Canada may have a problem with real estate agents acting as a cartel that serves themselves rather than clients.
An investigation by the CBC found agents steered buyers away from a property because it would mean a smaller commission.
A buying agent and a listing agent in Canada typically split a 5 percent commission paid by the seller, but they are supposed to negotiate commissions with each listing or sale. Sellers can lower that by listing a property themselves.
The CBC investigation started after a couple in Ontario listed their property without an agent and offered any buying agent a 1 percent commission.
They received no calls from agents after six weeks with the house on the market, although agents did call looking to represent them. When one of the sellers asked an agent why she had not heard from any buyers, the agent said the listing had been “blackballed,” the CBC reported.
Posing as potential buyers, the news service called three agents asking them to represent them in acquiring the couple’s home.
One agent said the property was overpriced and said the couple wouldn’t lower their ask. Another said that a showing could not be scheduled. But the sellers said no agents ever called with a potential buyer.
The agent who claimed the couple wouldn’t negotiate did call and immediately brought up commissions.
“Right off the bat, she wanted to know if she was getting 2.5 per cent [commission],” seller Joanne Petit said. “When we told her that there would only be a 1 percent commission, she said, ‘OK, thank you, I’m not interested, I’ll keep my clients to myself.’”
Also, when CBC reporters also posed as sellers and asked 25 agents if they could lower the commission offered to a buyer agent, 88 percent warned against it.
Accusations of collusion among real estate agents is by no means unique to Canada. Brokerage costs in the U.S. are two to three times higher than in the rest of developed world, according to REX, a digital real estate startup based in Texas.
“In terms of commissions, the industry functions as a cartel. They enforce on the entire industry a certain high and relatively uniform commission level,” said Stephen Brobeck of the Consumer Federation of America, a Washington, D.C.-based nonprofit.
Brobeck said that commissions should not be negotiated between seller and buyer agents. He said “decoupling” commissions could save consumers billions of dollars a year.[CBC] — Dennis Lynch