August 4, 2008
Toronto’s bidding wars continue
Even as the real estate market softens, vendors still offer conspicuously undervalued homes in some Toronto neighbourhoods
Listing properties below the market value has become a common practice in the Toronto area over the past five years – creating a bidding-war mentality for buyers. Even with sales down, the market cooling dramatically and active listings up by 22 per cent compared with last year, multiple offers continue in some highly sought-after areas.
While houses sit on the market longer with more inventory available in the Greater Toronto Area, most of the multiple offers are taking place in pockets of the central city still coveted by buyers. But under-listing properties has created a backlash, not just among frustrated consumers, but also from some agents who say the practice is undermining the profession.
“Underpricing a home to create an auction-like frenzy started on really great homes in nice neighbourhoods,” realtor Sally Cook says. “Now everyone is doing it on any old piece of crap.”
“It’s detrimental to the seller. You might have 19 bids, but only two people can really afford the house, because you’ve attracted everyone else who can’t with a lower listing, so it’s completely artificial,” Cook says. “And of course the house is going to sell over asking – because it’s underpriced in the first place.”
The Toronto Real Estate Board, meanwhile, says there’s little it can do to restrict the listing price an agent might place on a property.
“Auctions, bidding wars and the various ways of marketing properties are driven by the marketplace,” board president Maureen O’Neill said in a written response to questions by the Toronto Star. “TREB (and others) do not have the right to interfere with a market-driven function.”
See full story in the Toronto Star »
May 28, 2008
Realtors settle Internet Policy lawsuit
The National Association of Realtors agreed to give discount Internet brokers access to its listings of home sales, resolving a U.S. antitrust lawsuit that accused the trade group of trying to restrain competition. The settlement, filed in U.S. District Court in Chicago, calls for the realtors group to revise a policy that let real estate agents exclude their sales information from Web sites. The government said the practice propped up an old-fashioned business model and harmed consumers who can save 1 percent of the price of a home by using a Web-based broker.
“Today’s settlement prevents traditional brokers from deliberately impeding competition,” said Deborah Garza, deputy assistant attorney general in the Justice Department’s antitrust division. “When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates.”
The agreement comes as the housing market, in the midst of a two-year slump, has showed no signs of recovery. Today, the Commerce Department reported that sales of new homes in April were the second lowest since 1991.
U.S. sales of previously owned homes probably will fall to 5.39 million this year, the realtors association said in a May 15 forecast. That would be a drop of 24 percent from 2005’s all-time high of 7.08 million, making it the worst housing recession since the four-year slump.
On-Line Realtor Pleased
“We are reasonably happy but not completely overjoyed,” Glenn Kelman, chief executive officer of Redfin, a Seattle-based on-line brokerages, said in an interview. “It throws the gate open to all sorts of business models.”
Kelman said the settlement will still allow realtors to bar some on-line comments and price comparisons from firms such as Seattle-based Zillow.Com and Cyberhomes, a service of Fidelity National Financial, Inc. of Jacksonville, Florida.
Richard Gaylord, president of the realtors association, said in a statement that the settlement will let the group focus on “re-energizing the housing market” during a difficult period.
“Competition is alive and well in the real estate industry,” he said. “In fact, the competitive nature of our industry is even more apparent in times of market turmoil like those we are currently experiencing.”
Internet Brokers
Internet brokers, who seek to cut costs by charging only for the services a seller wants, sprung up in the 1990s and now operate in all major metropolitan areas.
Traditional real estate agents for such companies as Coldwell Banker Residential Brokerage and Re/Max International Inc. usually charge a commission of 5 percent to 7 percent of a property’s sale price, while discount brokers charge 2.5 percent to 4.5 percent, or a flat fee depending on the services provided.
In 2006, consumers paid $93 billion in real estate commissions, the Justice Department said.
In most markets, real estate brokers participate in the Multiple Listing Service, which lets them share information about properties that are for sale. By using the service, brokers and buyers can get listings on almost all homes in the market.
About 800 of the listing services across the U.S. are affiliated with the National Association of Realtors, which sets policies governing their use.
Listings
Realtors usually give their clients printouts of the listings and not full access to the database. However, some brokerages that operate online let customers see all the Multiple Listing Service information via the use of a password.
Those sites, the Justice Department said, help real estate agents be more productive and let them pass cost savings onto home buyers with lower commissions or rebates. The agency filed its case in 2005 and it was set to go to trial in July.
The Chicago-based realtors group, which has more than 1.2 million members who work in the residential and commercial real estate industries, didn’t admit or deny the Justice Department’s allegations in settling the case.
The agreement puts the group under enhanced government oversight for 10 years. There was no financial penalty. Garza, speaking to reporters in Washington, said the Justice Department generally doesn’t seek fines when it first tries to halt anti- competitive behavior.
“What we’ve done is achieve a very lasting and important change to the conduct” of the realtors association and its affiliated listing services, Garza said.