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Proposed Change to the Act governing Real Estate Agent Listing Commission

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  • May 21st, 2015 9:10 am
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Deal Addict
Oct 29, 2010
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OP, i'm trying to understand the math behind your new option.
If i list a house for 400k and it sells for 380k or 400k then the agent gets a flat fee? Say $2,000.
If i list a house for 400k and it sells for 500k then the agent gets the flat fee plus a tiered %. Flat fee plus tiered bonus together are capped at 2.5%?
How does it come into effect from a buying stand point? Right now it's 2.5% for seller and 2.5% for buyer.
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Apr 20, 2011
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this random listing in Ontario is a good example of why new complex commission structures are not necessary. its listed with 1% realty. I don't see how it could get any lower than that.

$299,900 157 Lakeshore Road, St Catharines, , St. Catharines
[OP]
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Aug 2, 2010
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flafson wrote:
Apr 21st, 2015 11:29 am
OP, i'm trying to understand the math behind your new option.
Incentive based commission = Difference in selling price over listing price (or whatever lower number you choose) x % commission you agree upon, capped at 2.5%. Adding a flat fee is up to you.
flafson wrote:
Apr 21st, 2015 11:29 am
If i list a house for 400k and it sells for 380k or 400k then the agent gets a flat fee? Say $2,000.
Agent didn't get you over listing so commission = $0 (unless there was also a flat fee). Pay for performance!
flafson wrote:
Apr 21st, 2015 11:29 am
If i list a house for 400k and it sells for 500k then the agent gets the flat fee plus a tiered %. Flat fee plus tiered bonus together are capped at 2.5%?
It's pretty simple and uncomplicated. There are no tiers. It's just the % you agreed upon. If commission = 2.5% + flat fee then just subtract selling from listing price and multiply by the commission. Easy peasy:

$500K-$400K=$100K. Commission = $100K x 2.5% = $2,500 + any flat fee

But it's also flexible because if you list the house at $400K but figured it would sell in a New York second for $350K without any work at all, ie just the MLS listing, you could still list at $400 but set the commission to start at anything over $350K (or any other number you choose under $400K). So $500-$350K=$150K x 2.5% = $3,750 commission. This structure remunerates the agent only for getting you a selling price over and above the 'price you would get anyway' without any work whatsoever, ie the fire sale price. Why pay him for that portion of the selling price? Makes zero sense! Prices have increased 100% in the last 9 years in Toronto yet inflation was only 16% and the work is the same, but arguably less. Prices increased 10% in March, 2015. Is the work 10% more? No!
flafson wrote:
Apr 21st, 2015 11:29 am
How does it come into effect from a buying stand point? Right now it's 2.5% for seller and 2.5% for buyer.
Only applies to listing/seller's commission. I would not advise reducing buyer's agent commission because buyers agents will not be motivated to show or market your home to clients. Sad, but true. All most real estate agents care about is feathering their own nest with high commission rates.

Why else would they be so against this new commission structure? They are running scared about something that may not affect them at all because they are still free to choose. Funny that!
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eonibm wrote:
Apr 21st, 2015 11:53 am
Only applies to listing commission. I would not advise reducing buyer's agent commission because buyers agents will not be motivated to show or market your home to clients. Sad, but true. All agents care about is feathering their own nest with high commission rates.
I would advise reducing the buyers agent commission because buyers agents will be motivated to show your listings. And no need to confuse people with multi level tiered compensation rates that would require an act of Parliament.

http://ontario.onepercentrealty.com/faq.cfm
5. Other agents have told me that if I list with One Percent Realty, agents from other companies will not show my house because they don't get the same amount of money. Logic would dictate, that they are going to sell the house down the street where they get paid more money if their clients buy it. Do agents boycott your listings?

Our listings are shown by cooperating REALTORS® everyday just like other listings on MLS®. We cannot measure showings that we don't get. What we have seen across Canada over the years is that approximately 70% of our listings sales are sold by cooperating agents. Would they rather have more money? Of course-no argument. But the fact is, our listings are displayed everywhere that all the other listings are. All our listings are on MLS®, all the top internet sites, have a sign on the lawn, are in the real estate paper, and we do open houses. So if someone is looking for a home in your neighbourhood, in your price range, they are going to know it is for sale. That buyer is going to look at whatever is on the market before they make their decision. Buyers don't pay the real estate commission, so why would they care which house they buy? If their agent is unhappy with what we pay, the buyer will call us. But the fact is that the agents show & sell our listings, every single day. All of our sold signs over the years prove it!
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eonibm wrote:
Apr 21st, 2015 11:53 am
Incentive based commission = Difference in selling price over listing price (or whatever lower number you choose) x % commission you agree upon, capped at 2.5%. Adding a flat fee is up to you.
With a discount structure such as this example already permitted, there isn't a need for a new law.

Your House Traditional
MLS® Broker* Savings
$ 200,000 $ 6,900* $ 10,000 $ 3,100
$ 300,000 $ 6,900* $ 15,000 $ 8,100
$ 400,000 $ 6,900* $ 20,000 $ 13,100
$ 500,000 $ 6,900* $ 25,000 $ 18,100
$ 600,000 $ 6,900* $ 30,000 $ 23,100
$ 700,000 $ 7,900* $ 35,000 $ 27,100
$ 800,000 $ 8,900* $ 40,000 $ 31,100
$ 900,000 $ 9,900* $ 45,000 $ 35,100
$ 1,000,000 $ 10,900* $ 50,000 $ 39,100
Deal Addict
Dec 18, 2006
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popbottle wrote:
Apr 21st, 2015 11:56 am
http://ontario.onepercentrealty.com/faq.cfm
5. Other agents have told me that if I list with One Percent Realty, agents from other companies will not show my house because they don't get the same amount of money. Logic would dictate, that they are going to sell the house down the street where they get paid more money if their clients buy it. Do agents boycott your listings?

Our listings are shown by cooperating REALTORS® everyday just like other listings on MLS®. We cannot measure showings that we don't get. What we have seen across Canada over the years is that approximately 70% of our listings sales are sold by cooperating agents. Would they rather have more money? Of course-no argument. But the fact is, our listings are displayed everywhere that all the other listings are. All our listings are on MLS®, all the top internet sites, have a sign on the lawn, are in the real estate paper, and we do open houses. So if someone is looking for a home in your neighbourhood, in your price range, they are going to know it is for sale. That buyer is going to look at whatever is on the market before they make their decision. Buyers don't pay the real estate commission, so why would they care which house they buy? If their agent is unhappy with what we pay, the buyer will call us. But the fact is that the agents show & sell our listings, every single day. All of our sold signs over the years prove it!
Anecdotal, however I'm sure customers of One Percent as well as other CB's will agree - listings with One Percent typically become stale and then switch over to a brokerage that offers the area market rate CB Comm.
popbottle wrote:
Apr 21st, 2015 11:56 am
I would advise reducing the buyers agent commission because buyers agents will be motivated to show your listings. And no need to confuse people with multi level tiered compensation rates that would require an act of Parliament.
I'm not sure if this post was made in sarcasm/jest by the poster, but this is the absolute worst thing you can do at the moment (until the competition bureau or even the RE industry itself revamps the entire CB comm structure) All of our FSBO MLS listing customers that have tried this route can attest to this - anything less than market rate CB comm will be skipped by buyer agents. We've had about 6 out of 300 FSBO clients in the past 5 yrs that have tried this and they quickly realized it was not working. As soon as they bumped the CB comm to area market rate, the floodgates for showings from buyer agents opened up and the properties then sold.

You can get away with having significantly discounted listing agent commissions/fees - however you will be shooting yourself in the foot in the current market if you do not offer area standard market rate CB comm (buyer agent commission). This is not "fear mongering" as some posters would like to claim - this is fact at the moment. Until the industry gets a revamp, this is likely how it will continue to work.

Good luck!
Jay Rana, Sales Representative
CENTURY 21 Titans Realty Inc. Brokerage
@RE4L.ca - Real Estate 4 Less
*Cash Back For Referrals & Purchases (conditions apply)*
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y2jversion1 wrote:
Apr 21st, 2015 12:18 pm
Anecdotal, however I'm sure customers of One Percent as well as other CB's will agree - listings with One Percent typically become stale and then switch over to a brokerage that offers the area market rate CB Comm.



I'm not sure if this post was made in sarcasm/jest by the poster, but this is the absolute worst thing you can do at the moment (until the competition bureau or even the RE industry itself revamps the entire CB comm structure) All of our FSBO MLS listing customers that have tried this route can attest to this - anything less than market rate CB comm will be skipped by buyer agents. We've had about 6 out of 300 FSBO clients in the past 5 yrs that have tried this and they quickly realized it was not working. As soon as they bumped the CB comm to area market rate, the floodgates for showings from buyer agents opened up and the properties then sold.

You can get away with having significantly discounted listing agent commissions/fees - however you will be shooting yourself in the foot in the current market if you do not offer area standard market rate CB comm (buyer agent commission). This is not "fear mongering" as some posters would like to claim - this is fact at the moment. Until the industry gets a revamp, this is likely how it will continue to work.

Good luck!
Of course reducing commissions will cause some agents to silently not show those discounted listings, but then why would one percent say 70% of their listings are sold by cooperating agents?

Also that complex proposed law will reduce commissions too. Its almost the same thing as one percent, with more stuff to calculate.
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Dec 18, 2006
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popbottle wrote:
Apr 21st, 2015 12:22 pm
Of course reducing commissions will cause some agents to silently not show those discounted listings, but then why would one percent say 70% of their listings are sold by cooperating agents?.
Have a look at their current active listings - majority of their listings in Ontario are not in the "centre of the universe" (GTA). Also the percentage is based on their Canada-wide listings - the major bulk of their business is in smaller areas (non major metro/surrounding areas). Also the the 70% statistic does not go into details. Say out of 100 listings, 90 listings get cancelled because it's not effective and switch to a "big-name" brokerage. Out of the 10 remaining listings, if 7 listings are sold through a buyer's agent - that can make up the 70% that they claim.
Jay Rana, Sales Representative
CENTURY 21 Titans Realty Inc. Brokerage
@RE4L.ca - Real Estate 4 Less
*Cash Back For Referrals & Purchases (conditions apply)*
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y2jversion1 wrote:
Apr 21st, 2015 12:32 pm
Have a look at their current active listings - majority of their listings in Ontario are not in the "centre of the universe" (GTA). Also the percentage is based on their Canada-wide listings - the major bulk of their business is in smaller areas (non major metro/surrounding areas). Also the the 70% statistic does not go into details. Say out of 100 listings, 90 listings get cancelled because it's not effective and switch to a "big-name" brokerage. Out of the 10 remaining listings, if 7 listings are sold through a buyer's agent - that can make up the 70% that they claim.
I saw the www.homes4less.ca 0.5% site you posted. Its even cheaper than one percent realty and the discounts are easy to understand. There is no need for new laws yet.
[OP]
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Aug 2, 2010
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Given the need for new laws (the only ones who don't think so are real estate agents - funny that!) I have had the opportunity to talk to the government about my proposed change. They are considering it for the next revision to the Real Estate and Business Brokers Act and agreed that it was a brilliant simple change that will preserve consumer protection and give more options to the public. They also mentioned that they have been getting a lot of comments from the public that this type of commission was not allowed and many complaints that artificial legislation is keeping real estate agent fees high.

However, I don't want to wait until they review the Act again, so I have found an MPP who is willing to present this as a private member's bill to change the Act. That will speed things up. More choice. More freedom. Different ways to calculate commission! YAY! Anyone who is against this freedom of choice is a real estate agent or agent fanboy/girl who just wants to protect their gravy train of commissions.

This new commission structure is about as simple as it gets. Anyone who says it's complicated never took Grade 4 arithmetic. Subtract listing price from selling price, multiply by commission rate. Done! Easy peasy! (actually the Act has far more complicated structures already in it - take a look at the convoluted declining commission structure depending on tiers that is already allowed).

I will announce when this change has gone through so RFD readers can take advantage of it. It may take a while though as the government moves very slowly. If the private members bill doesn't go through you can be sure it will be in the change to the Act when they get around to doing a full review of it.

Wonderful!
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If Ontario adopted the standard BC commissions then everyone would save a lot. Commissions in Metro Vancouver are already half the rate(2.5%) of Ontarios and have been for many years, all without any new laws that will confuse the customer with complex math that is never detailed, despite being alleged easy.
[OP]
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Why are real estate agents so scared of this change even though they will not be forced to choose anything? Why don't they want the public to have more choice? Why does something that may not affect them bother them so much? Why are they so paranoid about this? Why do they even bother commenting on it?

Yes, your first guess was right!
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For citizens that aren't familiar with Canada's political system, private member's bills rarely pass.
http://www.revparl.ca/english/issue.asp ... 1&art=3487

http://blog.greensofttech.com/blog/?Tag=canada
"From 1910 to date, only 259 private member's bills have passed in a vote, and even the Canadian parliament website notes that these bills rarely become law. "
Jr. Member
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popbottle wrote:
Apr 21st, 2015 12:22 pm
Of course reducing commissions will cause some agents to silently not show those discounted listings, but then why would one percent say 70% of their listings are sold by cooperating agents?

Also that complex proposed law will reduce commissions too. Its almost the same thing as one percent, with more stuff to calculate.
what they seem to miss is that a smart buyer's agent enters into a contract with the client (buyer) that outlines how much they are going to be paid. They educate the purchaser and they certainly highlight the fact that the BUYER (you know, the person in the contract) is responsible for any shortfall in the amount of commission paid by the seller, and the agreed commission set out in the contract.

ie... this is what I am going to do for you, this is what I bring to the table (skill set) and this is what I charge.

This removes ANY conflict where one could accuse the Agent of not showing low commission properties.... because the Agent will get paid regardless.
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tdeem1 wrote:
May 21st, 2015 1:54 am
what they seem to miss is that a smart buyer's agent enters into a contract with the client (buyer) that outlines how much they are going to be paid. They educate the purchaser and they certainly highlight the fact that the BUYER (you know, the person in the contract) is responsible for any shortfall in the amount of commission paid by the seller, and the agreed commission set out in the contract.

ie... this is what I am going to do for you, this is what I bring to the table (skill set) and this is what I charge.

This removes ANY conflict where one could accuse the Agent of not showing low commission properties.... because the Agent will get paid regardless.
Do you mean a BRA? ( that's what the Toronto real estate board calls it )

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