Canada Might Have a Real Estate Agent “Leadership” Problem

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Some agents have been found directing homebuyers to homes that would give them a larger commission. (Getty)

Canada may have a problem with real estate agents acting like a cartel that serves themselves rather than clients.

A CBC investigation found that agents had turned away buyers of a property because it would mean a lower commission.

A buying agent and a listing agent in Canada typically share a 5% commission paid by the seller, but they are expected to negotiate commissions with each ad or sale. Sellers can reduce this by listing a property themselves.

The CBC investigation began after a couple in Ontario listed their property without an agent and offered a buying agent a 1% commission.

They received no calls from agents after six weeks with the house on the market, although agents called to represent them. When one of the sellers asked an agent why she hadn’t heard from any buyers, the agent said the listing was “blackballed,” CBC reported.

Impersonating potential buyers, the news service called three agents asking them to represent them in the purchase of the couple’s home.

An agent said the property was overpriced and said the couple would not lower their demand. Another said a screening could not be scheduled. But the sellers said no agent has ever called a potential buyer.

The agent who claimed the couple would not negotiate called and immediately set up commissions.

“Right off the bat, she wanted to know if she was getting 2.5% [commission]”Said salesperson Joanne Petit. “When we told her there would only be a 1% commission, she said, ‘OK, thank you, I’m not interested, I’m going to keep my clients to myself.’

Additionally, when CBC reporters also posed as salespeople and asked 25 agents if they could reduce the commission offered to a buying agent, 88% cautioned against doing so.

Charges of collusion between realtors are by no means unique to Canada. Brokerage fees in the United States are two to three times higher than the rest of the developed world, according to REX, a Texas-based digital real estate startup.

“In terms of commissions, the industry operates like a cartel. They charge the entire industry a certain high and relatively uniform level of commission, ”said Stephen Brobeck of the Consumer Federation of America, a nonprofit based in Washington, DC.

Brobeck said commissions should not be negotiated between selling and buying agents. He said the “decoupling” commissions could save consumers billions of dollars a year.

[CBC] – Denis lynch


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