A proposed class-action lawsuit in Canada alleges a “conspiracy” that artificially inflates real estate commissions, potentially costing homeowners significant sums. The lawsuit echoes recent developments in the United States, where the National Association of Realtors settled a lawsuit, agreeing to pay compensation and change commission rules. This settlement could have far-reaching effects on the Canadian housing market.
Garth Myers, a partner at Kalloghlian Myers LLP, the firm behind the Canadian lawsuit, believes its success could significantly reduce transaction costs for residential real estate, benefiting Canadians overall. However, the Federal Court has yet to certify the case, and the allegations remain unproven.
The Canadian Real Estate Association has dismissed the allegations as meritless, signaling a staunch defense. Yet, Myers argues that the real estate industry’s opaque and anticompetitive nature necessitates change, as industry associations historically resist reforms.
In British Columbia, where commissions typically reach seven percent on the first $100,000 of a home’s sale, with three percent thereafter, sellers often factor these costs into their listing prices. Trevor Koot, CEO of the B.C. Real Estate Board, suggests that consumers can negotiate commissions, countering the notion that lawsuits alone will drive down costs.
Robert Price, co-founder of Bōde, an online real estate marketplace, emphasizes the need for reform, highlighting the potential impact on home affordability. Bōde operates with a one percent commission for sellers, allowing negotiation for buyer agent commissions or eliminating them entirely if the buyer lacks representation.
Tom Davidoff, an associate professor at UBC’s Sauder School of Business, draws parallels between the U.S. and Canadian real estate markets, suggesting that the U.S. settlement could set a precedent for Canada. While increased competition may benefit buyers, Davidoff cautions that it won’t solve affordability issues entirely.
Housing Minister Ravi Kahlon refrains from taking a stance but acknowledges the government’s monitoring of the situation. He cites recent measures in British Columbia aimed at addressing affordability concerns, including a cooling-off period for buyers.
As the Canadian lawsuit unfolds and the aftermath of the U.S. settlement reverberates, the Canadian housing market braces for potential shifts that could alter the dynamics of buying and selling homes across the country.