An MLS for you and another for agents – guess which is bet­ter

Garry Marr, Finan­cial Post

It’s a lit­tle device, wafer thin and about half the size of your fin­ger that every real­tor in Toronto has attached to a key chain.

It spits out con­stantly chang­ing pass­words that are used to guard access to one of the most pre­cious resources the Cana­dian real estate indus­try owns – MLS or the mul­ti­ple list­ing ser­vice. Every board in Canada has its own secu­rity system.

The inter­net was sup­posed to make the real estate agent redun­dant. The the­ory was peo­ple would sim­ply go online and find a home for sale. But even today, esti­mates are that at least 90% of all real estate trans­ac­tions go through an agent con­nected to the MLS, which serves as the cen­tral sys­tem for real estate list­ings.

There is no ques­tion the pub­licly acces­si­ble site of the real estate indus­try is much bet­ter than it used to be at pro­vid­ing con­sumers with infor­ma­tion. When the site first opened in 1996, list­ings were pro­tected with such zeal that you could see a home but not the address.

The Cana­dian Real Estate Asso­ci­a­tion owns the rights to the mul­ti­ple list­ing ser­vice, which has been around since the 1950s. When an agent gets a list­ing, he or she col­lects data on the prop­erty and then puts it on the local board’s sys­tem. CREA rep­re­sents more than 97,000 real estate bro­kers, agents and sales­peo­ple work­ing through 100 real estate Boards and Associations.

It’s up to the seller to decide if he or she wants that list­ing to be made pub­lic. If the answer is yes, the data is uploaded to the national site, mls​.ca or, as it is mar­keted these days, real​tor​.ca. CREA grav­i­tated towards the real​tor​.ca site because it did not want to con­fuse con­sumers into think­ing they were get­ting full access to the mul­ti­ple list­ing ser­vice. It also did want to give up the name to major league soccer.

What’s the dif­fer­ence between the pub­lic sys­tem and the pri­vate site that the agents guard so closely? For starters, the agents-only site has his­tor­i­cal data that makes it much eas­ier to get a sense of the value of the home. It also pro­vides com­mis­sion rates, tells you who the seller is and in most cases has supe­rior search options.

“There is still so much more on the pri­vate site than the pub­lic site and why shouldn’t there be? It’s our site,” one real estate vet­eran said.

How has MLS been able to stave off com­pe­ti­tion from for-sale-by-owner sites – called FSBOs – and other third-party sites on the Inter­net, when infor­ma­tion is sup­posed to flow freely?

MLS has reached such a crit­i­cal mass it is impos­si­ble, or sim­ply not smart, to sell your home any other way. Sell it pri­vately or through another web site and there is a greater like­li­hood of miss­ing out on poten­tial buy­ers will­ing to pay a higher price.

The MLS has grown in dom­i­nance from hav­ing just $1-billion in sales in 1960. Sales through the sys­tem climbed to $7-billion by 1976, and by 1986 had soared to $30-billion. Last year, close to $131.9-billion of res­i­den­tial sales were listed through MLS.

The fed­eral Com­pe­ti­tion Bureau has an open file look­ing into whether the MLS sys­tem has rules that vio­late the Com­pe­ti­tion Act. At one point, Stephen Mora­nis, the for­mer owner of Real­ty­sellers (Ontario) Ltd. sued the Toronto Real Estate Board (TREB) and Cana­dian Real Estate Asso­ci­a­tion, alleg­ing the two orga­ni­za­tions were forc­ing the com­pany to raise the price it charged home buy­ers and sell­ers. Real­ty­sellers was offer­ing at the time a pro­gram that allowed you to get an MLS list­ing for $695.

Last month, Mr. Mora­nis’ mother, Sadie, a female trail­blazer in the indus­try, passed away. Accord­ing to sources, Mr. Mora­nis is now run­ning her com­pany, Pru­den­tial Sadie Mora­nis Realty, putting him on the side he once sued.

While his mother was a strong mem­ber of the real estate indus­try, who served as the first female Toronto Real Estate Board pres­i­dent, her early days in the busi­ness illus­trate how closely-held things were 40 years ago.

Before real­tors agreed to a cen­tral sys­tem to list all their prop­er­ties, list­ings were called “exclu­sives” and were held by one shop, which would try to con­trol who bought and sold a prop­erty so it could con­trol both ends of the commission.

“Every com­pany tried to sell inhouse. This was before any sort of sophis­ti­cated tech­nol­ogy,” recalled Sherry Chris, a for­mer LeP­age vice-president who is now chief exec­u­tive of Bet­ter Homes and Gar­dens Real Estate, which plans to launch its brand in Canada this year.

Back in the early 1980s, the dom­i­nant player in Toronto was A. E. Le-Page, which in 1984 merged with the real estate arm of Royal Trust to form Royal LeP­age, and became the country’s largest real estate brokerage.

Bro­kers like Ms. Mora­nis, who were out­side the LeP­age umbrella, but had clients who wanted to buy LeP­age prop­er­ties, were forced to make side deals with agents inside the com­pany, trad­ing commission.

The MLS sys­tem at the time hadn’t really taken off. In CREA’s own words: “Bro­kers tended to use it as a sys­tem of last resort to sell prop­er­ties they couldn’t sell on their own.” Con­sumers gen­er­ally had to pay a larger com­mis­sion for an MLS-listed property.

One of the key changes to the Cana­dian land­scape was the arrival of Re/Max. The firm changed the rules on how com­mis­sions were split. Before Re/Max’s arrival, half an agent’s com­mis­sion went to the bro­ker­age. Re/Max soon let agents keep about 90% of their com­mis­sion while charg­ing them var­i­ous fees.

Agents started migrat­ing to Re/ Max because of the bet­ter split. They were mak­ing more money and the result­ing com­pe­ti­tion for list­ings led to lower com­mis­sions – and made list­ing on the MLS less expensive.

Michael Pol­zler is exec­u­tive vice pres­i­dent of Re/Max Ontario-Atlantic Canada. His father, Frank, helped found the firm in Canada. Mr. Pol­zler said bro­kers have got­ten used to con­sumers hav­ing access to more infor­ma­tion, but con­cedes the pub­lic site does not pro­vide as much infor­ma­tion as the pri­vate site. “The bro­kers are see­ing much more detail. But it’s enough of a view for the aver­age con­sumer,” said Mr. Polzler.

Phil Soper, the chief exec­u­tive of Royal LeP­age, said the infor­ma­tion on MLS that is acces­si­ble to the pub­lic is restricted by gov­ern­ment rules. “There has been a real tight­en­ing of pri­vacy guide­lines,” he said, adding those guide­lines are one rea­son his­tor­i­cal sale prices on a prop­erty are not avail­able to the public.

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