A substantial settlement recently announced by a U.S. group representing more than one million Realtors has real estate experts hopeful Canadian home sellers could soon get a better deal.
Last week, the U.S.-based National Association of Realtors (NAR) agreed to pay $418 million US to end legal claims from home sellers that argued the group artificially inflated real estate commissions.
The NAR, which denied any wrongdoing in the case, has also agreed to eliminate the standard six per cent sales commission and do away with other commission rules.
The landmark settlement in the U.S. is playing out at the same time as a proposed national class action lawsuit makes its way through Canadian courts, with the lawyer behind the claim saying a win would reduce the cost of Canadian homes.
A University of British Columbia real estate professor says the settlement bolsters the argument for similar changes to happen in Canada, which could make it cheaper for people to buy and sell homes.
WATCH | B.C. real estate agents paying attention to U.S. settlement:
Why B.C. real estate agents are paying attention to a U.S. settlement on Realtor commissions
5 hours ago
Duration 2:14
A landmark settlement in the U.S. is garnering the attention of B.C. real estate experts. A U.S. group representing more than one million Realtors agreed to pay more than $400 million US to end legal claims that it artificially inflated real estate commissions. And it agreed to a change that could mean cost savings for home sellers. As Yasmine Ghania reports, a similar lawsuit is playing out in Canadian courts.
“It’s going to revolutionize the practice of real estate,” said Tom Davidoff, an associate professor at UBC’s Sauder School of Business and the director of UBC’s Centre for Urban Economics and Real Estate.
“It may become more competitive, but more importantly, cheaper for people to sell their homes.”
While they would not be a solution to the affordable housing crisis, Davidoff said, changes to commission rules would be a win for those looking to buy a home because prices would fall if sellers have lower costs.
Tom Davidoff, an associate professor at UBC’s Sauder School of Business, says the National Association of Realtors settlement could be revolutionary. (Mike Zimmer/CBC)
The U.S. case
For decades, the NAR has required brokers listing homes for sale to make a commission offer to a buyer’s agent up front — typically about six per cent of the sale price, split between a seller’s broker and a buyer’s agent.
Lawsuits argued home sellers were compelled to enter into commission-sharing arrangements in order to market their homes on multiple listing services (MLS) and not lose out on potential buyers.
As part of the settlement, the NAR has agreed to stop that practice, and to prohibit agents’ compensation from being included on listing portals.
In Canada, commission structures vary across the country, but typically real estate agents and their brokerage charge a percentage-based commission on the sale price of a home, split between the seller’s and buyer’s agents.
In B.C., it’s seven per cent on the first $100,000 and three per cent on the balance in a real estate transaction, according to real estate agents who spoke to CBC News.
Lawsuit alleges conspiracy
The Canadian Real Estate Association (CREA) is a defendant along with dozens of local brokerages in a proposed class-action lawsuit, filed in January of this year, which alleges “a conspiracy, agreement or arrangement” between brokerages leading to illegal increases in the price of residential real estate commissions.
The lawsuit filed in Federal Court has yet to be certified as a class proceeding.
“In a universe in which housing prices have grown astronomically … and the buyer brokerage is being paid based on a commission, are they doing any more work today than they did 15 years ago? The answer is probably not,” said Garth Myers, a partner at Kalloghlian Myers LLP, the firm that has filed the lawsuit.
The CREA represents more than 160,000 brokers, agents and salespeople through over 65 boards and associations in the country.
WATCH | Realtor says changes to commission rules could be ‘challenging’ for agents:
Commission changes could make business harder for Realtors, B.C. real estate agent says
1 day ago
Duration 0:52
Tamara Stone, co-founder of the Kelowna-based, ReMax-affiliated Stone Sisters, says changes to commission rules similar to ones recently agreed to by the National Association of Realtors in the U.S. could increase competition among real estate agents in Canada.
None of the allegations have been proven in court. The CREA has said it considers the allegations “to be without merit and will continue to vigorously defend against them.” It also says it’s “closely monitoring” the settlement agreement in the U.S.
Myers says he’s hopeful the U.S. developments strengthen the Canadian case.
“[The U.S. settlement] puts a major dent in any argument that the Canadian Real Estate Association is going to make with respect to the necessity of these [commission] rules for the proper functioning of the system,” he said.
“We think that the consequence of our lawsuit will mean more money in the pocket of home sellers and it’ll reduce the cost of residential real estate across the country.”
Lawyer Garth Myers says if successful, the Canadian class action lawsuit could mean more money in the pocket of of home sellers. (Maggie MacPherson/CBC)
Tamara Stone, a real estate agent and co-founder of ReMax Kelowna Stone Sisters, says that if Canadian commission rules are changed similarly to the U.S., it could lead to more competition among agents. ReMax is named as a defendant in the Canadian lawsuit.
“If [a Realtor] isn’t really showing value … negotiating and marketing for a seller and negotiating and working hard for a buyer, I think that will bring fees down,” Stone said.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
