Sold data pushes open the door to disrupters
Some say real estate industry is ready for a new business model
In the seven years the Toronto Real Estate Board (TREB) was losing its fight to keep the selling prices of property offline, it effectively delayed an incursion from the kind of tech-based disrupters that have rattled the taxi and travel industries.
With sold data on its way to virtually every real estate site in the Toronto area, if not the country, some believe the door is finally open to a new breed of competitor that will challenge the traditional agent-client business model.
Last month, the Supreme Court dismissed TREB’s application to appeal a Competition Tribunal decision that ruled that web-based brokerages — known in the industry as virtual office websites (VOWs) — should be allowed to publish sold data on their websites. All consumers should need in order to access that information online, said the tribunal, was a password such as the one they would use to shop for virtually any other product online.
A federal appeals court upheld the tribunal’s decision and the Supreme Court’s dismissal effectively spelled the end of the road for TREB’s fight.
For many agents the only surprise was that their board had waged such a vehement, protracted battle.
John Andrew, real estate professor at Queen’s University, says TREB wouldn’t have fought so hard if there wasn’t a lot at stake. It was a strategy designed to ward off competition from companies offering an alternative to longstanding practice of consumers accessing sold information through their realtor.
The weird part, he said, was that the legal fight, ostensibly opposing the Competition Commissioner, was really against TREB’s own members, “many of whom wanted to liberate this information, do the best job for their own clients by making this data available.”
“It’s been a pretty effective protectionist strategy. They played the same game the big taxi companies did. They could have been evolving and making use of technology, but they didn’t,” Andrew said.
As far back as a decade, pioneering realtors Fraser Beach and Lawrence Dale were set to open one of the first web-based brokerages.
“With the backing of Bell Canada, with almost unlimited technical and financial resources, I thought this might be a go, but TREB was able to stop that at the time,” Beach said last week.
“If that project had been allowed to go ahead, the real estate industry would have changed dramatically,” he said. Since then, of course, webbased brokerages have proliferated.
The advantage and profit of being first in online real estate has been lost, said Beach, who runs a brokerage called Select/ Plan Real Estate that reports on properties listed and sold on the Multiple Listings Service (MLS). Sold data, always available at public land-registry offices and from realtors directly, is now barely a ripple on the expanded sea of online property information.
“Data provides no competitive advantage any more because it’s going to be ubiquitous,” he said. But in an era of self-driving cars, Beach said there is still room for disruption in real estate, and at least one frontier is ripe — agent commissions.
“The next step is to substantially reduce fees,” he said. “With this intervention, there will be a lot more legitimacy for people that charge substantially less. There will be levels of service and pay-as-you-play kind of services, which organized real estate has mainly been able to reject.”
Andrew expects the wide- spread release of sold data will entrench and expand the number of alternative real estate providers, web-savvy, prepared companies that posted sold prices immediately after the Supreme Court released its decision instead of waiting until TREB’s earmarked date of Oct. 22.
He agrees with Beach that there is room for more do-ityourself business but the market is limited. “There’s nothing in (the real estate transaction) that your average Canadian couldn’t educate themselves on and save a great deal of money. But I don’t really think that’s going to happen for a majority of Canadians,” he said. Regan McGee, CEO of Nobul, a digital platform claiming to be the “world’s first marketplace where agents can compete to represent buyers and sellers,” thinks that is changing as consumers are increasingly comfortable doing business on the internet.
After all, he said, “Most marriages start online nowadays.”
Nobul, which is just launching in Canada and Florida, expects to operate across North America within a year. It lets real estate agents submit proposals to buyers and sellers, outlining how they plan to market a home, the compensation they expect and incentives they may be offering. Buyers and sellers can choose an agent based on their proposals, online reviews and video chats.
It won’t necessarily encourage agents to undercut their competitors’ commissions, McGee insists. Consumers look for a range of rates and services, not necessarily the cheapest, in the same way Airbnb renters might pay more for a location or more luxurious accommodation, he said.
Nobul will provide the transparency consumers have been demanding for years, according to McGee. Its verified reviews will identify problem agents — those that sign a listing agreement never to be seen again, the ones that don’t take your calls, play games with fees and upsell services in exchange for discount commissions. Eventually it will add empirical data such as the number of transactions the agent has handled, the list price and selling price of those sales.
“If you look at the millennials, even the younger Gen-Xers, they don’t trust word-of-mouth versus (online) verified user reviews,” he said.
Nobul is free to consumers but charges agents 0.2 per cent on the purchase price of a property, not the commission. That works out to $2,000 per $1 million in property value — only if the transaction closes.
“The job of being a real estate agent is customer acquisition. It’s not trading property,” McGee said. “They can come on our platform and bid on deals all day for free if they want, and they’re doing that.”