If you think AI begins and ends with ChatGPT, you’re missing out on a universe of possibilities. While OpenAI’s chatbot took the world by storm, it’s just one star in an ever-expanding galaxy of AI models. Relying solely on ChatGPT is like trying to build a house with only a hammer — you’re limiting your potential and possibly compromising your results.

This principle applies across industries like Canadian real estate. Realtors in this field wear many hats, requiring skills in negotiation, social media, content creation and more. By exploring AI tools beyond ChatGPT, realtors can leverage diverse AI capabilities to enhance various aspects of their business, rather than limiting themselves to a single tool.

 

Risks of relying on a single AI system

 

• Missed opportunities. Using a single AI system can lead to missed opportunities and biased results.
• Limited perspectives. A single model can only provide a narrow view of a problem or solution.
• Stagnation. Relying on a single AI system can lead to stagnation, as you miss out on innovations from other models.
• Vulnerability to outages or updates. Dependence on a single system leaves you exposed if it experiences downtime or significant changes.

 

My experience using various AI models over the past four years has reinforced these risks. The quality of outputs can change dramatically, sometimes on a weekly basis. This volatility underscores the danger of stagnation when relying on a single system.

For instance, if one AI model consistently produces poor social media posts for first-time homebuyers, exploring alternative models could yield better results rather than waiting for improvements in a single system. 

 

Benefits of AI diversification

 

• Comprehensive insights. Multiple AI models provide a more comprehensive understanding of a problem or solution.
• Innovative solutions. AI diversification can lead to innovative solutions and new ideas.
• Adaptability. By using multiple AI models, you can adapt quickly to changing circumstances.
• Enhanced problem-solving. Different AI models approach problems in unique ways, leading to more robust solutions.

 

Diversify your AI arsenal — at no cost

 

Imagine having unrestricted access to the internet in its early days — you would have seized the opportunity!

Today, top tech companies worldwide are offering their cutting-edge AI language models for free. However, unlike the internet’s early days, we now have multiple AI models in an intense arms race, with innovations emerging every week.

 

Compare AI responses: One prompt, multiple platforms

 

One of the most effective ways to harness the power of AI diversity is to use identical prompts across different AI platforms. This approach allows you to directly compare outputs, highlighting each model’s unique strengths and perspectives. By using it, you can identify which AI excels at specific tasks, uncover nuanced differences in language understanding and even spot potential biases.

The method not only enhances the quality of your final output but also deepens your understanding of each AI’s capabilities, enabling you to make more informed decisions about which tool to use for future tasks.

 

Top alternative AI tools

 

In the rapidly evolving artificial intelligence world, several powerful alternatives to mainstream AI models have emerged, each offering unique strengths and capabilities.

For example, Claude by Anthropic excels in nuanced conversations and ethical reasoning, while Google’s Gemini brings multimodal capabilities and up-to-date information to the table. Perplexity AI stands out with its real-time information synthesis and source citation (very important), offering an interactive search experience. For those seeking open-source solutions, Meta’s Llama 2 provides flexibility and customizability.

By exploring and leveraging these diverse AI tools, users can tap into a rich ecosystem of capabilities, each suited to different tasks and requirements.

1. Claude by Anthropic — known for nuanced conversations, ethical reasoning, detailed explanations

2. Gemini by Google — known for multimodal capabilities, up-to-date information, integrated search

3. Perplexity AI — known for real-time information synthesis, citation of sources, interactive search

4. Llama 2 by Meta — known for open-source flexibility, customizability, strong performance on various tasks

 

Stay diverse to stay ahead

 

The AI landscape is evolving rapidly, and relying on a single AI system can lead to missed opportunities and biased results. By embracing AI diversification and exploring multiple models, you can gain comprehensive insights, innovative solutions and adaptability.

Stay ahead of the curve in your real estate business by harnessing the power of AI diversification.

 

The three questions I heard most following the publication of my article in REM, The time has come to make a fundamental shift in organized real estate, were:

1. When does the sequel come out?

2. Why should we want to do the things you wrote about in the article?

3. What are you going to do about it?

The fact that you are reading this answers the first question. I will attempt to provide more context in answering the other two.

 

Why should you care?

 

So, why should we want organized real estate to move away from the legacy model of protectionism by actually collaborating to better utilize the resources available to us as a whole so that we can actually innovate?

There’s this sense in organized real estate that when we talk about collaboration, we’re automatically suggesting mergers and amalgamations of the many organizations across the country. I’ve always believed that amalgamations will happen at a grassroots level. The boards of directors and members of an organization will see the benefit and move toward action.

That said, organizations resistant to mergers for reasons such as “it takes away their identity,” “real estate is local” or “members NEED local representation” should probably do an environmental scan to ensure they have the necessary resources to manage today’s liabilities and tomorrow’s risk.

 

Address redundancy to get the right resources & support for realtors

 

Like other organizations, when we review our risk register, it’s necessary to consider if we have the resources and capacity not only to continue providing the everyday services expected by our membership but also to navigate challenges ahead.

This is asking a lot. It means:

• having a strong internal cybersecurity strategy with confidence that we won’t be the next London Drugs in the national news,
• being prepared for the impact of new technology and AI used by members, consumers and other stakeholders,
• being prepared to support the role of the broker over the next decade with the pressure on that role increasing,
• having the resources to navigate the legal challenges the profession faces,
• having the capacity to work through an increasingly complex regulatory environment and
• having the resources and technology to satisfy the growing demand from regulators and government to ensure data is available to inform policy and rules.

Even if we have the resources to tackle these issues, it does not make sense for multiple organizations to duplicate this work. By addressing redundancy in some of these critical areas, we can create the additional capacity to truly support the realtor community and provide the services they need to navigate the risks and challenges ahead.

 

Start acting more corporate

 

In the original article, I made several suggestions on what we could start to do differently, which would help us move the needle on being more collaborative and innovative.

The first is to start acting more corporate. We have a saying in British Columbia, “That’s just playing office.” This comes from often seeing one board paying a neighbouring board for the listings their members are putting on the MLS system, or vice versa. One organization sponsoring an event hosted by another organization. One group contributing to a fundraiser of another group. Every dollar that flows into organized real estate comes from the same place, the realtor, but we act like each entity is somehow disconnected from this reality.

A shift to a corporate organizational model would prioritize decisions that result in efficiency, eliminate redundancy and focus on the interests of the corporation. Considering organized real estate as a collective of corporate entities (which they are) with access to $288 million annually, as referenced in the first article (which they have) — taking steps to build out a corporate organizational model would inherently move us toward innovation.

Stop “playing office,” stop acting like service clubs and start making decisions that are motivated by good corporate practice.

 

Break down boundaries, centralize & leverage data and information

 

When we talk about fundamentally shifting organized real estate, the second suggestion in the original article would result in the largest impact toward that shift — moving away from the over-fixation on the existing cooperative construct. Organized real estate represents 160,000 independent business owners across the country. These entrepreneurs have more access to business tools and competitive differentiators than ever before. The cooperative sandbox that we built 100 years ago just isn’t working for today’s playground. 

Imagine if we stopped focusing on the cooperative nature of organized real estate and instead considered it a centralization of data and information that can be leveraged to bolster the industry. Data has always been synonymous with MLS systems and real estate boards but its value has always been predicated on cooperation. If you play in the sandbox, you get the benefit.

If we break down the boundaries of the systems to make the data more impactful, apply a corporate mindset to leverage the data beyond what has been done traditionally and remove the cooperative framework that the system currently requires, we will have a robust network of organizations across the country that are leading innovation in the industry to provide:

• better options and opportunities for realtors,
• more robust consumer engagement and
• an ecosystem that is adaptable and ready for the ongoing changes we will continue to see.

 

What am I going to do about it?

 

As for the final question posed at the start of this article — what are you going to do about it? This. I am going to do this:

I will continue to be a critic of the industry, as much as I am a champion. I will challenge the status quo by initiating and leading discussions with industry stakeholders across the country focused on eliminating redundancies, learning from each other and enhancing our collective efficiency.

I will also remain actively available to my colleagues nationwide, fostering collaboration, encouraging innovative practices and advocating for strategic shifts that push the boundaries of traditional approaches.

 

It’s too often that in leadership rooms, we look around for an “adultier adult.” Well, we are the adults. We are the leaders in this industry at this pivotal moment. It’s time for us to engage in these difficult conversations and make tough decisions — even when they’re not universally popular.

By embracing a corporate mindset, we can confidently manage risks, prioritize the corporation’s best interests and propel our industry forward into a new era of innovation and resilience. Together, we will forge our own legacy.

 

Please note that it’s BCREA policy to not respond to comments on any of its online articles.

 

Canada’s housing supply is at a breaking point, and it’s time for an innovator’s mindset to overcome the barriers hindering progress. The business-as-usual approach is no longer working.

Canada Mortgage and Housing Corporation (CMHC) has stated that Canada needs to build 5.11 million new homes between 2022 and 2030 to restore affordability to the market. To put that into perspective, Canada has never built more than two million homes in any eight-year period.

There has been a lot of discussion about the bottlenecks preventing our country from meeting the housing supply challenge — but the biggest barrier is how we’re thinking about the problem. 

 

The ways of our past cannot get us to the future we need

 

To revolutionize the real estate industry, we must rethink legacy approaches and embrace innovation, and it needs to happen at every level of the ecosystem from government, industry players, realtors and consumers. We also cannot innovate in silos — true change can only come when all stakeholders are on board. And while it’s true that we all have a role to play, we need visionary leaders to lead the charge. 

These leaders must be willing to challenge the conventional ways of doing things. We need game-changing entrepreneurs, human-centric realtors, innovative corporations and early adopter customers to unlock new opportunities and drive industry-wide transformation. 

The 2024 Industry Innovation Agenda lays out a roadmap for exactly that kind of vision, offering clear objectives and actionable strategies in five key areas: leadership and institutions, affordability and supply, climate resiliency and low carbon, optimization and capital, and labour and supporting infrastructure. It’s a call to action for industry players to join forces and convert ideas into action.

 

An innovative approach to office building conversions

 

One opportunity for innovation is in the commercial real estate sector. By asking the right question — how can we convert underutilized office buildings into housing units? — we can begin to unpack solutions.

The challenge, in this case, is that many office buildings are not ideal for residential conversions because their floor plates create suboptimal layouts. In the past, we would have simply said it couldn’t be done. A more innovative approach, though, is to look at the broader ecosystem for solutions.

Imagine a scenario where office floors are transformed into schools, allowing parents to drop off their children and then head to their workplaces on different floors. By repurposing office buildings into multipurpose spaces and combining essential amenities such as schools, medical facilities and community centres with residential units, we not only create new housing opportunities but also reduce commutes and enhance the overall quality of life in our communities.

 

Modular housing and ADUs: A supply solution that can go beyond housing

 

Additionally, innovative technologies such as modular housing and mass timber can play a pivotal role in tackling the housing supply challenge. The key to unlocking the potential of these innovations lies in understanding what’s possible and then choosing to embrace innovative solutions.

For example, accessory dwelling units (ADUs), which allow two separate units within a single property, such as a laneway or garden suite, are a prime example of how innovative policies can support housing solutions. Modular housing offers great promise as a solution to the housing crisis. Realtors, with their professional understanding of real estate and housing issues, entrepreneurial thinking and extensive networks, have a great opportunity — and perhaps even a responsibility — to drive this kind of innovation. 

Consider this situation: a family of four resides in a detached home in the suburbs while their widowed parent or grandparent lives in a separate home in the city. The family provides daily care, support and transportation to medical appointments. A realtor who understands the needs of families such as this, along with the ADU regulations and market capabilities of modular housing, can help explain how adding an ADU to the senior parent/grandparent’s home creates an opportunity for the family of four to sell their home, move into the primary dwelling unit where the parent/grandparent lives and solve their own housing needs.

This solution goes beyond housing. A senior who may have struggled with loneliness now has loved ones nearby, countless commutes are eliminated, carbon emissions are reduced and a family has strengthened their financial position and family ties through a common-sense housing decision. 

 

Forward-thinking realtors are in a position to be true innovators in Canada’s housing market. Realtors are equipped with strong networks, industry expertise and deep relationships. They hold an important key to helping reshape the future of Canada’s housing sector through innovative thinking and strategic collaboration. 

 

A big thank you to Tamara and Shannon Stone. After our original March feature fell through, the Stone Sisters — who we were going to feature later in the year — agreed to move up their interview and accommodate us at the last minute. That’s why our March feature and Backstage Pass Q&A for March is coming in early April. 

Ultimately, the story of the Stone Sisters in Kelowna is the story of innovation, adaption, trust in family and relentless focus. Tamara and Shannon Stone have turned their business into a Kelowna household name built on the power of relationships. 

Let’s dive into their story.

 

The early days — laying the foundation

 

“29 years. I got my license in 1995,” Tamara reminisced about her start in the industry. Both her mom and dad were already successful realtors. They didn’t want Tamara riding their coattails, so they made her a deal. She could shadow them for six months and then she was on her own.

She started shadowing them and doing what they told her for six months. It went by so fast that she didn’t even realize that six months had already passed. “I showed up as I had for the prior six months, dressed in my business suit, and I said, ‘Okay, so what are we doing today?’ and my dad said, ‘Your mom and I are going golfing. I don’t know what you’re doing but you’re on your own.’ I had no idea what to do. It took me five months to get a deal and I was literally starving.”

She started doing open houses every single weekend. “I would do two on Saturday, two on Sunday. And I did that every weekend, with the odd exception, for two to three years because that’s how you met people.” 

Between her network and open houses, she started to build a nice business for herself. For the first 10 years of her career, Tamara built a business on her own, separate from her parents. That’s when, in 2005, her sister Shannon decided to get licensed.

 

Trial-by-fire

 

Tamara made Shannon the same deal she got from her parents: get trained for six months and then you’re on your own. She’d learn the ins and outs of the business. After the six months though, Tamara wanted to take the month of August off, thinking she could leave her sister in charge of her business during one of the slowest sales months of the year.

As the old cliche goes, “If you want to get busy, book a vacation.” That month, with Tamara gone, Shannon did almost 40 transactions — more than one a day. There was no question that Shannon’s ability to handle a month like that after only six months in the business meant she’d be an invaluable asset.

So, they took a Tamara-led “Stone Team” and formed the “Stone Sisters.”

 

Adapt to thrive

 

From even the early days, the pair has focused on leading when changes are happening.

“The big thing I did when I started that was revolutionary and wild was get a website. It was the first real estate website in town and it was shocking to many, and cutting edge. We still own the original domain name, too,” recalls Tamara. 

With a renewed energy for the business, the sisters continued innovating and adapting. Shannon’s marketing background brought a lot of ideas to both marketing and client engagement.

Spend time talking to the Stone Sisters about the evolution of their business, and you realize quickly they’re proactive about change. They’re looking ahead to see what challenges are coming and they’re getting ready.

 

See change coming, come up with a plan, execute with purpose

 

In British Columbia, you’re no longer allowed to double-end a transaction, a change that was hinted at for a couple of years before it came into effect. If implemented, they realized this would have a massive impact on running a team where you often have a buyer’s agent sell the team’s listings.

They looked at what that might mean and they came up with a plan. Shannon got her broker’s license. When the change happened, they completely shifted their entire model, going from being the Stone Sisters at Re/Max Kelowna to forming their own sub-brokerage, Re/Max Kelowna Stone Sisters. 

Now, instead of a traditional team model, Shannon and Tamara run the brokerage and the agents run their own business, with the Stone Sisters providing services and coaching along the way. This way, they act as the designated agents for their clients.

The sisters were able to completely shift the model and not miss a beat. They don’t sit back and complain when change is coming — instead, they see it coming, come up with a plan and execute with purpose. 

 

Marketing that works

 

Shannon had a background in marketing when she joined and, with that, brought fresh ideas and promotional efforts. With Tamara’s experience and her sister’s background, they came up with regular ideas that brought real business. Things that few others were doing.

For example, in Kelowna, where many properties are sold to people from out of town, the team tracks not only the percentage of properties sold to out-of-town buyers but also where they came from. This informs their next steps when it comes to marketing.

This tactic worked well during a big Alberta oil boom when the pair noticed a lot of business coming from buyers in Fort McMurray. They had some connections there and set up a learning seminar about buying property in the Okanagan. 

They flew into Edmonton, got this little rental car and made the drive up to Fort McMurray. A client that worked up there told them, “Don’t show up in your white suits and be fancy to people. Jeans, beer and pizza.” 

So, they rented the back room of a Boston Pizza, bought pizza, wings and beer for everyone, and started promoting the Okanagan. Little did they know, due to the big boom and undersupply of housing in Fort McMurray, there weren’t even hotel rooms available. They had to make the drive back to Edmonton at 3:00 am.

But it was worth it. The sisters sold a tonne of properties to people there until the downturn in the oil industry.

Today, they go to cities like Vancouver, Calgary and Toronto because that’s where a lot of their buyers come from. They do group seminars and 1:1 consults with potential clients to promote their book on the Okanagan. 

Social media advertising plays a big role in making trips to cities where they don’t have brand recognition a success. The sisters invest in it and see a great return. In a market where almost 50 per cent of buyers come from out of town, the Stone Sisters regularly see over 70 per cent of their buyers come from elsewhere — a testament to the success of their marketing strategies. 

 

What you measure, grows

 

Nothing happens by accident at the Stone Sisters. Much like tracking where buyers come from, the team tracks everything in their business. They look at where leads originate to evaluate the success of each marketing channel they try, and then what percentage turn into clients. They monitor the volume of phone calls, emails, social media messages and every other way that people reach out to the team.

Aside from the volume and nature of inquiries, the number of showings, traffic to and time on the website, social engagement and everything else that helps inform their marketing and get a pulse of what’s happening is tracked.

And no fancy dashboards needed — the team tracks it all across simple Excel spreadsheets. They can tell you at any time exactly what’s happening in their business and where the trends are going.

At the volume of deals the Stone Sisters are doing (300+ annually), their business metrics can say a lot about the greater Kelowna real estate market trends as well. 

 

The white suits

 

Since my earliest days in real estate, I’ve known the Stone Sisters. They were presenting at a conference on negotiation the first time I saw them. At that conference and to this day, they often stand out by wearing white suits. In fact, their entire team wears all white — it’s their uniform.

I asked them about this because they do stand out when you meet them. It went back to a Re/Max conference they attended in Las Vegas. There were so many agents there, they wanted to find a way to stand out from the crowd. A way to make them more memorable.

The sisters went with white suits. Now, the entire team does and it’s become a signature look. If anyone on the team, and now at their sub-brokerage, goes out in the community for their business, they wear white. This has become an integral part of their branding. 

 

The ‘Buyer Book’

 

Early on, Tamara and Shannon created what they call the “Buyer Book” for their business. When they got leads, they’d print out the email, hole punch it and put it into a binder. Any time things were either quiet or they had some downtime, they’d open up the binder to where they left off and “shake the tree.” 

The sisters would call everyone in the book. When they finished, they’d start over, back at the beginning. They made handwritten notes to send by snail mail to people they had good conversations with, a practice they still do to this day. There were people in that book for 3-5 years before they ended up doing a deal with the Stone Sisters — a testament to their consistency.

Today, the team follows a very similar practice, leveraging Follow Up Boss as their CRM. With organic buyer leads coming in, they convert them at a rate of 23.5 per cent. (During our interview, without having asked them ahead of time to be ready with anything, they had all the data at their fingertips. Like I said, they track and monitor their numbers.)

The most impressive stat? They convert 94 per cent of the website contact forms for a home evaluation to in-person appointments. As of our interview on March 20, 2024, the team had received 78 home evaluation requests and had done 74 in-person appointments as a result. 

That’s how strongly they’re seen as experts. Tamara mentioned that early on in her career they tried a series of TV commercials. “They were light and fluffy, like Cinderella, the Stone Sisters. It wasn’t us doing it; it was someone else’s perception of us. It gave the impression of, ‘It’s so cute they dress the same.’ Now, we have a much more serious reputation.” 

 

A little bit ‘hardass’

 

The sisters admit they’re known for being a little bit “hardass” at times, as they put it. They’re serious about the business and they get the job done. They’re not afraid to tell their clients what they don’t want to hear, and they won’t take a listing if the client is unrealistic about the price.

This brand they’ve built since 1995 is a huge factor in their conversation rates. On top of that, they work the phones, send out automated emails and encourage everyone at their brokerage to make as many phone calls as possible.

They find that even young people, who are often derided for not wanting to be on the phone, regularly have great phone conversations with their team. And when things get slow or quiet for a time? Everyone is encouraged to “shake the tree” as they do with the Buyer Book but with people in their Follow Up Boss database.

 

Systemized success

 

Like our previous monthly features this year, Mark Faris and Alex Wilson, it’s no surprise after talking to them why the Stone Sisters are so successful. They’ve built the systems, they follow them and they keep their agents accountable. 

The sisters are looking ahead at what’s coming and getting ready to adapt. They’re closely watching the commission lawsuits with NAR in the U.S. and Canadian equivalents. Despite verdicts likely being a ways out, they’re ready in case of changes. 

No matter what happens, one thing is certain: they won’t be caught unprepared. 

 

Proptech Collective recently released its third annual Proptech in Canada report, which highlights the many startups and trends shaping the future of the real estate and construction industries.

Proptech is flourishing in Canada

Canada is not just establishing itself as a prominent North American tech hub, but it’s also emerging as a haven for real estate innovation, supported by attractive immigration policies, access to a robust talent pool and enhanced support for innovation programs.

In the last year alone, over 50 new startups have become part of the Proptech Collective database, bringing the total to 500 active proptech companies. Looking into startups across commercial real estate, residential real estate and construction tech sectors reveals the following highlights:

Hub concentration. Approximately 77 per cent of Canadian proptechs are located in five major hubs — Toronto, Vancouver, Montreal, Calgary and Kitchener-Waterloo — with nearly 46 per cent located within the Greater Toronto Area.

Startup evolution. A significant 75 per cent of Canadian proptech startups have been launched within the last decade; 40 per cent emerged in the past five years.

Financial milestones. Even in a challenging market environment, Canadian startups have collectively raised over $1.5 billion in funding since June 2022.

Industry segments. Residential real estate proptechs make up more than 40 per cent of all proptech startups across the country.

Significant newcomers to the space included Adaptis (circularity and decarbonization planning software), Chexy (rental rewards platform), Doormat (a modern lawyer for real estate transactions that real estate agents and clients benefit from on cost, efficiency and transparency), Wiseday (instant, digital mortgages) and Landslo (lead generation for mortgage and agents).

Navigating future trends

Four trends were clear from the conversations with entrepreneurs, real estate leaders and investors:

• Decarbonization. With a focus on sustainability, experts are prioritizing the integration of ESG (Environmental, Social and Governance) principles and data into the entire real estate value chain — from design through operation to demolition. Examples of areas include sustainable materials, grid stability and robotics aiming to reduce waste for offsite construction.
• Affordability. The widespread issue of affordable housing across Canada is spurring innovation. Examples include alternative financing and co-ownership models to enhance housing security, as well as opportunities where prefab and modular options allow for building faster and more sustainably.
• AI integration. Many of us are no strangers to artificial intelligence, and neither are real estate leaders. From leveraging AI for scenario analysis or even using tools like ChatGPT to automate conversations and listing promotions, there’s a growing consensus on the need for increased adoption of this technology in the industry.
• Integration and consolidation. Proptech’s evolution over the past decade has paved the way for consolidation and partnerships between different startups. Strategic collaborations are starting to allow for more holistic consumer experiences, for example in residential real estate, by integrating search, mortgage and closing processes into one platform.

Paving the path forward

While the last year has proved to be more challenging across the industry given rising interest rates, the need for digital solutions has not diminished.

The future promises not just growth but a transformation. Canada will remain a hub for real estate innovation, shaping a resilient and positive path for the real estate and construction industries. Visit proptechcollective.com to learn more about the Proptech in Canada 2023 report and Proptech Collective’s year-round work.

In recent years, ongoing legal battles in both the United States and Canada have brought significant attention to the real estate industry, raising questions about traditional commission structures, antitrust regulations and the potential impact on consumers. These lawsuits could potentially serve as a driving force for innovation – increasing choices, enhancing services and lowering costs for real estate consumers.

 

Legal battles south of the border

 

In the U.S., two notable lawsuits have garnered significant attention: the “Sitzer/Burnett” case and the “Moehrl” case. These cases have achieved “class status”, signifying their potential impact on the industry.

Class certification is a major milestone for the plaintiffs and could result in significant financial implications for the defendants, possibly amounting to hundreds of millions of dollars. The long-anticipated Sitzer/Burnett commission trial is currently underway in Kansas City, Missouri.

The central focus of these lawsuits revolves around commission-sharing arrangements between listing and buyer brokers, which may infringe upon U.S. federal antitrust laws. This has broader implications for both the U.S. and Canadian real estate markets, given their striking similarities.

 

Parallel realities in Canada

 

In Canada, our system closely mirrors that of the U.S. Brokerages in either country adhere to similar rules and policies, requiring the listing brokerage to offer compensation to the cooperating brokerage to access a real estate board’s MLS system.

In practice, this effectively removes fee negotiation from the hands of the buyer’s agent, providing selling brokerages with a significant degree of control over the cost of services being delivered. The amount is considered material since the fee often constitutes a substantial portion, frequently half, of the total fee charged to the seller.

 

Sunderland

 

Similar to the U.S cases in many respects is the “Sunderland case”, a Canadian lawsuit currently underway, which alleges violations of certain provisions of the Canadian Competition Act. This case arose from a Toronto seller, Mark Sunderland, objecting to the 2.5 per cent commission required to be paid to a buyer’s brokerage when he sold his home in 2020.

The case is said to be filed on behalf of sellers who listed on the MLS owned and operated by the Toronto Regional Real Estate Board (TRREB) dating back to March 2010. While TRREB is a defendant in the Sunderland case along with the Canadian Real Estate Association (CREA), so are seven brokerages and five prominent real estate franchisors.

Charges, however, that defendants conspired to “fix”, “maintain” and “increase” prices for buyer brokerage services were recently struck down by the judge. But, claims suggesting that defendants somehow “control” prices of buyer brokerage commissions are being permitted to proceed.

The Sunderland case, unlike the U.S. cases, is still in the process of seeking class certification and claims that defendants violated the Canadian Competition Act.

 

The politics of competition enforcement

 

In the realm of competition enforcement, the political landscape plays a significant role.

Currently, the industry faces pressure due to the rise of political consumerism. In the U.S., President Joe Biden’s recent Executive Order vigorously targets any practices hindering competition across various sectors, including real estate, where he wants lawmakers and all levels of government to work together in identifying and eradicating any:

• unfair tying practices or exclusionary practices in the brokerage or listing of real estate, and
• any other unfair industry-specific practices that substantially inhibit competition.

This political push prompts industry leaders to reevaluate existing regulations, policies and traditional commission structures to drive innovation, choice and lower prices for consumers.
And, although Canada and the U.S. have distinct competition enforcement models, there is an inclination in Canada to perhaps draw key policy insights from the U.S. approach, especially concerning dealing with “abuse of dominance” or monopolistic practices.

Recently, Canada’s Commissioner of Competition invited the U.S. Federal Trade Commission and the U.S. Department of Justice to share some of their experiences in enforcing antitrust laws. This collaboration makes sense, considering the strong economic ties between the two countries.

Furthermore, Commissioner Matthew Boswell emphasized the need to modernize Canada’s competition laws and implement pro-competitive policies in response to a recent competition report. Like Biden, he seeks support from all levels of government to counteract market forces that harm competition and disproportionately impact consumers. You can bet that the real estate sector will be on his radar.

 

Earlier Canadian intervention

 

A significant development occurred in 2010 when Canada’s Competition Bureau entered into a Consent Agreement with CREA. This was inevitable, as it was playing catch up to similar and earlier enforcement initiatives achieved in the U.S.

The deal, brokered by then Commissioner of Competition Melanie Aitken, opened the door for member brokerages of CREA to access real estate boards’ MLS systems to offer and deliver innovative and lower-cost services to consumers.

Both existing and new market entrants began almost instantly marketing services where sellers could access the boards’ MLS systems for a hugely discounted fee and where the seller could negotiate commissions directly with the cooperating brokerage instead of it being negotiated in advance by the selling brokerage.

Those who choose to practice real estate this way believe it’s the best way to achieve maximum competition, as it gives the seller optimum negotiating power. Based on that, perhaps the best solution to the industry’s problems is right under our very noses.

 

A plausible solution

 

Why not simply have the amount of buy-side commissions entirely removed from the boards’ MLS systems and instead have these commissions negotiated as part of the offer process? This approach would drive competition like no other idea and immediately put an end to illegal “steering” – which is difficult to pinpoint and prove but is likely more rampant than reported, and only exists as a result of current commission policies.

 

The ongoing legal battles in the real estate industry, both in the U.S. and Canada, have the potential to reshape the landscape for real estate consumers. The lawsuits challenge traditional commission structures, drawing attention to antitrust concerns and their effects on consumers.

The real estate industry’s long-standing uniformity in commission rates and the complex challenges it faces are now under the spotlight. While this issue has roots dating back decades, the current legal battles may prove to be the very catalyst needed to promote innovation, increase choices and, ultimately, lead to better services and lower costs for real estate consumers, both in Canada and the United States alike.