Another great example of why you not only shouldn’t believe everything you see on television, you almost shouldn’t believe anything you see on the “news”. This isn’t the first time I’ve been on the “inside” of an industry that gets a scathing report on some “investigative journalism” show. Years ago there was a segment, on a what I thought was a well respected news show, about the insurance company where I worked at the time – I honestly can’t even remember now what the controversy was, but being someone who worked on the inside, I could see the gross errors and pretty much outright lies in the report. The hour long interview with the president of the company was condensed down to about a minute of snipets that put him in a very bad light and didn’t reveal any of the background.
Now we have a Global News 16×9 report on the state of the relationship between For Sale By Owner (FSBO) companies and the REALTOR® community. Fascinating piece of “journalism”. When you watch it, pay attention to amount of air time that the president of the Toronto Real Estate Board (TREB) gets.
TREB has developed a point by point rebuttal of the things mentioned in the report, and while the rebuttal is correct in its statements, it is lacking in one respect. It fails to acknowledge that many of the points made in the Global report have a basis in fact.
What you say? Steve is agreeing with Global? No, not by a long shot. What they have done is focused on the worst of the worst and suggested that the whole industry is that way. Obviously every industry has its share of unprofessional members – people who don’t follow the rules and give the rest of the people who are actually trying to do a good, honest job a bad name. Are there agents out there who won’t show FSBO properties? Of course there are – but not many. People are people. Are there bank clerks scamming money, doctors taking kickbacks from drug companies, accountants doing shady practices or lawyers participating in mortgage fraud? Yes on all accounts. That doesn’t mean their industries are corrupt or evil, it just means that those people are.
Some of what the Global report states is just plain false. There’s no secret area on the MLS® system, at least not in my board. Yes there are some pieces of information that are not disclosed until such time as an offer is on the table. Things like the property owner name and contact information, but this is dictated to us by Privacy laws. Information that is pertinent to the property is fully disclosed, in fact, it’s the law that is must be.
The truth of the FSBO topic is this: In any industry you can either do it yourself or hire a professional. Home renovation, car repair, tax preparation, legal advice, even medicine for that matter, all offer that choice, as does real estate. Those people who feel competent to do the work themselves can sometimes save themselves a lot of money by DIY’ing things. I do the bulk of my home renovations myself because I’ve had a fair amount of experience with it (it also takes me years to complete anything, but that’s another story). However, when I switched my oil furnace out for a gas model, I hired a professional. I could have tried it myself, but I probably wouldn’t be sitting here to tell the tale.
DIY real estate is more akin to selling your car privately. Sellers who are comfortable with the process are happy to do it and buyers who know cars and know what to look for are happy to engage in a private sale as well. I personally would never buy a car privately because I don’t know much about cars beyond how to fill up the tank. As complicated as cars are, houses are more so and much more expensive. The legal ramifications of purchasing property can be very complex. That’s why the vast majority of buyers (yes, the people you want to sell your house to) would prefer to work through a trained and licensed real estate professional than buy privately. And that’s the crux of it. Real estate sales people and brokers are highly trained and looking out for the best interests of their clients. In a private sale, nobody is doing that. We know what questions to ask and what things should be sending up red flags. That’s what you’re paying the commission for.
And as for the “huge” size of commissions, in my local area, an average total commission on a sale of a house might be around $8,250. (5% of $165,000). Holy smoke you say. Well I sat down as I was writing this and came up with an estimate of the hours involved in a real estate transaction and the expenses required. Of course it varies wildly based on the complexity of the transaction, but when I took a typical listing in my area along with a typical passage of events to get the house sold, I came up with an hourly rate of about $70.00. That’s more than my roofer charged me to put a new roof on my cottage, but less than the flooring guy charged to tile and carpet the office. And that figure doesn’t take into ongoing expenses like mandatory education, licence fees, insurance and the like. Put in that context, I don’t feel the commission amount is “huge” by any standard. And trust me, on the individual level, the amount of money that finally filters into my bank account after brokerage fees and commission splits is only a fraction of the total amount.
I have no gripes with someone trying to sell their house on their own. I have a gripe with people saying that the real estate industry is greedy and superfluous. The vast majority of REALTORS® offer a valuable service and work hard for the money. Oh, and by the way, if you do run into a REALTOR® who you think has broken the rules, talk to their broker or contact the Real Estate Council of Ontario and report them. I don’t want them working in the industry any more than you do.
Steve