Forcing Realtors to Adopt MLS Is Likely a Good Thing for Buyers and Sellers

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A Canadian Real Estate Association (CREA) policy change will soon require participating brokerages to list nearly all residential resale properties on the Multiple Listing Service (MLS), preventing some real estate agents from marketing properties online. private.

CREA says the policy, which will come into effect on January 1, 2023, is in the best interests of buyers and sellers, but its decision has raised concerns that it prevents estate agents from providing personalized services. to their customers and limits the choices of real estate agents and consumers.

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

Consumer interest is often compromised when advertisements circulate only in closed circles, thereby depriving potential buyers of the opportunity to bid. But it’s easy to imagine circumstances where a seller might prefer not to have a publicly available listing.

For example, celebrities and others with legitimate privacy concerns may choose to market property to closed circles. The new policy accommodates these sellers as it recognizes two distinct marketing approaches.

A “desktop exclusive” listing is one that “is not publicly marketed at the seller’s written request.” Instead, real estate agents may use their private networks to market the property to those “directly affiliated with the brokerage/listing office in a business capacity” in accordance with “seller’s written instructions”.

The public marketing approach is the status quo model, in which an advertisement is promoted to the public or realtors “not directly affiliated with the brokerage/listing office in a commercial capacity”.

If a Realtor uses traditional means to promote an office-exclusive listing, such as yard signs, flyers, or digital marketing, the listing will “lose its exemption” and must be placed on the MLS system within three days of public marketing, like any other residence. property. The policy exempts commercial properties, units under construction with multiple units, and rental listings.

But buyers and sellers have distinct preferences that can sometimes conflict. For example, blind auctions may be preferred by sellers, but not by buyers. How does the new policy serve the unique interests of buyers and sellers?

Buyers are likely frustrated with these “coming soon to MLS” yard signs for properties that never end up on MLS. As buyers diligently watch the property’s MLS portals, the for sale sign is unceremoniously removed, leaving them guessing whether the home has been sold or withdrawn from review.

Selectively marketing a home to distinct cohorts deprives most potential buyers of the opportunity to consider it, but can also discriminate against racial or other minorities. For example, the closed marketing of housing could be used to preserve the homogeneity of a neighborhood, which is a flagrant violation of Canadian laws and standards.

Exclusive marketing is also unlikely to be in the interest of sellers. As an exchange, MLS offers the most exposure for any listing. Once available on MLS, buyers from across Canada, or even the world, can find the listing, compare it to other offers, and decide whether to pursue further. Economics 101 suggests that the higher the exposure, the greater the competition, which is likely to lead to a faster sale at a desirable price.

A study published in the American Economic Review in 2009 compared MLS ads to those of a platform for sale by owner (FSBO) and concluded that “FSBO is less effective in terms of time to sell and probability of sale”. But the authors also acknowledged that more patient sellers sometimes opt for FSBO anyway.

Most academic publications on this topic predate Internet-based real estate portals, such as MLS and virtual office websites. It assumes that buyers’ agents discover leads and bring them to their customer’s attention. Current practice is more nuanced, as buyers actively search for properties on the internet and notify brokers of their preferred listings.

In a hyperconnected world of internet portals, social media and ubiquitous availability and flow of information, networks and their size matter. For real estate marketing, MLS remains the largest network. 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 veteran of the real estate industry. They can be contacted on the Bulletin Haider-Moranis website, www.hmbulletin.com.

Kristan F. Talley