Is it merely assumed that real estate agents are going to have a problem with any piece of news portraying the real estate industry in an unflattering manner?

I don’t think it should be.

After all, every single blog post I write on TRB takes at least one or two shots at real estate agents or the industry in general.  I’ve been as open and honest about the state of the real estate industry since the day I started TRB in June of 2007, and it continues to get me into trouble.

But surely I’m not the only one.

I typically enjoy watching news stories or reading articles about the industry itself, or profiles of those in the industry, or new technologies, trends, or business practices.  I love working in this fast-paced, dynamic field, and I don’t turn off my real estate brain when I go home.

I’ll read or watch stories that I like and stories that I don’t.  I’ll agree with some and disagree with others.

But this latest CBC Marketplace show on “commission steering” was not very good.  And by not very good I mean it was actually terrible, but I don’t know if a real estate agent calling this piece “terrible” is going to be taken at face value because of the inherent bias.

Here’s the story:

“Real Estate Agents Caught On Hidden Camera Breaking The Law, Steering Buyers From Low-Commission Homes”

There’s a story in print on the CBC website but it was the television program Marketplace where the eyes really started to pop.

The video itself is called “REAL ESTATE SECRETS” and comes with the eye-catching phrase, “Hidden Camera Investigation.”

They did hide cameras, and they did find agents breaking the law and acting unethical.

But what else is new?

There are 62,000 real estate agents licensed by the Toronto Real Estate Board and I’ve gone on record many times by saying that at least half of them are complete garbage.

But what you didn’t know was that, two months ago, I received a phone call from a journalist (not with the CBC) who asked about “steering.”

My response?

“What’s steering?”

I honestly had no clue what she meant.

“Commission steering,” she said.

I paused, thought about what that could mean, then asked, “You mean, like, agents all consistenly charging five percent on listings, or what?”

I really didn’t know what commission steering was.

“Commission steering is when a buyer agent steers his buyer clients away from a listing because they’re not offering enough commission,” she explained.

“That makes sense,” I told her.  Then I asked, “So is this the new buzz-word for the media?”

In the spring, it was “blind bidding.”  That was the phrase that proverbially sold newspapers.

But that’s old news!  Especially now that the election is over and the federal government won’t do anything about it, despite a well-timed election promise.

So what do we need now?  A new villain!  A new buzz-word!  A new way to get clicks, subscriptions, and attention!

I had never heard of “commission steering” until then, but I gave this journalist my off-the-record thoughts, as I always do.  I told her that I’m sure this happens all the time.

She was actually quite surprised to hear me say this, and I asked her why?  Why wouldn’t you expect that this happens?

Of the 62,000 real estate agents licensed by TREB, more than half of them don’t make enough money to live on.  The “average” real estate agent is worse at their job than ever before, and I say this as somebody who’s been selling real estate since 2004, so I have a leg to stand on here.  I see it every day.  I just received a text message that was a screen-shot of Google Translate; an agent speaking into her phone in another language, then sending me the translation to ask a question.

Easy target there, I know.  But that’s the freshest example because it happened four seconds ago as I’m writing this.  Explaining why and how real estate agents are worse than ever is a whole other topic.

But my point is this: bottom-feeding agents who do only a handful of transactions per year are going to look at the commission offered and make a decision about whether or not to “steer” their client from that house.  But the good agents?  The reputable ones?  They don’t care.  An agent doing 20, 40, or 100 transactions per year will get paid what he or she gets paid, and it will all even out in the end.  An agent who sees the value in his or her reputation, good standing, name, and ability to interact with colleagues in the industry and be well-respected is never going to jeopardize all of that to make a few extra bucks on one transaction.

So who is to blame for commission steering?

Buyers.

Yes, you read that right.

I blame buyers.

Because the buyers who employ these deadbeats are what keep these deadbeats in the industry.

You want to work with that discount, cash-back agent?  Or your wife’s cousin who works a 9-to-5 but sells real estate “on the side?”  Those are the agents who are going to be commission steering, simply because it makes or breaks their entire year.

You get what you pay for in this business.  You want a short-cut, a rebate, or your own delusional idea of a ‘leg-up,’ and you’re going to find one of the worst of those 62,000 agents, so don’t be surprised when they cut corners and look at how much they’re getting paid before they’re looking after your best interests.

If buyers didn’t use the services of the worst 25% of licensed realtors, then those realtors wouldn’t exist, and we wouldn’t be talking about commission steering.

So that’s part of what CBC Marketplace got wrong.

But where they went from debatably incorrect to downright tabloid sensation was by not fact-checking the star protagonist of their story.

Per the CBC Marketplace article in print:

When Joanne Petit and her husband, Frank, put their house up for sale this spring they decided to do it without a real estate agent. 

To save on some of these costs, Joanne decided to skip the listing agent and instead paid a $200 flat fee to a discount brokerage that listed her house on MLS but left the rest of the work to her.

“I know there have to be people like myself looking on MLS to buy a house … and [they would]  say to their agent, ‘I would like to see this house,'” she reasoned.

Joanne was still prepared to pay the real estate agents representing the buyer one per cent commission, which totalled nearly $15,000. After six weeks on the market, Joanne received zero calls from agents with interested buyers.

“They called a lot because they wanted us to sign with them, they wanted us to list with them, they wanted to be the selling agent,” said Joanne, who eventually asked one of those local agents why no buyers were interested. She says he informed her that her house had been, in the words of the agent, “blackballed.”

“Agents want to work with agents, and agents want their 2.5 per cent commission,” Joanne told Marketplace. “It’s not fair, and I think more people have to know about it.”

Easy, right?

The CBC concludes from this that the reason agents weren’t showing Joanne and Frank’s house was because they were “commission steering.”

But the CBC didn’t do their homework!

In fact, they didn’t really do anything but jump at this story, like a dog in heat, and rush to get it on television and on the web.

It’s sexy, right?

Another story about those scumbag real estate agents that are solely responsible for the rise in real estate prices in Canada!

When I spoke to that journalist two months ago, I pitched her another idea: that the government is responsible for real estate prices escalating, on account of municipal development charges, federal HST, and provincial and municipal land transfer tax, all of which combine to somewhere around 35% of the cost of a new home or condo.

But she didn’t bite.  She had her story on commission steering, although I never saw her name in any byline, so maybe the CBC beat her to it, or maybe she’s ready to piggyback this hidden camera expose!

The CBC wants viewers to see real estate agents in a negative light because of the allegation of commission steering.  But I’m going to give you several other reasons why Joanne & Frank’s house wasn’t getting showings.

Okay?

–

1) The property was very over-priced.

I mean, like, really, really over-priced!

Not just by a few dollars, or few hundreds-of-thousands, but rather by several million.

Wait.  What?

Several million?  Did you read that correctly?

Yes, you did.

Here’s the original list price:

Okay, okay, it’s a typo.

They accidentally listed the property for $14,750,000 instead of $1,475,000.

But whether this mistake was rectified in an hour or a week, it’s not exactly the best way to start, right?

–

2) The property was very over-priced, like, for real.

I mentioned that a lot of people emailed me last week about this CBC Marketplace story.

Would you believe that one agent did a full market analysis for it?

As I always say, “You can make numbers say anything you want,” so feel free to take this with a grain of salt if you please, or, run your own analysis of the property’s value in the spring of 2020.

But here are the properties that one of my industry colleagues chose for her CMA:

The average sale price of these eight properties was a mere $1,276,250.

To be fair, Frank & Joanne’s house at 12 Villandry Crescent was a 4-bedroom, and six of these eight listings are for 3-bedroom houses.  That’s fine, so we can add $50,000 – $75,000 to those sale prices for that 4th bedroom.

But the lot width at 12 Villandry Crescent was only 30-feet.  “Frontage” has a huge impact on property value, especially in areas like Maple where the square footage and layout of the home greatly depend on lot with.  With an average of 34.3 feet, and at $10,000 per front foot, the subject property would be worth, on average, $43,000 less than these comparables.

We can play this game all day long, if we’d like.

Or, we can simply look at the eight properties, realize that the highest sale from February of 2020 was $1,428,000, and conclude that perhaps the $1,475,000 that 12 Villandry Crescent was listed for was exceptionally high.

Did Frank & Joanne have the best house in the area?  The best by far?

Unlikely.

It’s far more likely, as is almost always the case with for-sale-by-owners, that they have no clue what their house is worth.

3) The market was sporadic.

The local market was quite softer than it seemed, and not nearly as hot as the CBC Marketplace story made it out to be.

It’s true that 58 other two-storey homes sold in Maple over the 90 days that Joanne & Frank’s house was up for sale but few of these went smoothly.

There were sixteen failed offer nights.  That’s when a house is listed, presumably low, with an “offer date,” and not enough interest materializes, so the house doesn’t sell and is re-listed.

There were twelve price reductions.

There were ten conditional sales.

Overall, 28 of the 58 sellers sold below the list price.

So the market in Maple wasn’t quite as mad as CBC Marketplace would have us believe.

The 14-day mark is a crucial divide in Maple, Ontario.

As this chart will show, after two weeks on the market, every single sale was below the list price.  And the longer a home was on the market, the bigger the need to discount:

Joanne & Frank’s house was the one exception.

Unlike almost every other seller in their situation, they refused to lower their list price and instead held out for “the right buyer” who was willing to give them most of what they wanted for the home.

They also agreed to a very long closing date of nearly 2 1/2 months, which meant they were formally involved in the sale process for 169 days.  That’s a pretty risky move in a market that seemed to be softening.

A real estate agent understands not just “the market” in general but also the local market.  It’s clear that Frank & Joanne are far from experts in this regard, but when a know-it-all

–

4) The listing was half-complete.

There are a lot of aspects of a listing that really sell that listing.  I know this to be a fact, on account of how I list and sell my properties.

Whether it’s big-ticket items like staging a home, or moving the sellers out to provide unfettered access during the listing period, or whether it’s the small, seemingly innocuous elements like the MLS “write up,” I know all these factors combined, matter.

Joanne & Frank’s decision to tackle the listing on their own meant that they missed out on things like room measurements and descriptions on the MLS listing, for one.

Here is an image that shows, at the top, how Frank & Joanne had no room measurements or descriptions, compared to a competing listing:

You might think this doesn’t matter, but it does.  Everything matters when you’re listing real estate and expect top dollar in this market.

–

5) The listing was inaccurate.

The 2021 listing for the home noted the house was “2000-2500” square feet.

The 2010 listing for the home noted the house was “2500-3000” square feet.

Did the house shrink?  Or did Joanne & Frank make a mistake?  And what’s the going rate for a mistake that’s equal to about 20-25% of the house value?

The 2021 listing for the home noted a one-car garage.

The 2010 listing for the home noted a two-car garage.

Did they add a room where their garage was?  Or did they just eff this up?

In a vacuum, one of these examples might not matter.  But all together, along with everything else on this list, Joanne & Frank just didn’t do a good job attempting to sell their home for 110% of anything resembling fair market value.

–

6) There was no marketing.

I’ve been told sometimes that I’m inflexible.

I was told this as recently as today!  And when I refused to consider the possibility, the person I was speaking to used this against me – to say that I was inflexible!

Well, damn.

When it comes to my listings, I have a proven method and process.  I never stray from that process.  Ever.

I want my clients to renovate and repair, first and foremost.  Lately, we’ve been doing our pre-inspections well in advance and then looking for items in the report to rectify.  We paint where needed, we clean the house upside-down, and we look for any objections a buyer might have, and then address it.  I tell my clients from the get-go, “You’re likely going to remove 70% of everything that’s in this house, whether that’s packing up boxes, or me moving your furniture to a storage locker so we can stage.”  They often think I’m joking!  But ask any of my recent clients, and they’ll set you straight.  Then I tell them, “You won’t be living here while the property is for sale,” since we need unfettered access for buyers and a property that’s so clean the team from C.S.I. couldn’t find a single hair or fingerprint!  After we’ve repaired, painted, cleaned, decluttered, packed/moved, and cleaned again, we stage the property, take photos with the best photographer that I know, and then spend a week getting our marketing ready.

Joanne & Frank didn’t do any of this.

They just looked at the market and arrogantly decided that they’d throw their house up on MLS at 110% of what it’s worth, then sit back, and wave with both hands saying, “Come to mamma.”

Joanne & Frank didn’t lift a finger.

7) The sellers did not offer to pay buyer agents.

Here’s the truth, folks.  And I saved this for last because the first six points on their own are enough to show you why Joanne & Frank didn’t have any luck selling their house, but now that we’re here, can we please talk rationally and logically about the concept of working for free?

Joanne & Frank said, in the CBC Marketplace piece, that they offered to pay agents 1% commission.

That was never conveyed to agents.

Never.

There is no debating this.

With these discount firms, you usually see a commission stated on the MLS along with the fact that the listing brokerage only pays $1.00 or often one penny.

Here’s an example:

Easy, right?

Whether the seller is paying 1%, 2%, or 2.5%, it’s noted.  It’s also noted that the listing brokerage is only responsible for $0.01.

The problem that Joanne & Frank had was that they weren’t going to pay agents.

And on its own, this is still an issue.  Legally speaking, if there’s a property that meets the criteria of an agent’s buyer, that agent must show the property to his or her client, regardless of commission.  However, back on planet earth, and away from the people who despise real estate agents so much that they think they’re going to work for free, we can all agree that about 80% of agents out there will not work for free, and won’t show this listing.  The other 20% will figure a way around this.

In any event, Joanne & Frank never offered to pay agents.

It’s here in their listing, clear as day:

They offered to pay $0.01.

And in the space where they could have further explained that they were going to pay 1%, they simply reiterated that they would pay $0.01.

Those of you that simply hate all this talk about real estate agents and the money they make will argue, “It’s naive to think that a seller wouldn’t pay an agent.  That’s ridiculous.  Agents should have assumed that they were going to get paid.”

Really?

What’s that famous movie quote about assumptions from Under Siege 2: Dark Territory?

Dang.  I tried to embed the clip from YouTube, but it’s got bad language and is blocked.  Alright, well, the quote is also in Lock, Stock, And Two Smoking Barrels.

There’s no assuming here, nor should there be.

Joanne & Frank simply screwed up.  Their entire listing is riddled with problems, and it’s quite ironic that in the image above, when we’re talking about a $0.01 commission, you can see that this damn property was listed for $14.75 Million!

They told the CBC in that interview that they advertised a 1% commission when they did not.  And the CBC didn’t fact-check this.  Pathetic.

–

This is simply “The Magnificent Seven” of issues.

Collectively, I have no idea how the CBC could have got this story wrong.  They wanted so badly to trash real estate agents that they were like a fish biting on a hook without a worm.

It’s sad, really.

If the CBC wants a story about crappy agents, they could have called me!  I have so many!

Instead, they invented this story.

It’s quite telling that they could only find one example of a seller who felt agents were steering buyers away from their property.  One.

You would think that if this was really going to be a story, an editor or producer somewhere at the CBC would say, “Okay, go find another example of this.  Find us a couple of other sellers who can go on camera.”

But no.  Just one.

So we’ve got do-it-yourself sellers who put zero effort into their home, drastically over-price, advertise that they won’t pay cooperating agents, produce a listing with inaccuracies and errors, accidentally list the property for $14.75 Million, and who completely misread and didn’t attempt to understand the market.

And these sellers, along with the CBC, decide that buyer agents are to blame.

Sigh.

Wake me up the tabloid sensations are behind us and we can actually read news again…