What Is The Role Of Government In A Red Hot Market?

Maybe I’m stuck on this theme as of late, but I feel that after Wednesday’s blog about “the government’s” role in the rental market, and after Monday’s blog about how the government, in Australia, will punish those who advertise homes for sale at list prices below their fair market value, we should continue the conversation for one more day.

I mentioned “gazumping” briefly in Monday’s blog, which is, in my opinion, the absolute worst feature or practice in any market, anywhere on planet earth.

Last year, there were calls among the UK public for the government to “ban” gazumping, and it begs the question: what role, if any, should the government have in the Toronto market?

SoldFlaming

If you were so inclined, you might make a list of all the things that bother you in the Toronto real estate market.

Your list may or may not include features or practices that are, by all accounts, totally fair in a free market.

It all depends on how “free” you believe the market should be, how much government intervention you would like, and on what the government can and should intervene.

On Monday, just for fun, I showed you how the Australian auction market works, and how it is illegal to advertise a property for sale at a price that is lower than either what the seller will accept, what the seller has already turned down, or what the agent believes fair market value is.

There are pros and cons to this approach.

But with my lead-in to Monday’s post, I talked about how Toronto agents will market their “sale-to-list” statistic as though it’s something to be proud of, so we could then have a discussion about how meaningless the “list price” is in today’s market.

It’s a practice that people absolutely hate, and I don’t blame them.

And while I don’t want to be “that guy” who, whenever somebody makes a point, tries to make a bigger point, I do want to suggest that while our market here in Toronto can be frustrating, it’s nothing compared to what goes on in Jolly ‘Ole England.

Here’s an article about “gazumping,” which is the practice of beating somebody else’s bid, for a firm deal – something we would never think could, ever, ever, ever happen in Toronto.

The article, written ten months ago, suggests that the government is finally going to step in and ban the practice, which wreaks chaos on the British market.

Have a read:

 


Relief For Home Buyers As The Government May Ban “Gazumping”
The Telegraph
May 9th, 2016

Gazumping could be banned by the Government, as it has emerged that officials have held private meetings with industry to discuss bringing forward the point at which house sales become legal, in line with Scotland.

The radical move would prevent millions of British housing sales falling through as 18pc, or around 200,000 transactions collapse each year.

A major reason is a plague of buyers outbidding others who have already put down an offer, a practice commonly known as “gazumping”.

It causes frustration and disappointment for buyers who think they have secured their dream home, only to find they lose it overnight to someone with more cash. It also routinely leaves frustrated would-be-buyers paying for bills for surveying and legal fees which can run into thousands of pounds, providing a further kick in the teeth.

Last week policymakers at the Department for Business Innovation and Skills (BIS) held a private meeting with senior figures at the National Association of Estate Agents, the Telegraph can disclose, in which it floated plans to put an end to Britain’s gazumping problem.

This came ahead of a “call for evidence” into how the Government could make it quicker and cheaper to buy homes in England and Wales, which BIS will launch in the coming weeks.

The meeting was used in part to discuss the idea of introducing the system which already exists in Scotland and in other countries in Europe, under which property sales are legally binding at the point where an offer is accepted by the buyer.

At present deals made in England and Wales are only binding once the contracts have been exchanged, giving buyers with big deposits ample chance to “gazump”.

While this Scottish-style system could make life much easier for buyers of English homes, experts predicted it would be very unpopular with sellers and could even put them off moving house.

This is because they may have to take on the cost of legal and survey fees currently borne by buyers, which typically exceed £1,000 per sale.

In the Budget in March, the Government signaled plans to solve the problem, saying: “We will publish a call for evidence on how to make the process better value for money and more consumer friendly.

Mark Hayward, managing director at the National Association of Estate Agents, said: “The English system for buying and selling property dates back to the 1920s and has not been updated for nearly 100 years. It is an archaic system which doesn’t allow for modern technology. It needs updating to allow for as much work to be done before the point of offer as possible.”

David Hollingworth, a spokesman at London and Country, a mortgage broker, said: “Bringing more security to the buying process through more upfront information would give welcome clarity to potential buyers while also retaining flexibility. Of course, that will raise the questions of who pays for the upfront costs like surveys and legal fees, and that could put some homeowners off marketing their property altogether.”

 


Did you see that statistic?

18%.

That’s 18% of ALL SALES that fall through, as a result of gazumping.

How about this line, which I find almost comical:

“The meeting was used in part to discuss the idea of introducing the system which already exists in Scotland and in other countries in Europe, under which property sales are legally binding at the point where an offer is accepted by the buyer.”

It’s so foreign to us!

It’s like saying, “A group of scientists got together to discuss whether or not eating food and drinking water would help humans live longer.”

Isn’t it insane?

To suggest that property sales should be “legally binding at the point where an offer is accepted?”

I loved the note about how the English system “has not been updated for 100 years” and might be out of date.

Ya think?

It’s like our friends down south, who rely on a set of principles written by men 250 years ago, when a “gun” was a single shot of lead that took a full minute to load into a gun and fire, who believe that this somehow translates into the “right” to own machine guns and keep them in their kitchen.

Then again, British police officers don’t carry guns at all!  Can you believe that?

Topic for another day, I know…

In any event, it’s been almost a year, and nothing has been done by the British government to “ban” gazumping.

So if you think we have it bad here in Toronto, I’d hate to be “that guy,” but this is evidence that it could always be worse.

Now I’m going to be incredibly hypocritical, partly for effect, and partly because I believe in what I’m about to say.   And I’m going to suggest that while I think it’s totally fair for the British government to step in and ban gazumping, because is a flaw in the basic fundamentals of contract law, I don’t think the government of Canada should step in to our real estate market, and change things around just because our market is red-hot.

In the past couple of weeks, both on this blog and in the media, there has been massive talk of rent controls, restrictions or bans on foreign ownership, and taxation of different classes of real estate owners.

So I’ll pose two questions to you guys:

1) Just how “free” do you believe a free market is?  Should the government oversee, or regulate, the Canadian real estate market?

2) If you believe the government’s role is to regulate the market, what would you have them do tomorrow?

The second question is open-ended, but we could come up with a massive list!

In fact, why don’t we?

The possibilities are endless, and if this is an exercise, and if people are frustrated enough, they might come up with outlandish ideas.

Then again, define “outlandish” anyways!

In some countries, it would be outlandish to outbid a buyer of a home who has already accepted the deal!

In other countries, it would be outlandish to suggest that every teacher in an elementary school should not be equipped with a machine gun, you know, to make the school more safe.

See what I mean?

So let me start off with a few ideas:

1) Ban foreign ownership of Canadian real estate.

2) Tax foreign owners at a higher rate – tax at purchase, property tax, disposition tax, capital gains tax.

3) Tax domestic “investors” or owners of multiple properties at higher rate (same options as above).

4) Eliminate or reduce land transfer tax at municipal and/or provincial levels.

5) Establish rent controls on condominiums.

6) Oversee education, licensing, and discipline of Realtors.

7) Control the purchase and sale of real estate (they do it with alcohol – think LCBO or Beer Store!)

8) Eliminate the CMHC.

Do any of these ideas make sense?

Do all of them, in a vacuum?

Or do we simply let the free market be free – so long as there’s no gazumping going on?

45 Comments

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  1. Janet Johnson says:

    A silent second mortgage may seem to be a wonderful lifeline to a home buyer who cannot afford a down payment.

    http://www.insurezero.com/are-silent-second-mortgages-legal/

  2. kd says:

    See what you started. Let me add my two cents worth.

    First: too many people chasing too few properties inevitably leads to surging prices. Balance needs to be restored. This is an issue on both the supply and demand sides. Unfortunately new supply can’t be added quickly or cheaply, so short term, highly targeted tax and other incentives should come into play to incent home owners to list, sell and move away from high demand areas to places with lower appeal. There are lots of places in Canada and Ontario which are dying for people. It should be very easy to figure out which places qualify.

    Second: the Trudeau and Harper governments both seem determined to transform mortgage insurance into just another form of politicized regional subsidy with benefits bestowed on only those they consider deserving. 45% of houses sold in the GTA so far in 2017 went for more than $1 million and don’t qualify for insurance. A few more months of soaring prices and buyers will be in the minority.

    Slowly but surely CMHC & the “private” mortgage insurers are becoming irrelevant. With their soaring fees and excessive qualifying conditions, the mortgage insurers are well on the way to becoming havens for the desperate and the stupid. These days most conscious buyers will too almost anything to avoid these companies. And that’s not a good thing for any of us.

  3. jeff316 says:

    Can’t believe it took a party this long to do this. Here it comes guys, be prepared for this place to explode…!

    https://www.thestar.com/news/canada/2017/03/09/ontario-reconsidering-foreign-buyer-tax-to-cool-housing-market.html

  4. E says:

    I completely agree that gov’t shouldn’t interfere but it’s a double edge sword. What if the market cools and many homeowners are underwater? Should they interfere? Should Chmc be once again used as intended, to provide loan security for the purchase of basic housing?

    There are 3 arguments being made in Toronto with how the housing market is:

    Renters want rent control
    Owners want no interference
    Buyer want taxes to cool the market so they can buy.

    I think the market will cool once year over year gains stall out. That might be the end of this year or next depending on what the Fed does and how much important inflation we get in Canada.

  5. Rickdeckard says:

    I’d say leave it as a free market. Government intervention of markets always results in disaster. Torontonians shouls feel blessed that people want to work and live in this city. The economic benefits outweigh the risks in my opinion. As prices rise builders will be incentivize to build more, and let’s face it – not everyone can and should be able to afford a home in the central core of one of the best cities in the world.

    While rising real estate prices make good headlines and a lot of disgruntled folks who missed out, it is what it is. Prices will level off on their own, probably not far from where things stand now.

    1. chT says:

      Completely agree

    2. Jack says:

      Governments already have a role in regulating markets. The question is what that role should be.

      Governments are compelled to act in a crisis. Regardless of their stated ideology, they have to act when things fall apart. They had to act in 2008, and they will act again in the next crisis. So it’s only prudent for governments to think ahead and exercise their influence to prevent the crisis before it happens or make it less severe.

    3. Chris says:

      I would suggest this video as a quick introduction to how rapid asset appreciation can lead to an economic crisis.

      https://www.youtube.com/watch?v=v-3zwsufih0

      The so-called “soft landing” that we always hope for is not a thing that actually happens in economics.

      “As it stands, these forecasts have very little scientific value and there is not one single verifiable instance of a soft landing following an economic bubble.”

      https://en.wikipedia.org/wiki/Soft_landing_(economics)

    4. Jeff says:

      So I’ll play devils advocate.

      Say an investor from China comes in, buys an entire floor of units in a prime location downtown Toronto and puts all of them on airbnb? Then more people like him join in where they now dominate an area, pricing people out?

      I give you that example because I just got back from a work trip to Barcelona and that is what is going on there, except it is German and British investors. Locals are being priced out of areas, entire areas have been converted for tourists. Who should get priority? The free market or should we have some sort of control dictating supply should be focused on locals?

      If people really want the free market, you have to get rid of CHmc, and things like first time home buyer credit, being able to use RRSP money towards home, land transfer tax rebate for first time home buyers, because those are all government programs to assist people in buying homes.

      1. Chris says:

        The city of Paris has identified exactly this as an issue, and are taking steps to remedy it.

        http://www.telegraph.co.uk/news/2017/01/27/britons-property-paris-hit-new-tax-hike/

  6. Jack says:

    It is a stretch to call a market free when one group, TREB in this case, keeps market data and controls how much of it is made available to whom and how.

    It would be quite easy for the provincial government to make sure that the MPAC database of RE transactions is updated in near real time (say within 3 days of each sale), and to make the information available to everyone. MPAC already has a web site where some of this information is available, but with restrictions and with long delays.

  7. Rear-view Mirror says:

    Addressing David’s question on the role of the state…we might recall interest rates doubling or more overnight during the early-mid 1980’s and catastrophic consequences for individuals, families and presumably some lenders. This impact differed as it hit owners new and old with the bad luck to owe money on their house at a bad time. The challenges of purchasing RE today in Toronto, etc., are at least voluntary. My clear recollection is our various governments at that time did nothing. Whether this was simple pragmatism, represented the views of the electorate or the incipient nanny-state could not find suitable diapers I do not know. But it happened, in the face of a market meltdown one would prefer to forget, since simple ambitions to move house – within Metro Toronto – became a practical impossibility at the time.

  8. Condodweller says:

    I just had an outlandish idea for a transparent offer system. It’s nothing new of course but it would be new for property sales with a few tweaks. Drum roll please…… silent auction on a website, possibly on MLS, but without a hard end time to avoid sniping. Let’s say each bid extends the deadline by five minutes. This would make bidding totally clear as day and would remove the heat of the moment bids of a live auction.

  9. Libertarian says:

    I agree with the other commenters that the gov’t itself doesn’t have to do much. It’s the real estate industry itself that needs to raise the standards of how things work. Once that’s take care of, then the likes of RECO, CRA, and FINTRAC should have an easier time dealing with all of the transactions taking place and making sure that the rules are being followed.

    Going back to Monday’s blog, tweaking the blind auction system a bit to make it more transparent would probably go a long way in exposing the professional agents from the jokers. Eventually, the jokers will cease to exist. Once that happens, real estate won’t be the Wild, Wild West anymore.

    1. Ralph Cramdown says:

      The industry, being self-regulating, is — almost by definition — happy with the current system. The top producers make lots of money, and lots of young wannabes subsidise the regulatory costs, brokerage overhead and customer acquisition costs, and provide warm bodies to staff those open houses.

      A few dozen tickets to government fundraisers every year to “represent the interests of first-time buyers,” and some cheques to various campaigns, and they’re golden.

      As much as some agents squawk about part-timers, I don’t know if the industry would change much if its annual votes were changed from “one license, one vote” to “one deal end in the past year, one vote.”

      1. Libertarian says:

        I agree that the industry is happy with the current system, but if they want to stay happy, it’s in their best interest to implement some changes, such as the ones you suggested below (which are what I was referring to in my comment above). This sends a message to the provincial government (even the other two levels) and society in general that they’re doing something about the complaints people have. The changes may or may not work, but at least they’re being proactive.

        If they don’t do anything, they run the risk of what happened in B.C. – the gov’t concluded that the regulator wasn’t fulfilling its duty, so the gov’t took over. I’m sure if you asked the top producers whether they’d prefer to be overseen by a regulator or the gov’t, they’d all pick the regulator.

        1. Libertarian says:

          Forgot to write in my last paragraph that it refers to #6 on David’s list.

  10. Jack says:

    CMHC insures mortgages up to $1,000,000. CDIC insures deposits up to $100,000. That is perverse, especially in the current environment, with the private debt at record levels. The government should be encouraging private savings, not private debt.

    1. A says:

      It is not as distorted as you suggest. A saver can spread the savings across different institutions (and different CDIC insured entities within a financial institution group) so that insured savings can be in excess of $1M in aggregate.

  11. Joe says:

    I’m not sure any of you are aware that there are already existing regulations in place regarding foreign ownership (the correct term should be non-residents of Canada, the CRA doesn’t care about nationalities, they only care if one has physically lived in Canada for more than 183 days of any given year) of Canadian real estate properties:

    1. 25% of purchase price is withheld by the CRA through the buyer (or seller’s lawyer) when a non-resident seller sells a home.
    2. A Certificate of Compliance (3 months to obtain from the CRA after sale) is needed to refund the cost of obtaining the property portion back, but 25% of net gain is still withheld.
    3. The seller has to file an income tax return to deduct costs of selling and gets hit with Capital Gains tax on their net gain after deductions.

    Surely this procedure can be extended to a larger demographic.

    Proposal for regulation changes:
    1. Treat domestic (tax resident) investors the same as foreign investors with the 25% of sale price withholding. (Goal: to reduce liquidity on investment properties)
    2. Now that Principal Residence Exemption has to be declared, set a cap on PRE at 1mil in gains, and the amount above cap is taxable. (Goal: social transfer, same as Estate tax)
    3. Take away Mortgage Interest as a deduction on investment properties, and let it become deductible to people with 50%+ equity on original purchase price of their principal residence (Goal: to increase investors’ cost, and to encourage people to be responsible with debt)

    1. A says:

      I am aware of the 25% w/h on non-residents as mentioned by Joe but here are some counter-arguments to points 1-3:

      i) The reason why a non-resident is subject to 25% withholding is for the CRA to secure its tax collection. The premise is that a Cdn resident is not going to abscond to avoid a tax obligation.
      ii) Are you really going to subject someone selling a $250k condo to tax professional fees to handle withholdings and clearance certificates? Ordinary Canadians are not familiar with withholdings and clearance certificates. Your proposal has the potential to reduce supply since people are less likely to sell or trade up.
      iii) Are you saying someone resident in Canada selling a $1M home should have buying power of only $750k since $250k will be tied up till after the tax return has been filed? Are you thinking the seller should rent for a year until the seller gets a tax refund? Are you going to subsidize the seller’s interest cost on the $250k if that $250k would otherwise be used to repay a mortgage? Your proposal does not make sense, especially if the seller is selling to trade up.
      iv) If the family home is passed down from one generation the next, limiting PRE exemption might force a sale of the family home to fund the taxes. Is that really what we want? Are you suggesting this because you are against ultra high housing wealth? Or is it that a family home does not have sentimental values, etc. to you?
      v) Making interest deductible on principal residence, no matter what the equity threshold is, can have the effect of further fueling the housing market. I venture to guess Joe has one property, being his principal residence with >50% equity.

    2. Condodweller says:

      Don’t you think we get taxed enough as it is? Why on earth would you want to limit the PRE and eliminate the last tax break we get? Your make interest on investment properties non-deductible suggestion smacks of sour grapes.

  12. Joel says:

    I think the idea that makes the most sense is to not limit the private mortgage insurance companies. The government can do what they want with CMHC, but allowing Canada Guarantee and Genworth to provide insurance on any property will help to eliminate the hysteria.

    As you mentioned last week you had clients who could buy for $999,999 and were trying to find any house. Without this they would not be restricted to that number. These restrictions have drive the price of houses in Toronto ever closer to the great divide of $1 million. This is artificially raising the prices. If the government reversed some of the mistakes they have made in the past we would see a more free market.

    Let Canada Guarantee and Genworth decide their own risk appetite.

    Perhaps there could be a land transfer tax break for those 65+ leaving their homes to downsize. This would open up availability of family homes, If seniors reduced their square footage by 35% or more, they can see a reduction in the land transfer taxes of the new property they purchase.

  13. Boris says:

    David, was the first amendment incapable of anticipating things like iPhones and social media, therefore the first amendment is invalid?

    The musket argument has been FIRMLY put to rest as a load of liberal nonsense to deny 2nd amendment rights.

    You really think the forefathers thought that technology would stand still?!!?

    BTW the Girandoni Rifle existed at the time of US confederation which was basically a machine gun. Privately owned ships during confederation could carry cannons and use them against enemy ships.

    The musket argument is a Huffpo/CNN soundbite. You’re better than that.

    1. Max says:

      Mother always told me to never trust a real estate agent who doesn’t know the U.S. Constitution inside out.

      1. Boris says:

        The point is when you fool yourself into thinking you are maintaining the substance of an ideology after each hack and tweak, you find yourself in the company of the hundreds or thousands of others that also thought the same thing until one day the ideology is indistinguishable from something that was originally opposed to it. Call it death by a thousand cuts.

        There isn’t a lot resembling a free market at all in most sectors of most economies in the world. Socialists said post the 2008 financial crisis “well that’s capitalism for you! It doesn’t work!”. Crony ‘capitalism’ is not capitalism. Banks being bailed out, the Federal Reserve printing bubble after bubble is quite the opposite of capitalism.

        In this case the idea of esconcing additional regulation and controls by government to solve a problem caused by government to solve a problem caused by government is akin to giving an alcoholic an all you can drink pass at a Vegas casino.

        Look at excessive red tape preventing capitalists from building new product if you want an answer. Or look at subsidized housing regime we have in Canada through CMHC. Or artificially set interest rates by central banks, or sky high income tax rates with loopholes for primary residence dwellers. Or possible the silly other impediments like the land transfer tax, estate taxes. How about incessant regulation and red tape leading to few other good uses of capital, herding folks into res real estate speculation. Ask an entrepreneur who wants to open a restaurant in Toronto how many inspectors, regulations, permits etc they have to deal with to set up shop. This deflects capital away from useful enterprises, like business and into things like property speculation.

        Canada has a VERY unfriendly business environment and thousands of regulations causing incredible unintended economic consequences. This is but one of them.

        Central planning has never worked and never will. And while we certainly don’t live in Soviet Russia, we also live in a system that is very far from what any reasonable person would call capitalism.

        1. Wow says:

          And breathe…

          1. Homer says:

            There’s no need to patronize this person. Do you have a different point of view?

  14. Max says:

    We really need the government to design better locks for barn doors, even though the horses have already fled.

  15. Chris says:

    My opinion is to leave the market relatively free; usually when government gets involved, there are unintended consequences.

    What I would like to see, is a property tax surcharge for vacant and underutilized homes. I find the proposal from the joint UBC/SFU team of 1.5% of property value to be very reasonable. This surcharge is offset by income tax paid in Canada, so someone living and working in the country (or renting their home out and declaring the income) would not be effected.

    “For example, the owners of a $1 million home would pay a $15,000 surcharge, but if they had paid $15,000 or more in income taxes to Canada Revenue Agency that year, the surcharge would be zero. If they paid $10,000 in taxes, their property surcharge would be $5,000. Veterans, disabled people, and Canadians of retirement age would be exempt.”

    https://www.biv.com/article/2016/1/local-economists-have-solution-unaffordable-vancou/

    1. Joe says:

      I like the surcharge idea, but the last line I don’t agree: “Veterans, disabled people, and Canadians of retirement age would be exempt.”

      You can categorize people based on their income or net worth, but not their occupation or physical abilities. If I were a super rich spoiled brat who never contributed a dime to society, but slipped and broke my leg in a boating accident, all of a sudden I’m exempt? Doesn’t make sense. Same goes for super rich veterans and super rich old people.

      1. Chris says:

        Joe, while you raise a valid point, the authors crafted the proposed policy to align with British Columbia’s current Home Owner’s Grant (which veterans and disabled people are exempt from). I suspect the thought process behind exempting those receiving CPP is that they have paid into income taxes their entire life.

        The full policy is availabe to read here if you are interested:

        http://www.housingaffordability.org/

        1. Boris says:

          I hate the idea of further complicating the tax code with more exemptions. Adding this 1.5% offshore rule grows the bureaucracy, ie government, as they will need more agents to enforce this, and will simply spur innovative strategies for offshore investors to avoid this through stated loopholes or exemptions.

          Tear down parts of the tax code, don’t built more pieces into the already overcomplex and politicized system.

          1. Chris says:

            Boris, please read the website before you level criticisms that are already explained:

            14. Isn’t this going to be expensive to administer?

            No. It relies on existing assessments. These assessments are then multiplied by 1.5%. The exemption information is easy to report. And, while we expect people to be honest, the exemptions are also easy to verify since almost all of the necessary information is already on income tax returns.

            This structure makes the BCHAF proposal much easier to administer than other proposals that rely on determining personal characteristics of the owner, such as citizenship or days of residency.

          2. Boris says:

            Chris, please be realistic before you post.

            This Pollyanna idea you have that automatically multiplying 2 numbers together is magically going to alleviate problems and not costing anything is wildly delusional. You think that this wont require enforcement? You think that offshore investors wont look for one of the many convoluted loopholes that were proposed (Veterans, elderly etc) on top of the other ones we have?

            Look at Florida and New York, and the US domiciled holding companies that hold many high end properties for various tax and obfuscation purposes.

            The idea is asinine, and is the exact same type of thinking that led North American tax codes to becoming this awfully built frankenstein, stained by politics and wraught with unintended consequences.

          3. Chris says:

            Boris, again, please read before you post. This is not my idea. This idea was proposed by and signed by 40+ economists in British Columbia.

            I highly recommend you familiarize yourself with the proposed plan before putting forward any more criticisms. I’m happy to debate it with you at that point, but for now, you’re just arguing things that are clearly addressed by the original inventors of the plan.

            http://www.housingaffordability.org/

          4. T says:

            Boris,

            You remind me of an old house, with old knob and tube wiring. Heavy on the knob.

  16. Kyle says:

    Rather than adding yet more regulation and yet more bodies who don’t enforce anything. It would be nice to see some actual enforcement of the laws/rules that already exist (e.g. RECO, CRA and FINTRAC). And if the intent is to try to prevent housing prices from spiraling out of control, it would be helpful if the Government deregulated and streamlined zoning/planning to allow new supply to be built.

    1. T says:

      RECO, CRA and FINTRAC are not laws.

      Please, provide details of challenges you have had with zoning and planning.

  17. Ralph Cramdown says:

    – get rid of the limitations on commission structures in REBBA
    – abolish the rule that says that if one agent agrees to a commission discount, all the other bidding agents need to be informed
    – have buyers pay for their own representation, instead of it being “free”

    Who could disagree with those?

    P.S. Nobody who says they want a free market in real estate actually means it. If we abolished CMHC, the requirements for real estate and mortgage brokers to be licensed, and tossed the planning act, zoning and building codes, there would be howls of outrage. These people should just admit that when they say “free market” they mean “the way things were when I got into the industry.”

    1. jeff316 says:

      Agreed, those three are reasonable and helpful and the post script is bang on.

    2. Joe says:

      I agree that the current listing agent vs. buyer agent model doesn’t make sense any more. It’s a well developed model suitable for normal markets where buyers and sellers hold approx. equal bargaining power. It’s clearly not the case in today’s Toronto market.

      Why don’t we get rid of the buyer agent 2.5% commission, and replace with “buyer fiduciary advisor”, someone who gets paid hourly and a fixed closing bonus, but has no financial interest in final purchase price. The agents most fluent with the market will be able to close the most deals. It will also stop amateur buyers dragging on and on trying to find “deals”, which we know rarely exist outside of deliberate invitations for massive bidding war.

    3. Condodweller says:

      I totally agree with buyer pay his own agent’s commission. This would incentivise buyers to shop without an agent, which they are perfectly capable of doing, which in turn will provide buyers to FSBO sellers. Of course this wouldn’t be necessary if commission rates were reduced to a reasonable level.

      With that add reducing commission rates to the change list. Stop the wealth transfer from sellers to agents.

    4. T says:

      – get rid of the limitations on commission structures in REBBA
      — could be positive in terms of creating more competiton and niches within the real estate industry

      – abolish the rule that says that if one agent agrees to a commission discount, all the other bidding agents need to be informed
      — no as this can create unfair offer advantages; bad for buyers competing for, and other realtors earning commissions on, the deal

      – have buyers pay for their own representation, instead of it being “free”
      — if you think ‘buyers’ agents are representing ‘buyers’ you are mistaken. Use the term ‘selling agent’ instead of ‘buyer agent’. In a standard deal involving two agents (one on each side) you have a ‘listing agent’ and a ‘selling agent’. Both of whom actually represent the property transaction (and hence property owner), both of whom are compensated based on the selling price. A higher selling price equals larger commissions for both. There is no real thing as ‘buyer’ representation outside of the BRA agreement which is really to protect a selling agent’s time investment, nothing really about protecting the buyer. All a sham. When you sell your house in the standard realtor way – you are paying one realtor to list it, and another to sell it. Sometimes a realtor can double end but that’s a whole other issue…

      1. Homer says:

        I’ve never thought of it this way. Thanks.

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