The people can be forgiven for viewing elections with indifference. Like a spouse’s obsession with binge watching old television shows (that weren’t great when new), the themes can seem dully repetitive. Yet for those in the real estate industry, the pandemic-fuelled, hyper-focus on the importance of one’s home has elevated housing to arguably the most important issue in the 2021 federal campaign. Two topics that are generating a disproportionate level of debate are the housing supply crisis and the brokerage sales process itself.

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Affordability is the surface issue that gets consumer’s blood boiling, and a lightning rod for vote-seeking politicians. Royal LePage research reveals that 57 per cent of Canadians aged 18-34 say that a candidate’s position on tackling housing affordability will influence their vote this fall. Further, we found that 84 per cent of Canadians are fearful that an increasing number of people will never own a home.

Yet affordability is simply the symptom – the result of the underlying malady. If you insist on dancing barefoot on sharp rocks, buying Band-Aids is folly. You need to buy shoes to stop the bleeding. Canada’s crisis is our meager housing supply. We have far too few roofs to shelter our people.

This is at least a decade-old problem; one that is getting progressively worse. Our millennials, the most populous generation in Canadian history, have driven unprecedented levels of demand for new housing. Newcomers, driven by the most economically successful immigration program in the world, need homes too. Instead of rising to the challenge, public housing policies at all levels of government have been a barrier to progress. Our bureaucracy has created slow and expensive regulations.

A recent Scotiabank report found that Canada’s persistent under-building has resulted in a shortage of some 1.8 million homes in this country, the lowest number of housing units per capita of any G7 country. Crisis is not too strong a word.

Thankfully, the major parties are waking up to the fact that adequate housing supply is the solution to affordability. Policy proposals include a number of new program ideas to increase the speed with which we build homes in Canada. We must hold the new government accountable to delivering on these promises.

Farther from the core housing shortage issue, the real estate brokerage process itself has found its way into stump speeches. Erroneously, some politicians (and too many consumers) have been led to believe that the way homes are sold is actually responsible for driving prices higher.

The current brokerage practice of sharing with prospective buyers the number of registered bids but not disclosing the value of those bids does not artificially inflate home prices.

Openly sharing the value of competitive bids would not materially impact home prices either. The brokerage process does not drive changes in property values. As Syrus wrote in the first century B.C., “Everything is worth what its purchaser will pay for it.” And in a market with escalating demand and limited supply, houses are worth more. Much more.

Importantly, while we recognize the fact that the brokerage process doesn’t hurt consumers, failing to evolve how we service clients would be a lost opportunity for our industry. We should and must continue to improve how we help families buy and sell homes. We need to embrace openness because our clients are demanding openness.

In the 2000s there was a series of emotional battles within the industry. Some Realtors fought our move to provide quality online images of a property’s features and detailed website mapping, arguing, “What will they need me for if they know where the house is and can see property features?” Of course these fears proved completely unwarranted. Even the Competition Bureau-triggered opening of the MLS system to limited service brokerages (mere posters) has done nothing to diminish the desire of clients to work with highly trained, licensed real estate professionals. FSBO-like services have smaller market share today than they did a decade ago.

In my business career, I have seen again and again that restricting a customer’s access to information they consider vital always backfires. As honest property brokers, we must move steadily towards the next stage of information sharing. The value of previously sold properties must be available online. And the competitive bidding process must become more open.

Transparency equals trust. And trust is good for business.

19 COMMENTS

  1. Well,if there are many bids on any commodity -especially real estate- it is imperative that the amount of each bid be disclosed. How else can a potential buyer make an intelligent decision as to “value” The buyers know how much someone ELSE thinks it’s worth and can offer accordingly. Under the present system, I’m waiting for the time when someone whose bid was the highest but finds out that the second highest was (say)100K less and realizes they paid about $90,000 more than they had to!ALSO how do we intelligently tell someone what their property is WORTH? Best we can do is say “let’s put it on at (say) $X ad see what kind of offers we get !(Wow how professional is that?)Now, let’s pretend YOU are an unlicensed person, a member of the public and wants to sell their property. Wouldn’t it be a great idea to make up all the features, stick a price on it, make it known that the number you bid will be shared with other bidders( no names) any increase offer must be a minimum of (say)$5000 higher than the previous offer, and a date when all offers will be closed and a caviat that highest or any offer not necessarily accepted. And hire an agent to shepherd this whole process including showings etc.viewing offers Seller pay all advertising costs, all on an either commission rate or simply a flat fee of (say$15,000) to look after all this. Amt to split with a fellow agent to be negotiated. Why would you pay $40,000 to sell an $800,000 house when it is no more work than selling a $300,000 house.Let’s get real!How many agents would refuse this offer of employment?. .
    Re -Creating more houses: Lets look at the war years and close afterwards:The government built thousands of “Wartime Houses (So-called) ut they were SMALL and MODEST in the extreme-ot with features the average (so-called) ordinary house to day is!Food for thought maybe!

    • Peter I would love to hear your thoughts about broker offices that have hired hundred of Realtors on the rent a desk concept compared to when you started in the business 67 years ago. I understand there is a brokerage office today in Toronto that have over 4000 registered agents. I expect when you started in the business there were 2 or 3 salespeople in your office
      and house prices were in the $10,000+- range. Today there are 50000 Realtors in the Toronto area which seems ridiculous to me. With 67 years of experience you will have lots of stories to tell. D

  2. I have left some comments. Thank you, everyone, for your comments I understand it’s a time in life to share and be open Communication has never been better. But the Big Bad Wolf is still out there. Maybe We should have listing Brokerages and selling Brokerages then the buyer would truly have someone representing working for them.

    • Lawrence – I agree that buyer consumers need to be represented by their own Realtor. Unfortunately, most Realtors today call themselves “Buyer Agents” when dealing with a buyer
      and the next day they are “Seller Agents” when dealing with a seller. Some Realtors might even refer to themselves as “Exclusive Buyer Agents” which is even more misleading. In today’s real estate market almost every buyer that signs a buyer agency contract with a Realtor in a large brokerage will find themselves immediately in a “Dual Agency” situation. Questions: Will a Realtor avoid showing a company listing to avoid Dual Agency. Do buyer consumers really understand that if they agree to be represented as a DUAL AGENT that their level of service and representation is diminished? Do Realtors care that their level of service and representation to their BUYER and SELLER clients has been diminished in a “DUAL AGENCY” situation. With Dual Agency your CLIENT becomes a CUSTOMER which is not what any informed consumer would want to accept. Do buyers and sellers really understand the dangers of Dual Agency. Under the present brokerage system buyers and sellers will continue to be misrepresented until buyers and sellers are truly represented 100% as clients by a Realtor. D

  3. Real Estate is shelter. One of the essentials of life. Alone with Water, Air, Food, Sex. All have been explored to make money.
    Real Estate has been purchased and sold, Wars have been fought many homes have been lost All over the world.
    Canada Began to grow in the 1940-50-60-70-80-90 and up to today. To tell the story would take a book or two. Real Estate is Land and Buildings and many tax dollars and levies. Today it’s better to have money invested in the land than have it in the bank. Today we have investors putting money into pre-constructed apartment buildings to rent to families that can not afford to purchase real estate as a home.
    What has driven Real Estate? MARKETING Everywhere someone is marketing Real Estate. There are more non-licensed people working and selling Real Estate than licensed Realtors and Brokers. What is a Real Estate Board Without geowarehouse or Matrix? How do OREA and CREA service Real Estate? Questions Do professional Brokerage have a responsibility to provide the public with an honest value of their home. Or are they really Auctioneer. The first new rule is any licenced Brokerage that allows a property to sell over the listed price. The realtor should lose their licence.

  4. “The current brokerage practice of sharing with prospective buyers the number of registered bids but not disclosing the value of those bids does not artificially inflate home prices.”
    False. When there are only two offers on a property and the winner pays 75k more than the other offer, this process artificially inflates home prices.

    “Everything is worth what its purchaser will pay for it.”
    True. However, it is not necessary not to disclose the value of other bids in other for the winner to pay more.

    “Importantly, while we recognize the fact that the brokerage process doesn’t hurt consumers”
    False. The process hurts the buyers big time.

    “FSBO-like services have smaller market share today than they did a decade ago.”
    It depends which market you refer to.

    “And the competitive bidding process must become more open.”
    Yes, more open, cease to hide the value of other bids. Remember: Transparency = trust!

    • Great response Yvan. Totally agree. When the successful duo in the new Luxury Brand Brokerage in town tells the Buyers Agent “we have some very strong offers, do you want to increase your offer” when in fact that offer is only 1 of 2 offers and the only one over list price. The buyer put another $25k on the table unnecessarily! That was a lie and should be illegal.

  5. It is an interesting and well thought out article, some of the comments don’t hold water, our brokerage mostly has commission split fees not desk fees, so having salespeople who just use up desk space and bother the front desk staff with idle chatter would not be desirable for the brokerage owner.
    The real crisis is the lack of supply, partly due to the large amount of immigrants we have had in a short time period, one of the reasons I left England 51 years ago was because in 1969 it was still almost impossible for young people to buy a home there as housing supply had still not regenerated after the end of WW2.
    The multiple bidding is partly due to Realtors not understanding the value of the property and partly due to those realtors who just want to be able to brag they have “sold over asking”. I have seen several examples in my market where a home almost identical to one that sold in the previous month is listed for $50,000-100,000 less in order to create a bidding war. The realtors who do this are able to position themselves as highly successful and although the public may say they distrust realtors, they still flock to list with those who advertise how many properties they have “sold over list”.
    Building materials have also risen in price, a friend/client who purchased a building lot 2 years ago and commenced building I. Spring 2021 has seen their initial cost estimates increase by $150,000, so again it is the lack of supply that is mainly increasing prices, and although it seems that lumber prices have lowered recently there are many other components that are in high demand and short supply, should overall prices are not going to suddenly crash.
    We have seen sudden market increases previously, the first house I purchased in 1973, a modest 3 bedroom, 1 bath side split for $20,000 with a government incentive to assist the builder to sell more homes, sold for $43,000 in 1978, it would now sell for close to $400,000. I have also lost money selling when mortgage interest rates increased in 1991, so the government has to be very careful not to affect the overall affordability by drastically changing interest rates.
    When people work hard and save to purchase a home it is devastating when they lose. I am working with some young first time buyers who are having a hard time getting an offer accepted on a house they want, so I do understand the full spectrum of what is currently happening, I have spent many hours showing and making offers on homes with them, to be outbid once again and deal with their sadness. Although the $ I will eventually make when we are finally successful will be less than minimum wage, I am still committed to helping them find a home they can enjoy.

  6. A party that will loosen up CMHC qualifying regulations and options for longer amortization for at least first time home buyers and new construction would get my attention.

  7. Your lead-in “Canada needs to get housing right” is right on the money, so I’m disappointed with this article – I thought it was going to offer serious and well-thought-out proposals to resolve the shortage of affordable housing in Canada, but nope, just a defense of the real estate industry’s current practices, which appear to be reducing the level of trust that buyers/sellers have in realtors.

    I always read the comments section, and I am curious about the comment that there are too many real estate salespeople. It sure looks like some people are mostly interested in protecting their own incomes by keeping other people out of the industry. Restricting competition doesn’t sound to me like something that would benefit consumers of real estate services or contribute to more affordable housing in our country.

    Anyway, Phil, I’m interested in what the real estate industry thinks the various levels of government, land developers and homebuilders could/should do to resolve the lack of affordable housing, and what role your industry can play in the market to enable people/families to obtain suitable housing. Of course, reducing the price of housing would affect the incomes of salespeople who are compensated based on a percentage of the selling price, but that might solve the “too many salespeople” problem as those who aren’t making money would exit the industry.

    I must disagree with the statement that the housing supply crisis has given rise to “a disproportionate level of debate” – I think the discussion is vital to Canada.

    Vicki Townson,
    Concerned Canadian Not Involved in the Real Estate Industry

  8. Phil:

    You correctly say “…trust is good for business.” Agreed. Then why do so many distrust Realtors, as displayed regularly by yearly surveys/polls? Why do Realtors rank waaayy down there with politicians, used car salesmen (they’re mostly men) and, lawyers? Maybe because it’s true?

    Could it be that too many—unlike you, and arguably, the minority of licensees—are actually untrustworthy when there’s a commission on the line?

    I think you’re a real pro. Why don’t you use your influence to do something about the ages-old problem of there being too damn many real estate agents prowling the streets/cyber space for business like Kirby vacuum cleaner door-to-door sales types of old? (I know all about that kind of crap; I did it for a few weeks long, long ago) I’ll even offer to help out in my own small way if you’re really interested in cleaning up this business…unless you’re not.

    The ball’s in your court. Are you in? Remember: Action speaks louder than words; talk is cheap.

    • Brian you hit upon the #1 problem with the real estate industry. TOO MANY Realtors. I think there were about 8500 hundred sales in Toronto in August 2021 and approximately 50,000 agents. Brokers do not make money based on the number of sales, but a desk fee + costs. Brokers no longer care about supervising their Realtors. They only care about the volume of bodies from which they can collect desk fees. The MLS boards only care about membership #’s to collect their fees. The RE business is not working in the consumers best interests. It is time for a major makeover of the RE industry. Phil likes the industry as it is since a major change will kill off their profits. D

      • Hi David;

        I would wager that about twenty-five percent of the current Realtor population in Canada agrees with you and me—and others who opine herein—re the over-population of their brothers and sisters. They would be the pros. Of course, the seventy-five percent would disagree. They would be the amateurs, often the scripted “salsey” types. But as we both know, the seventy-five percenters’ dues are what the O.R.E bureaucracies feast off of. Once indoctrinated into the bureaucracies, the rank and file staffers believe they’re doing their best for the cause…their cause. The bosses keep the game going. Why wouldn’t they? Who in his/her right mind would deep-six his/her own career by trying to undermine the current—and long standing—modus operandi of a successful make work project? Money talks, as it always has.

        Pass the tests, fog up the mirror, and presto…you’re hired! You now are a professional Realtor! Go get ’em soldier! Ignore those poor bastards cleaning out their desks in the back room. They weren’t any good any way. But you! You’re gonna slay ’em! There’s your desk, yes, that one over there, the one just vacated. We’re here for ya buddy! The sky’s the limit!

        So’s the basement.

        I don’t have much faith, if any, in government intervention into the business world. But in his case…?

        It’s just too damned easy to get a real estate salesperson license. That’s the bottom line.

        Too many brokerages want hires that are desperate for money. They want hungry Realtors. That’s the problem once licensed.

        The problem is, not many who don’t need the money want to venture into real estate sales. Why would they?

        • Brian:There is certainly a bubble in the marketplace. An “agent bubble”. Having so many Realtors in the business is definitely not in the consumers best interest. D

  9. Thanks, Phil. I agree with most of your points but I’m not sure I understand your position on multiple offers. You say: “The current brokerage practice of sharing with prospective buyers the number of registered bids but not disclosing the value of those bids does not artificially inflate home prices.” And later say: “And the competitive bidding process must become more open.” What are you suggesting?

  10. Totally on point! Our industry’s lack of transparency and resistance to information sharing is coming back to bite us! Nature abhors any vacuum and both realtors and clients have been uncomfortable with our multiple offer process, and refusal to disclose sold prices – for a very long time. And so, is it any surprise others are stepping up?
    Just keep doing surveys and paying dues – is anybody listening?

    • “Just keep doing surveys and paying dues – is anybody listening?”

      Nope! just pretending to.

      I mean how many years since the change to REBBA 2002 was set in motion 3 and a half? and all they’ve done is change registration requirements, titles and increased fines. Meanwhile they’re stuck on ethics! ethics! and the only things worthwhile to the consumer are as you say…

      bandied about in surveys for that smoke and mirrors element!

      The government bureaucracies with the help of the insiders not interested in change, move slower than lava going uphill

  11. In our business we have always said “location, location, location…..”.
    Well, we have about 40 million people in our country, about 80% of which want to live within 100 miles of the US border. Our population is growing and independent household sizes getting smaller. That puts “a little pressure” on prices in that belt.
    Rising prices are natural, most politicians and the lobbyists pressuring them are missing the point and making up bogeymen without looking at the situation clearly.
    God knows what that lack of insight is going to add to our national debt.

  12. Thanks for this Phil. Well said. Your closing comment hit the nail on the head…

    “I have seen again and again that restricting a customer’s access to information they consider vital always backfires.”

    We run into this on the property inspection front more and more. As a collective, our industries must collaborate more to bring more information, transparency & value to property owners/sellers and buyers.

    The practice of buyers in accelerated markets (often) feeling pressure to waive a critical condition like a comprehensive inspection and giving up information on a properties condition in order to “bid” has resulted in negativity towards the real estate professional where the result becomes loss of trust.

    Rick Mayuk
    Regional Owner | Managing Director
    A Buyer’s Choice Home Inspections Canada
    https://abuyerschoice.com/partners

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