Real Estate Talk: Class action
against commissions

A class action suit is taking place against Real Estate Boards regarding price-fixing commissions

By Joseph Marovitch

December 6, 2023

In an article in the Globe and Mail on September 29, and again on CNN Business on October 31, 2023, there were stories of a class action suit against Real Estate Boards in the U.S. and Canada. At issue is the practice of a seller listing their home for sale and offering a co-operating commission to the buyer’s agent.

The argument is that the way commissions are set up, the vendor must pay a commission to the listing broker, the broker selling the property, and the vendor’s broker must then split that commission with a selling broker, the broker bringing the client. In effect, the seller is paying both the listing and selling broker from their net gain.

In Quebec, this issue is partially resolved in that the listing broker is required to inform the buyer to acquire a broker to represent them in the event the buyer does not already have a broker. If the buyer refuses to acquire another broker to represent them, then the listing broker informs the buyer that they represent the seller only. The listing broker informs the buyer that they can only write the offer for both parties but not provide the buyer with any advice or information.

The argument is that the way commissions are set up, the vendor must pay a commission to the listing broker… and the vendor’s broker must then split that commission with a selling broker.

In the Financial Post on October 2, 2023, it is stated that the splitting of commissions and the standard average of 5% has been in effect since March of 2010 and that the setup impedes market competition and causes expenses the seller would not otherwise have.

While these articles mention high commissions and price fixing, which is not true, there is no mention of brokers paying expenses upfront and risking losing all upfront expenses if the property does not sell.

There is no mention of brokers splitting commissions with both selling brokers and their agencies. There is no mention of the tax paid on commissions, both sales tax and income tax, leaving the broker with half of their income.

‘While these articles mention high commissions and price fixing, which is not true, there is no mention of brokers paying expenses upfront and risking losing all upfront expenses if the property does not sell.’

There is also no mention of broker expenses such as time, materials, advertising fees, license fees, insurance fees, agency fees, office fees, Crea fees, APCIQ fees, car fees, parking fees, car maintenance fees, gas fees, web fees, and photographer fees. There is no mention of the expertise and experience the broker provides, saving clients time, money and legal issues.

If the class action suit is won perhaps brokers could then start to charge the same way lawyers, contractors, plumbers, and electricians charge – a percentage upfront, another percentage amount in the middle of the campaign, and a final amount at the end of the service.

At least brokers would make a living like everyone else whether the house sold or not and not take a gamble when the seller insists on a price higher than the market value.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: Mental preparation to sell your house

STATE OF THE MARKET

Canada Prime Rate today: 7.2%
Canada Inflation today: 3.1 %

The inflation rate has dropped from 3.8% to 3.1%, and the Bank of Canada today announced they are holding the key lending rate at 5%. The inflation rate is good news. The Fed holding the rate at 5% is not new. The Fed not raising the rate indicates the economy is slowing down, spending is decreasing, and prices are dropping, including real estate.

‘The fact that the Federal Reserve is keeping its rate at 5% indicates that the economy is slowing down, spending is falling and prices are dropping, including for real estate.’

With demand no longer higher than supply, we will see prices drop and real estate values decrease. In other words, living expenses will become more affordable. This is not to say rates will not increase in the New Year. Let us just hope stability remains after January.

Have a great week.

Let’s not forget that people with cancer are vulnerable too!

You are invited to keep giving to the following organizations since it’s now more important than ever to support cancer research! Click on the logos below to find out how:

Image: StockPholio

Other articles by Joseph Marovitch
Other recent articles