that people think its easy, an easy way to make a lot of money.

When asked how low she would go on commission, Thoms says, I would have to take it on a case by case basis.

Battle in the courts

Toronto real estate lawyerLawrence Daleapplauds feeDuck's mission, but he says services like it are really just a subtle evolution.

He desiresa shake-up of the entire system.

Dale is currently suing both CREA and TREB for implementing rules that he claimsforced his own discount real estate brokerage out of business. TREB would not commentbecause of thepending litigation.

The lawyersays more alternativediscount companies are needed to really spark competition. But he believes the traditional real estate industry is determined to prevent newentrants and models from thriving.

Breaking with tradition

Erin Hatcher and her husband, David, sold their home in Grimsby, Ont.,this past summer using the flat-fee brokerageComFree. They first interviewed three agents who quoted commissions of between 4.5 and 6.0 per cent to sell their home. But instead of going with the lowest bidder, the couple paid ComFree $2,000 for help marketing the house and negotiating the selling price.

Hatcher estimates they saved $22,000 by not hiring an agent. The couple had to show the home and field calls on their own, but she feels it was worth it. What shedidnt think was worth it was the price of commission: When you work hard for your own salary, to think that they can make a portion of that in just a few days just seemed a little bit excessive to me.

But Hatchernotes, there are not a lot of alternatives in the real estate market: Its one extreme or the other. You either go with an agent or you list it yourself.

Competition watchdog's case

If Canada'sCompetition Bureau wins its case, more options might open up for consumers.

The bureau is in a running years-long battle with TREB. This May, for the second time around, itwill take its case to its overseer, the Competition Tribunal. The bureau wants to break TREBs control over certain types of data that arecrucial to consumers. That includes information about previous home listings and sale prices, comparable properties and length of time on the market, information that, for now, can only be obtained through an agent.

For its part, TREB says it will continue to work to protect the personal information entrusted to it and its members.

Dale, the real estate lawyer, says that if the bureau wins its case, more non-traditional services can attract clients: If I have the data, I can build a website consumers are interested in. I can then generate the traffic.

Real estate agent Thomssenses the market is set for change. She says if more sales data becomes readily available, more people will think they can [sell a home] themselves.

No matter what the competition brings, she believes Canadians will continue to see value in the cost of a full-service agent: Its not just a matter of throwing it up onto a site and hoping that people come and buy it. You need some advice. You need some experience, she says.