A court ruling in the U.S. that found realtors colluded to receive higher high commission rates could change the way Canadian real estate agents do business, according to an industry analyst, as a similar case works its way through Canadian court.
This month, a jury in Missouri found the National Association of Realtors in the United States and others guilty of inflating real estate agent commissions.
While the verdict has been appealed, more lawsuits that examine real estate agent commissions have been brought forward in the U.S. and their impact could usher in change for Canadian realtor practices, according to Walter Melanson, co-founder and market analyst at PropertyGuys.com, given similarities in industry policies in the U.S. and Canada.
“The idea is that if there’s a lot changes as a result of these cases in the United States, we will start to see change here in Canada also,” Melanson told BNN Bloomberg in a Wednesday interview.
CANADIAN CLASS ACTION
A class-action lawsuit examining similar practices was also launched in Canada, and the lawyer handling the plaintiff’s case told BNN Bloomberg that he is hoping for a result similar to the one recently reached in Missouri.
"It provides a blueprint for establishing liability in Canada, one which we hope to follow to a similar result here. In terms of next steps, both sides are appealing the order from Chief Justice Crampton’s decision on the defendants’ motion to strike," Garth Myers, partner at Kalloghlian Myers LLP, told BNN Bloomberg in an email.
Those appeals will be heard by the Federal Court of Appeal in the new year. After that, the plaintiff will move for certification of the case as a class action, he added.
The Canadian Real Estate Association was named in the proposed class-action lawsuit.
"We consider the claims to be without merit and will continue to vigorously defend against them," a spokesperson for CREA told BNN Bloomberg in an email.
REAL ESTATE COMMISSIONS
Melanson said people may not be aware of how real estate commissions work.
“A lot of folks in the U.S. and Canada don’t know that real estate commissions are negotiable and at play here is how negotiable are they,” Melanson said.
The U.S. lawsuit argued that home selling agents are negotiating the commission of the buyer’s real estate agent before a sale has been made, Melanson explained, resulting in inflated rates.
“A lot of folks don’t think that that’s fair. They think a better system would be a system where the listing agent does what he does, and then the buyer agent comes in negotiates his or her commission during the offer process,” he said.
Melanson added that Canadian realtors have very similar policies to their counterparts of south of the border, and he expects this ruling to change the way real estate agents and brokers operate.
“A lot of (U.S.) brokerages are already starting to change how they do,” he said.