Will Realtor Commissions Plumet if MLS Sales Data Goes Public?
A recent outcome with the Toronto Real Estate Board that has required them to release MLS sales data to the public could bring the same fate to Vancouver. Realtors are no longer the gate keepers of information, so will Realtor commissions plummet?
So what do I think, will Realtor commissions plummet? The quick answer is no. But let me elaborate on that before you get all bent out of shape.
One could argue that releasing the sales data to the public will effectively diminish the role of the average Realtor. They key word here is average. The commodity agent, you know, a portion of the 12,000 Realtors licensed with the Real Estate Board of Greater Vancouver.
Here’s the thing, if a Realtor has built his business on being the gate keeper of information aka the MLS then they will lose. If they provide no other value then simply being a middle man of information such as the listings and the sales data then they are in trouble. They will be forced to cut their commissions because they’re a commodity and cutting commissions to get business is a race to the bottom. Who can cut their commissions the most? That’s a race you don’t want to win.
How will Realtors continue to justify their commissions?
Value, value, value. It’s no longer being the gate keeper of information. The internet changed that, and continues to change it at a rapid pace. A Realtor must now provide value by being a specialist, such as a condo specialist in Downtown Vancouver. That means knowing all the buildings, the amenities, the community around it, the restaurants and schools. If a Realtor wants to continue to justify their commissions they will have to become specialists not generalists.
You could argue they’re still not worth. Everyone is entitled to their own opinions. But let’s take a quick look at commissions across North America before we get too far ahead of ourselves.
- Vancouver Realtor commissions about 3% (1.5% to buyers agent)
- Toronto Realtor commissions about 5% (2.5% to buyers agent)
- Majority of United States commissions 6% (3% to buyers agent)
And I understand people will say Vancouver’s prices are way higher so commissions should be less. But let’s not forget that New York commissions are still 6%. The majority of the United States publishes all their MLS sales data to the public on sites like Zillow and Trulia yet Realtor commissions remain virtually unchanged.
I recently spoke to a Realtor friend of mine who works in Tucson Arizona, Tony Ray Baker at SeeTucsonHomes.com. They recently got approval to release sales data to the public, an option he fully endorses. “It seems to me that the more information we give to the consumer, the better. They understand that we actually do a lot more than the consumers of years past thought we did. The more they know, the more they realize we must know.”
I truly believe Realtors will still have a place, and the good ones will still take home their normal commissions. Publishing the MLS sales data will provide the public more insight, more truthful Realtors and should provide more commission cutting Realtors no doubt.
But Ultimately the specialized Realtors who can provide value besides publicly available data and who can package it all together in a convenient and advisory approach will rise to the top. The ones who don’t will get squeezed out of commission dollars. There will be very little room in the middle.