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Seven Things You Need to Know About Toronto Real Estate Right Now – Move Smartly

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Our interviews with top experts on the market amidst Covid-19 identified these key factors making an impact now – and what to watch for next.

After hosting over 20+ hours of top expert interviews at our online Toronto Real Estate Summit last week at MoveSmartly.com, we feel like we’ve just completed a killer crash course in real estate, finally ascending to the ranks of those who’ve learned something new in lockdown (move over, pandemic sourdough bakers). You can now watch all Summit sessions on demand here.

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Available Now: Watch all Toronto Real Estate Summit sessions on demand

When the Covid-19 (Coronavirus) crisis reached Toronto in mid-March, we were, like everyone, frightened by the loss of life and suffering of those around us and around the world – and stunned by the near total shutdown of our economy and our real estate market. 

And then the questions from worried home owners, buyers, sellers and renters started coming in. 

We decided to launch an online Summit, co-hosted by Realosophy Realty, to try to help by providing high quality information to real estate consumers given the anxiety we’re all feeling. 

After a week of truly insightful conversations with top experts, we can’t say that the troubling and uncertain times we are in will be over anytime soon – but we’ve heard from many Summit viewers that gaining knowledge has made them feel a little more in control of their situations and better able to do what is best for them.

Here are the top seven takeaways from the Summit:

 

1. A beach ball bounceback?

Pre-Covid, the Toronto area real estate market was red hot in Feb, with 17% appreciation in home prices year over year; pre-construction condo sales were similarly robust, and the main worry was that the market might be overheating.

In spite of real estate being declared an essential service, the market came to a near complete stop in mid-March as we entered lockdown with April seeing an unprecedented 70% drop in sales volume.

Summit experts across the board were surprised by the near total bounce back of the market in June, as buyers and sellers returned in strength and sales volume recovered to the same level as last year.

Speakers Jason Mercer, Chief Market Analyst at the Toronto Regional Real Estate Board (View session here), and Shaun Hildebrand, President at Urbanation (View session here), a leading Toronto condo market research and consulting firm, suggested they will likely return to pre-Covid price projections with the average Toronto home price expected to rise to $900,000 and condo prices per square foot to rise by 6.5% by the end of this year.

This early strength has made the Canadian Mortgage and Housing Corporation (CMHC) forecast which projects a fall in Canadian home prices of up to 18% by the end of the year in the wake of Covid-19 seem too pessimistic. 

But experts at the Summit expressed caution about the longevity of  a bounceback that was largely linked to the pent-up demand of active buyers who were unexpectedly locked down. Speaker Frances Donald, Global Chief Economist at Manulife Investment Management (View session here), has elsewhere recently likened consumer behaviour in the wake of the Covid lockdown to that of a temporarily submerged beach ball springing up out of the water and Hildebrand warned that without a recovery of the normal, longer-term drivers of home prices – such as immigration and job and income growth – the market was running “on the fumes.” 

 

2. A tale of two workers. 

With 14% unemployment in Canada in the wake of Covid, many Summit viewers wondered just who is buying homes today and how home prices are staying up and even rising?

One explanation shared by Mercer and other experts at the Summit is that the unequal impact of Covid-19 on job sectors, with those in the services being hit much harder than those office workers able to transition to working from home, has a parallel in the real estate market, with office workers more likely to own (and be able to continue buying) homes and service workers more like to rent.

But the complexity of the jobs story will only continue – sharp falls in consumer demand in certain sectors coupled with re-opening restrictions on how organizations will have to operate going forward may result in a reduction in income even for those who have managed to keep on working in higher-end occupations such as dentists and university professors. 

3. Working from home has driven buyers to outer burbs and cottage country.

Real estate professionals at the Summit reported a strong uptick in sales in the outer burbs and cottage country since June as many seek out better conditions as they work from home, home school children and bunker down in multi-generational bubbles while trying to avoid the risks of getting Covid felt to be higher in more dense urban areas. Recent sales stats show that the seven hottest municipalities in the Greater Toronto Area (GTA) with sales up by more than 40% are on average 86km from Toronto.

Summit speakers Donald and Lu Han, Professor of Economic Analysis and Policy at the University of Toronto, highlighted this as an important behavioural trend that may impact the Toronto area housing market in the years ahead.

Speaker Andrea DelZotto, Director and Executive Vice President, Community Development at the Tridel Group of Companies (View session here), Canada’s largest condo builder, noted that just how long-lasting such consumer behavioural shifts will be are harder to assess: How long will we want to work from home once we no longer need to? Will there be a return to pre-Covid trends such as the preference for dense, mixed-use “15-minute” cities

Even if Covid-19 health exigencies are shorter-term (far from a sure thing given concerns about returning Covid waves this fall and new pandemics in the future), a second trend, that of Canadians wanting to deleverage and downsize their mortgages as the Covid crisis has us all thinking about our personal finances more closely than usual (see point #6 on debt below), may make the movement to less expensive outlying areas a longer-lived one. 

Available Now: Watch all Toronto Real Estate Summit sessions on demand

 

4. Renting is about to get cheaper. 

Summit speaker Hildebrand notes that that condo rents were already on the decline pre-Covid as new condo units continue to reach completion in the Toronto area adding to supply. Overall, 2020 Q2 saw a decline of 3.5% per sq foot, with rents dropping further from 7 to 15% in more expensive, high supply downtown Toronto areas like the Entertainment District, Liberty Village and CityPlace.

Tighter regulations of short-term Airbnb-style rentals were also on the increase pre-Covid, including in the City of Toronto, leading to more units being offered to longer-term renters, adding to supply.

On top of this, Covid-19 has led to an unprecedented drop in non-permanent resident and foreign student arrivals, immigration and tourism, furthering dampening rental demand. Hildebrand noted that 25-35K non-permanent residents arrive in Canada every month, a number which dropped to 4K in April, and 11K in May. Since then, most foreign students have been advised not to travel to Canada while Covid restrictions remain in place.

 

5. Is the condo market (finally) about to slow? 

While the condo re-sale market and a few new condo projects were initially part of the market bounceback story (see #1 above), Hildebrand, Mercer and other experts flagged the condo market as facing the biggest number of uncertainties going forward. 

In spite of  Covid-19, Hildebrand notes that the Toronto area condo market may see 20,000 to 25,000 units completed, the biggest number since 2014, representing a significant increase in supply during a period where rental demand is falling.

Add to this the spectre of falling rents (per #4 above), and it remains to be seen how investors who have enjoyed good financial returns on their condo purchases up to now may judge prospects going forward.

 

6. Debt is a real drag.

Canadian households are in debt, our companies are in debt and our federal and provincial governments are in debt — and this debt was increasing before the Coronavirus crisis hit.

As Summit speaker Hilliard MacBeth, author and financial advisor (View session here), noted, Canadian household debt has been climbing at a much faster rate than in the U.S. since the last economic slowdown in 2008, and at 176%, we now have one the highest household debt-to-income ratios in the world. 

Even pre-Covid, there was concern that Canadians may not be able to manage higher mortgage payments in the event of rising interest rates, risking a downturn in the market.

Now, a second concern, that this debt makes the market more vulnerable in an economic downturn is on the front-burner.  With 16% of Canadians households currently deferring their mortgage payments, how many households, stretched too far by falling income and job losses due to Covid, will be unable to make mortgage payments the longer this economic crisis continues – and when government assistance ends?

Speaker Mikael Khan, Bank of Canada economist (View session here), suggests the risk of Canadians defaulting on their homes is somewhat mitigated by the amount of equity Canadians have accumulated over the last 20 years of rising home prices. But for how long? Donald points out that our debt levels may make our economic recovery a sluggish one for years to come.

(If the Covid crisis has made you, like so many Canadians, think more closely about your own personal finances and debt situation, don’t miss our tip-filled Summit sessions with Gail Vaz-Oxlade (View session here), Preet Banerjee (View session here) and Kerry Taylor (View session here).)

 

7. A longer-term boost for Canada and the Toronto Area? 

Summit speakers were united in their agreement that the Canadian economy – and the Toronto real estate market – faces an unprecedented (perhaps *the* word for 2020?) number of risks. 

Given this, one Summit viewer wondered why some speakers were still bullish on Toronto real estate in the long-term.

For anyone watching Toronto real estate for some time,  it may feel like we’ve been here before – and emerged relatively unscathed. This blog itself originated in the last severe economic crisis we experienced in 2008. However, Summit speaker Kevin A. Bryan, Assistant Professor of Strategic Management, University of Toronto, cautioned against making a comparison between these two very different crises (View session here).

While no one minimized the depth and complexity of the current crisis, Mercer and Hildebrand suggested that some factors may make Canada even more attractive once travel restrictions lift: Canada’s more open attitude to immigration, foreign workers and students than has recently been seen in the United States and Canada’s management of the Covid-19 crisis itself which has seen its cases and death per capita remain lower than in the States. “I’m upbeat on the GTA over the long-term in terms of a place to work and its ability to attract new people into the region with all of them needing a place to live ,” noted Mercer.

But the biggest question for now is just how we and our market will fare in the short-term, and at MoveSmartly.com we’ll continue to track just how the many different factors identified by experts at the Summit actually play out.

Urmi Desai is Editor at Move Smartly, a leader in Toronto real estate news & analysis, and is Realosophy Realty’s Chief Content Officer with responsibility for Realosophy.com and all consumer education and tools.

Urmi holds a B.A. in Political Science and English from the University of Toronto and an M.A. from the Norman Paterson School of International Affairs (Trade Economics) at Carleton University (Ottawa, Canada).

Email Urmi

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The Homeowners Who Beat the National Association of Realtors – The New York Times

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When Rhonda Burnett went to sell a home in 2016, she knew she would have to pay a commission to her real estate agent.

The house was a second home — she and her husband, Scott Burnett, had purchased the three-bedroom house in Kansas City’s Hyde Park neighborhood as a place for their oldest son to live after he was accepted to law school in Kansas City in 2008.

Her real estate agent presented her with a form that detailed how much commission they would pay, with choices in four boxes: 6 percent, 7 percent, 8 percent or 9 percent.

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Ms. Burnett was instructed to select one, and she picked 6 percent.

The rest of the form, which stipulated that the commission would be evenly split among the buyer and seller agents, was already filled out; Ms. Burnett asked if she could lower the commission paid to the buyer’s agent, but her agent told her doing so would discourage agents from showing her home. “I shop sales,” Ms. Burnett, 70, said with a laugh. She spent three decades as a stay-at-home mother while her husband, Scott Burnett, 72, worked for a waste management company and spent 20 years working as a local legislator. “I’m always looking for a break. But when I asked her if I could negotiate, she said, ‘No, you really can’t.’”

Three years later in 2019, Ms. Burnett became the lead plaintiff in a landmark legal case about home sale commissions against the National Association of Realtors that led to a settlement earlier this month that real estate experts say will rewrite the housing industry in the United States.

The settlement followed a federal jury verdict in October in favor of the Burnetts and four other plaintiffs, on behalf of 500,000 Missouri home sellers, that ordered N.A.R. to pay $1.8 billion in damages. Under the agreement, sellers’ agents will no longer be able to make offers of commission to buyers’ agents on most of the databases where homes are listed for sale, a shift that will, experts say, lower commissions across the board. For decades, most agents in the United States have charged an industry standard of between 5 and 6 percent, which is higher than in nearly any other developed country.

The plaintiffs argued that N.A.R. and several large real estate brokerages had conspired to inflate real estate commissions, pointing to several N.A.R. rules that required a seller’s agent make an offer of commission to a buyer’s agent. Those commissions, the home sellers argued, were negotiable in name only, and unnecessarily high, forcing home sellers to pay unnecessary fees to close a sale.

Ms. Burnett spoke for both herself and her husband. She told the jury how she felt that the rules of the real estate industry had seemed fixed, and she believed she was forced to pay a commission that was never truly negotiable.

In an interview, Ms. Burnett stressed that she didn’t blame her real estate agent, whom she believes was just doing her job. Ms. Burnett spent several years as an advocate for the Kansas City public schools, meeting with educators and parents that helped her district. Her real estate agent was also a school advocate, and they often saw each other at district meetings. She blamed the industry, and the powerful National Association of Realtors, which had set the rules.

“It’s not the Realtors. But the Realtors are controlled by a huge spider web,” she said. “After I joined the lawsuit, I learned so much about how the industry is run. It goes all the way to the brokerages and up to N.A.R.”

Despite the settlement, which is pending a federal judge’s approval, N.A.R. continues to deny any wrongdoing in terms of its rules for agent compensation.

“N.A.R. does not set commissions, and commissions were negotiable long before this settlement. They are and will remain entirely negotiable between brokers and their clients,” the organization said in a recent statement.

Before the lawsuit went to court, N.A.R. — a powerful trade organization with 1.5 million members, more than $1 billion in assets and a cash-flush lobbying arm — seemed impregnable. It had fended off a Justice Department inquiry into anticompetitive behavior for more than a decade, and successfully sued upstart real estate companies that challenged its stance. The Justice Department inquiry is ongoing.

But in U.S. District Court for the Western District of Missouri, the home sellers were speaking directly to a jury of their peers. It offered them an opening.

Michael Ketchmark, 58, a plain-spoken personal injury lawyer who became lead lawyer on the case, sensed his advantage on the first day of the trial.

Stepping to the front of the courtroom on Oct. 17, he gestured to his mother and father, who are in their 80s and attend all of his trials. On that day, Margaret and Eugene Ketchmark were seated in the front row.

“I told the jury that everything I needed to know about this lawsuit, I learned from my mom and dad when I was in kindergarten,” Mr. Ketchmark said in an interview. “If you take something that doesn’t belong to you, you have to give it back. And that’s what this case was. It was a refund case. It was about giving the money back.”

Mr. Ketchmark was referred to the case by a friend and fellow attorney who knew the Burnetts. He then began looking for other plaintiffs across Missouri who might have similar grievances.

Mr. Ketchmark had never tried a housing case before, but he was no stranger to big wins — in 2002, he won a $2.2 billion civil judgment against Eli Lilly and other drugmakers, claiming that they failed to uncover the scheme of a Kansas City pharmacist who was diluting chemotherapy drugs. The drugmakers, who never admitted any wrongdoing, later settled for $72.1 million.

Mr. Ketchmark had a similar upbringing to the plaintiffs in the case against N.A.R., with parents who didn’t make a lot of money and who saw a house as their biggest investment. He grew up in West Des Moines, Iowa, as one of four children, and his father worked at a bank. His mother didn’t finish college until he himself was in law school — she put herself through night school.

He had a strategy: Talk to as many average Americans as he could about the case, and find out what resonated. His team began running and filming mock trials.

“We would watch the tape, and start developing out the themes of the case,” he said. By the time they got to trial, Mr. Ketchmark estimates he had watched 2,000 hours of video of mock jurors discussing the case.

“I intuitively knew when the trial started that if we could win this, that if the jury followed the law and reached the right result, that it would change the industry. And it has,” he said.

He pressed Ms. Burnett, who grew up in Georgia and met her husband when they were both working in President Jimmy Carter’s White House — Scott did field organization, Rhonda worked as an administrative aide — to describe her childhood with a stay-at-home mother who sold Tupperware and a father who worked at the federal penitentiary and took on shifts selling sporting goods at the local Sears for extra cash.

Ms. Burnett’s agent listed the house for $275,000 but it sold for $250,000. Ms. Burnett paid $15,298 in commission.

Mr. Ketchmark guided Jerod Breit, 42, another plaintiff in the case, to share stories of working as a police officer in St. Louis before saving up enough to buy his first home in South St. Louis. And he encouraged Hollee Ellis, 53, to tell the jury about her mother, who worked as a real estate agent.

Ms. Ellis, a former high school English teacher who now works in nonprofits, talked about joining her mother at real estate showings as a child, and later even working as an assistant at her brokerage at one point. She joined the lawsuit, she told the jury, not in spite of her mother but because of her.

If real estate agents were actually able to negotiate commissions, she said, she believed her mother could have made more money, rather than less.

“She operated under that assumption and that practice and that standard for so many years,” Ms. Ellis said of the split 6 percent commission. She shared with the jury that her mother is now suffering from Alzheimer’s and has advanced dementia. “Whereas I know she worked very, very hard for some of her buyers and possibly could have negotiated a different rate.”

Ms. Ellis described selling a modest three-bedroom, single-level brick house in 2016 and feeling that she could not negotiate the 6 percent commission she paid that was split between her agent and her buyer’s agent. “It’s not about money at all,” she said of the case. “It’s about reversing a practice that I feel is unfair.”

Ms. Ellis and her husband, Jerry Ellis, a forklift driver, were looking to sell their house in Ash Grove, Mo., because Ms. Ellis had a new job opportunity at a nonprofit in South Carolina.

They owed $107,000 on their mortgage. They hired a real estate agent who sold the house for $126,000, netting them just over $18,000. Forty percent of that ended up going to real estate commissions for both their agent and the buyer’s agent.

“It was a hard pill to swallow that we were walking away with so little,” she said.

Mr. Breit, 42, also said he felt he had money taken from him.

He spent more than a decade as a police officer. He bought his first home, a two-bedroom brick Tudor in south St. Louis he described as a “gingerbread house,” with the help of a fellow officer’s father — a retired paramedic who worked as a real estate agent on the side.

When it came time to sell that home, Mr. Breit said, that same retired paramedic offered to help again, he said, and promised he would only take the “law enforcement special” of 5.5 percent commission.

Mr. Breit took issue with the commission to his buyer’s agent, and had already joined the class-action lawsuit when lawyers began reviewing the contracts of his home sale. It was only then, one day before he was scheduled to take the stand, that he learned he hadn’t been offered a law enforcement special anyway.

He sold the home for $149,900 in 2017. He was charged $4,946.70 in commission to his seller, and $4,047.30 in commission to his buyer, totaling $8,994. When the numbers were brought to his attention, he did the math in his head several times, disbelieving. His agent, using forms that were preprinted, had gone ahead and charged him the full 6 percent.

“I know people say it’s negotiable,” he said. “But it’s really hard for me to believe that it’s negotiable when the documents are pre-filled and we don’t question it.”

Mr. Breit left the police force in 2017 and now serves as a regional executive director for Mothers Against Drunk Driving, or MADD.

“I’m just a person who sold a house,” he said. “I don’t go to Jiffy Lube to pay for an oil change next week, and I don’t pay for someone else’s Hulu account because we live on the same block. People should only have to pay for what they use.”

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Opinion | Real estate feels too darn expensive. But are commissions to blame? – The Washington Post

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Regarding the March 21 editorial, “There’s a real estate shakeup — but more can be done,” and Megan McArdle’s March 22 op-ed, “We’ll soon learn the true value of real estate agents”:

As a residential real estate broker in the D.C. region for more than 40 years, I witnessed the creation of buyer representation nationally because of consumer demand. The purchase of a home is the largest and most complex financial deal most people enter into in their lives. They don’t do it often. The thought of a buyer not having an advocate makes me shudder. If you saw what I saw, you would, too!

Real estate agents handle so many issues. Some are questions about the physical condition of the property. Does the home have radon, lead paint, mold, asbestos or wells or septic tanks? Is it subject to obscure zoning rules, unusual property lines, conservation easements or historic overlays? We can tell buyers if a home inspector or contractor is reliable, and how to navigate mortgage financing guidelines or find a skilled underwriter. And we are their partners in the emotional parts of real estate: tough negotiations, nasty divorces or adult children who won’t move out.

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In helping buyers handle these issues, real estate agents create a community network of homeowners and service providers. Most people don’t know the depth of what their agent does for them. We can do a better job explaining that.

This is already a highly competitive industry. Inexpensive options for obtaining brokerage services have always been available to all clients. Sellers who choose not to offer compensation to a buyer’s agent will eliminate opportunities for Veterans Affairs-financed buyers and for most first-time buyers who cannot pay their agent because of loan-underwriting guidelines. That reduces access to homeownership unless these buyers buy without the benefit of representation. That feels discriminatory to me. Often, buyers would not even know they could buy a home without the help of a buyer’s agent.

Also, consider that for buyers and sellers getting their information off the internet, context is quickly lost. Relying on a website alone to buy a house or condo is sort of like diagnosing your medical problems by looking online and dismissing the need for a doctor.

Holly Worthington, Chevy Chase

I much appreciated the Editorial Board’s take on the National Association of Realtors with regard to “limited competition among agents on price and service quality.” For me, the editorial was, as Yogi Berra is famously thought to have said, “déjà vu all over again.”

From the spring of 1978 until the end of winter 1979, I led the Seattle office of the Federal Trade Commission investigation into NAR’s use of its multiple-listing services as a price-fixing scheme. The investigation, which received full cooperation from the NAR general counsel’s office, covered five metropolitan areas across the country.

Based upon MLS data, our investigation concluded that collusion between brokers was patent and the MLS was the vehicle that promoted price-fixing and service uniformity. My office sought to treat the listings database as an essential public service and proposed opening the MLS to consumers on a “user fee” basis. However, the FTC rejected the proposal in its entirety and reassigned the NAR matter to the Los Angeles office to pursue a market-driven, nonenforcement approach based on the development of “buyer broker representation.”

And here we are today. Perhaps there are lessons for the future in our work from the late 1970s and from the research conducted by our regional director, William C. Erxleben, on brokerage price fixing.

Michael Katz, Washington

As a long-retired Realtor, I was intrigued by Megan McArdle’s op-ed on real estate agents.

When I was active in the profession, I thought about a third of the active agents in my market were competent, knowledgeable and diligent and worked hard for their clients. Another third were inexperienced and learning, while the final third were unsuccessful and trying to find other employment.

Ms. McArdle wrote that she would pay pay a buyer’s agent between $500 to $2,000 for assistance. Her estimate of an agent’s worth assumes a buyer will establish market value, has knowledge of any needed inspections and understands the requirements when closing a transaction. I doubt many buyers have the necessary time and ability.

And Ms. McArdle ignored commercial and other nonresidential real estate transactions, which could be even more complicated. All buyers and sellers will continue to choose their agents. A more important question might be: What method could the industry develop to help them make an informed choice?

Certainly, technological innovations will affect residential marketing expenses. And it will be very interesting to see how the housing industry’s cost of goods sold evolves.

Frank Brodersen, Springfield

Contrary to the impression given in a recent Post editorial, a decrease in Realtors’ commissions will not decrease the price of homes. Home prices will continue to be determined by supply and demand, especially in a market in which there are very few listings. If real estate commissions decline, sellers might receive more money on closing. But in a market with hundreds of potential buyers and six listings, why would sellers lower their asking prices?

Roy Relph, Arlington

The editorial on real estate costs accepted without much question the narrative that waiving title insurance — which protects home buyers in the event that someone makes a claim to their new home — will help solve the nation’s housing affordability challenges. Unfortunately, the administration’s title insurance pilot program will exacerbate housing costs by exposing lenders, consumers and taxpayers to greater financial risk.

This experiment would allow some refinancers of federally backed mortgages to skip paying for title insurance in favor of inadequate verification methods. The program targets only higher-wealth homeowners, not first-time homebuyers. It will do little to spur new ownership.

And the program would put Fannie Mae, which was neither created, chartered, licensed, regulated nor reserved for such purposes, into the title insurance business. Fannie Mae helped implode the U.S. economy in 2008 and cost taxpayers more than $200 billion the last time it engaged in significant risk-taking beyond its charter.

For the protection it provides, title insurance is a good deal. While many other fees have increased, the cost of title insurance coverage has declined nearly 8 percent since 2004. We need to focus on the barriers to homeownership that exist today, but title insurance isn’t one of them.

Diane Tomb, Arlington

The author is chief executive of the American Land Title Association.

The long, and thorny, U.S.-Israel relationship

Regarding the March 25 front-page article “Gaza dissenter plans second act”:

This coverage of Josh Paul appropriately honored a man who acts on his conscience to bring an important and informed point of view to others.

However, the article gave the impression that Israel has always enjoyed an exclusive free ride from the highest levels of our government. This history is much more complicated.

No less a figure than U.S. Secretary of State George C. Marshall opposed recognition of the new state of Israel in 1948; he and his allies on the question feared ongoing war in the region and threats to U.S. access to oil. President Dwight D. Eisenhower demanded the withdrawal of Israeli forces from the Sinai Peninsula after the 1956 Suez Crisis and threatened to cut off U.S. aid if Israel did not comply. Citing larger geopolitical considerations, Secretary of State Henry Kissinger favored a stalemate rather than outright Israeli victory in the 1973 Yom Kippur War, even though Israel had been attacked. President George H.W. Bush withheld loan guarantees to Israel to accelerate Prime Minister Yitzhak Shamir’s negotiations with Palestinian leader Yasser Arafat. And in 2005, Prime Minister Ariel Sharon withdrew Israeli forces from Gaza in an attempt to improve Israel’s standing.

It is appropriate for Americans to convey to the Israelis what our nation has learned about warfare from the ugly experience of destroying Vietnamese villages in order to save them and inadvertently incinerating Afghan families unfortunate enough to live too close to military targets. But let’s not pretend that it’s simple to ask Israel to shield the innocent from a war started and pursued by people sworn to destroy it, or that any other nation has been held to this standard.

David Hornestay, Silver Spring

I want to offer high praise for the outstanding profile of Josh Paul. Mr. Paul’s thoughts and actions about the Israeli war on Gaza were measured and reflective of what many Americans , including me, think and believe. His integrity and determination to speak truth to power were inspirational.

I wish President Biden — who, until giving a catastrophically misguided hug to Israeli Prime Minister Benjamin Netanyahu in October, had been a good president — would listen to what Mr. Paul is saying. I agree with him that “what Israel is doing right now is deeply harmful to America” and contrary to the values America espouses around the world.

The courage demonstrated by Mr. Paul, a Maryland resident, and Sen. Chris Van Hollen (D-Md.), who has spoken out against selling Israel offensive weapons and in favor of more aid to Gaza, has given me reason to take pride in Maryland, our people and our leadership.

Robert J. Latham, Ellicott City

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A settlement in a U.S. lawsuit could upend the cornerstone of real estate industry: commissions – CBC.ca

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The cost of selling a home in the United States may be about to change dramatically.

A real estate trade group has agreed to a landmark deal to drop what was once a cornerstone of the industry: the six per cent sales commission paid to agents.

In Canada, two lawsuits filed against various real estate bodies want the courts to come to the same conclusion and force wholesale change in the way Realtors charge their fees when a home is sold.

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“We got here by a cartel of brokerages and real estate associations that control the rules, and they’ve done it for a very long time,” said Garth Myers, a litigator with Toronto law firm Kalloghlian Myers.

He filed the proposed class-action lawsuits in Federal Court on behalf of plaintiffs who allege that the Canadian Real Estate Association, the Toronto Regional Real Estate Board and several local brokerages and franchisors conspired to set fees and illegally drive up the price of real estate commissions.

At the heart of both the U.S. and Canadian cases is the opaque way in which real estate agents charge their fees.

Lawsuits revolve around Competition Act

In Canada, there are different fee structures in different jurisdictions. In Ontario, for example, a commission of five per cent of a home’s sale price is split between the buyer’s and seller’s agents.

With the average price of a Toronto home at $1,225,000 last month, Realtor fees would amount to $61,250.

In Vancouver, Realtors charge seven per cent on the first $100,000 of the sale price, and between 2.5 and three per cent on the balance. So agents would split between $29,500 and $34,000 in fees on a $1-million home.

A real estate 'For Sale' sign outside a single-family home.
In Canada, there are different fee structures for real estate agents in different jurisdictions. In Vancouver, Realtors charge seven per cent on the first $100,000 of the sale price, and between 2.5 and three per cent on the balance. (Ben Nelms/CBC)

In the U.S., agents generally charge a commission of five or six per cent.

But what is common among those different jurisdictions is that the fee paid to the buyer’s agent is baked into the price of the home, while a seller can negotiate with their agent and get a better fee.

A potential buyer can look up the details of a home on something called the Multiple Listing Service (MLS). The listing includes everything they would want to know about a property — from size and taxes to upgrades and amenities — but it doesn’t disclose the amount a buyer will pay in Realtor fees.

Myers said the existing system enables agents to steer clients away from homes that aren’t paying the full commission.

“It’s clear to us that consumers are being ripped off, it’s clear to us that the rules elevate the cost of buyer brokerage commissions,” he said. “Now the open question that the court is going to have to resolve is whether this is criminal conduct under the Competition Act. And that’s what we’re fighting about in court.”

It will likely take years before the cases are resolved.

WATCH | How sweeping U.S. real estate changes could impact Canada:

How sweeping U.S real estate changes could impact Canada

8 hours ago

Duration 6:22

A landmark legal settlement is upending the U.S. real estate market. CBC’s Peter Armstrong breaks down the possible ripple effects for home buyers and sellers in Canada.

U.S. industry pushes back

In the U.S., there is already fierce disagreement over what the court settlement — which ends legal claims from home sellers over real estate commissions — actually means.

On March 15, the day the $418-million US settlement was announced, the National Association of Realtors said fees have always been set by the market, not by collusion among agents. Besides, the group said, those fees have always been negotiable.

“Offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers,” the association said in a statement outlining the broad points of the agreement.

Rows of houses are shown in a subdivision.
A housing subdivision is shown in Middlesex Township, Pa., in April 2023. In the U.S., there is disagreement over what the $418-million US court settlement — which ends legal claims from home sellers over real estate commissions — actually means. (Gene J. Puskar/The Associated Press)

Since then, high-profile brokerages have pushed back against the notion that the industry will be forced to change as a result.

“Since the settlement announcement, there have been numerous articles and stories in the media on what this means for buyers and sellers,” Budge Huskey, president and CEO of Premier Sotheby’s International Realty in Naples, Fla., said in a statement released on Tuesday.

“Regrettably, most reflect a profound lack of understanding of the real estate business as well as mistaken claims.”

Huskey said the notion that sellers will no longer pay a fee to the buyer’s agent is simply false.

“There has never been any obligation for a seller to pay buyer agent compensation at any time, yet it has been a historical practice that’s worked exceedingly well since the advent of modern residential real estate,” he said.

Realtors in Canada, such as ReMax, aren’t saying much publicly while the cases work their way through the courts. A spokesperson for the organization would only say that “we do not comment on ongoing litigation.”

U.S. reaction watched closely here

“It’s important to note the litigations in Canada and the U.S. occur in different legal and factual contexts, and the litigations are at a much earlier stage here in Canada,” the Canadian Real Estate Association said in a statement to CBC News, adding that “we’ll continue to review U.S. developments.”

The statement goes on to say that buyers and sellers in Canada “have always been able to negotiate commissions with their agent…. On the buyer side, buyer representation agreements are required in at least seven provinces in Canada. These agreements set out terms like services and fees between an agent and their buyer. This represents more than 80 per cent of homes sold in Canada.”

Real estate experts on this side of the border have been watching the U.S. reaction very closely.

A man with grey hair and a grey beard, wearing a blue overcoat and tie, stands outside a building.
Murtaza Haider, a professor of real estate management at Toronto Metropolitan University, says he thinks the lawsuits in Canada will lead to the same outcome as those in the U.S. because the two real estate systems are so similar. (Pelin Sidiki/CBC)

Murtaza Haider, a professor of real estate management at Toronto Metropolitan University, said the two systems are so similar that he believes the court cases here will lead to the same outcome as those in the U.S.

But, he said, people should temper their expectations.

“We won’t have a system blow up. It’s basically giving the buyer the rights to negotiate with the agent, a commission for the services they may or may not use,” Haider said.

Down the road, he imagines a system where some buyers pay an agent a full commission to help them find a home, figure out a price and close the sale, while others will simply need someone to help them file the paperwork.

Haider warned that there may be some unintended consequences to changing the system. Currently, he said, the fee paid to both the buyer’s and seller’s agents is essentially included in the price of the home. Fees are not an extra closing cost outside the home price.

“Right now it’s baked into the mortgage amount, so you don’t have an out-of-pocket policy. But [if you] have the flexibility and freedom to negotiate, that amount [may be] coming out of your own pocket right away,” Haider said.

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