Taking the hassle out of haggling real estate commissions.
Can it do what Zoocasa couldn’t?
With the Toronto real estate market booming and the average detached home in Toronto or Vancouver selling for more than $1 million, the payout for real estate agents is pretty big these days, especially for the ones charging a five per cent commission.
A seller may well ask, “if the market is so hot, why do I have to give five per cent to an agent?” But the answer will depend on who is answering.
“I’m not huge fan of real estate agents,” said John Andrews, professor of real estate at Queen’s University, “but a good agent does a lot. One of the most important things (they can do is) build a buzz, an excitement about a new listing.
“If you’re going to go it alone, you have to be prepared to educate yourself and do a considerable amount of legwork. Figuring out how to price (your) home to dealing with offers and counteroffers … I don’t think most people are (willing to do that).”
FeeDuck, a new online service that lets agents bid on listings by lowering their commission rates, could be the answer for some sellers, but agents argue what they do for clients selling their homes is well worth the five per cent commission.
Sharn Kandola, a founder of feeDuck, said the idea for the service came about when she and three of her neighbours in Oakville, Ont., compared commission rates and the prices they paid for their houses.
“There should be a better way to find a good agent and to negotiate these commission rates,” she said. “Most of us in our day jobs aren’t negotiators. We thought there has to be a way to make that process easier.”
FeeDuck, which Kandola refers to as “real estate matchmaking,” vets the prospective agents and keeps their identities anonymous until they’ve won a bid. The agent pays a flat fee of $170 for every listing they win. Started in mid-January in the Greater Toronto Area, the company has expanded to cover all of Ontario, and has Alberta and British Columbia in its sights.
“Everything is happening online, why not real estate?” Kandola said. “The response we’ve received is phenomenal. We’re in the right place at the right time.”
Agents, however, are skeptical on how successful ventures such as feeDuck can be.
“There have been many startup companies that have entered the marketplace and have failed,” said Adam Stern, Toronto office manager for Royal LePage Your Community Brokerage. That’s “because the focus has been on attracting buyers and sellers to their websites with a promise to save on commissions.”
It’s a case of getting what you pay for, he said. Five per cent may seem steep, but the average home being sold without the help of an agent will sell for several points below market value.
“Our raison d’être is consumer protection,” in terms of legal checking, insurance and getting fair prices, said Larry Purchase, broker for Royal Le- Page Real Estate Services Ltd. Purchase served on the Toronto Real Estate Board from 2010 to 2012, chairing the commercial division.
Kandola doesn’t believe feeDuck will lead to lesser services from agents. Rather, she said, it will save the consumer thousands while allowing agents to connect with clients in a more sophisticated manner than word of mouth. As well, homeowners will be able to find multiple agents willing to take their listing in a single place.
In a survey conducted by the U.S. National Association of Realtors in 2014, two-thirds of recent buyers said they only interviewed one agent, 88 per cent said they would use the agent again and 98 per cent saw agents as “useful.”
“They’re right about one thing,” Queen’s University’s Andrews said of feeDuck, “commissions are negotiable. Very few people broach that with their agent. Very few people shop around. If they can get the message out there, they’re the only ones doing it, even if a small number of people (sign up), they could do fairly well. It’s hard to know.”
Andrews, however, is skeptical of success for emerging technology in the real estate listing market because of the dominant market share of the Multiple Listing Service. “It’s a Catch-22,” he said. “Until you get a 25 or 30 per cent market share, who is going to bother checking that (alternative) website?”
Zoocasa, a brokerage website that set up buyers and sellers, had what Andrews considered the best chance for success by virtue of being backed by Rogers Communications Inc. Zoocasa shut down on June 22 after it ran into trouble with the real estate board when it released information on the selling price of houses.
Andrews contends that the dominant market share of MLS was partly responsible for Zoocasa’s closing, because agents have a protectionist mentality in terms of keeping housing prices confidential, which has led to a slow development of online options for consumers. “They haven’t made much use of technology at all. You can’t do anything today you couldn’t do 15 years ago.”
The Toronto Real Estate Board has butted heads with the Competition Bureau in the past over limiting the information distributed about houses and otherwise acting in a manner that allows commission rates to remain high.
FeeDuck, for what it’s worth, is trying to challenge that attitude.