Enforcing MLS on real estate brokers is good for buyers and sellers

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A policy change by the Canadian Real Estate Association (CREA) will soon require participating brokers to list nearly all residential resale properties on a Multiple Listing Service (MLS), allowing some realtors to keep their properties private. can no longer be sold.

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CREA believes this policy, effective January 1, 2023, is in the best interests of buyers and sellers, but its decision limits realtors from providing customized services to their clients. and limit choices for realtors and consumers.

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Economic theory and empirical evidence suggest that open markets and exchanges, where buyers and sellers have access to all information, serve all interests for transparency and market efficiency.

When listings only circulate within closed circles, consumer interest is often undermined and potential buyers miss out on bidding. However, it is easy to imagine situations in which a seller would prefer not to have a public listing.

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For example, celebrities and others with legitimate privacy concerns may choose to sell their properties in closed circles. We correspond to such sellers.

An “office only” listing is a listing “not for sale to the public upon written request of the seller.” Instead, real estate agents may use their private networks to market properties to people who are “directly affiliated with a business-capable listing broker/office,” subject to “seller’s written instructions.”

The public marketing approach is the usual business model where a listing is advertised to the general public or real estate agents “not directly affiliated with the listing broker/office as a business”.

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If a realtor advertises an office-only listing using traditional means such as yard signs, flyers, and digital marketing, the listing will “lose the exemption” and, like any other residential property, will be MLS within three days of public marketing. should be placed in the system. property. This policy exempts commercial real estate, dwellings under construction with multi-family dwellings, and rental properties.

However, buyers and sellers have different preferences, which sometimes conflict. For example, blind bids are preferred by sellers but not by buyers. How will the new policy serve the inherent interests of both buyers and sellers?

Buyers are probably frustrated by the “MLS Coming Soon” yard sign on properties that never end up being registered with the MLS. As the buyer diligently peruses his MLS portal for real estate, the For Sale sign has been inadvertently removed, leading to speculation as to whether the home has been sold or taken out of consideration.

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Selectively marketing a residence to separate cohorts not only robs most potential buyers of the opportunity to consider it, it can also discriminate against race and other minorities. For example, closed marketing of housing could be used to maintain neighborhood homogeneity, which constitutes a blatant violation of Canadian law and norms.

Exclusive marketing is also unlikely to benefit sellers. As an exchange, MLS offers the greatest exposure to any listing. Once available on MLS, buyers across Canada and even around the world can find the listing, compare it to other offerings, and decide whether to investigate further. Economics 101 suggests that higher exposures are more competitive and likely to sell faster at desirable prices.

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A study published in the American Economic Review in 2009 compared the listing of an MLS with the listing of a sale-by-owner (FSBO) platform and found that “FSBO is less effective in terms of time to sale and probability of sale.” concluded. However, the author also recognized that more patient sellers sometimes choose his FSBO.

Most academic literature on the subject predates internet-based real estate portals such as MLS and virtual office websites. It is assumed that the buyer’s agent will find the prospect and get the client’s attention. Current practice is more nuanced, as buyers actively use the internet to search for properties and inform brokers of their desired listings.

In a hyper-connected world of internet portals, social media, ubiquitous availability and information flow, networks and their size matter. MLS is still the largest network in real estate marketing. Ignore it at your peril.

Murtaza Haider is Professor of Property Management and Director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be accessed on the Haider Moranis Bulletin website. www.hmbulletin.com.