As I write this column on the eve of The Canadian Real Estate Association (CREA) Special General Meeting in Newfoundland, where the membership will vote on the proposed consent agreement negotiated with The Commissioner of Competition, I am aware that whatever the outcome (by now all of that has been hashed and rehashed in the news), the real estate industry in Canada has changed.

Not necessarily for the better, and certainly not in ways real estate professionals would prefer—or at least that is how most consumers see things. Is this merely a failure to communicate value?

Real estate commissions of about 5% of the sale price have become the deal breaker for consumers. Commission fees for the sale of homes worth hundreds of thousands or millions of dollars have netted real estate brokerages and salespeople tens of thousands of dollars per sale—and a lot of consumer resentment at the same time. In the boom years of the 21st Century, the internet has made these transactions look too easy to arrange and, therefore, too expensive based on current commission rates and levels of service.

When substantial business change occurs principally as a reaction against pricing, consumers and business can lose. For instance, The Commissioner and CREA have worked out an agreement which, if ratified by CREA membership, would definitely allow Realtors to offer no-frills MLS^TM posting services. As real estate markets slow and stall, posting details on realtors.ca, an online Multiple Listing Service^TM or MLS^TM site, may not be enough to generate reasonable offers and get a property sold.

In an economy when belts are tightening everywhere, a shift in the cost of services for buying or selling real estate does not seem a surprise. What is a surprise is how the real estate industry allowed consumers to undervalue services and professional expertise, and how the industry failed to adjust to internet accessibility instead of having the government bring things to a head.

For instance, on CREA's site the second step for home sellers (and the fourth, for buyers) is to "find a REALTOR® who is right for you." This would indicate that there are significant steps in the buying and selling process where professional input holds no value. Since real estate and finance are not taught in school, how can consumers make truly informed decisions at any stage of the real estate continuum?

Here are a few scenarios where a professional's input may be invaluable as a first step:

• When an event or lifestyle change occurs, consumers may decide a move is necessary, and then call a real estate professional to facilitate that move. However, talking to a broker or salesperson first may reveal errors and overlooked opportunities in the making of a decision to move. That's one of the points that this column has been making for years: What consumers don't know may hurt them. In a number of situations I have heard of, a real estate professional suggested that there were better solutions to the owners' problems than selling the home. For example, a reverse mortgage may be the appropriate solution for some.

• Learning about your real estate choices should be an ongoing exercise. Building a relationship with a broker or salesperson means they are monitoring market conditions to seek out opportunities for you. What about all the property owners who received a call about a new listing from the real estate broker or salesperson who knew their goals and needs? Out of the blue—step one—these owners became buyers, and then decided to sell their real estate.

Discounted fees, if coupled with higher liability for consumers, may not mean improved service. During the boom, just putting your real estate up for sale with a sign or an internet posting was enough to generate offers. In post-boom markets, what else must consumers do to sell their real estate at fair market value? For instance, the main purpose in advertising listings is to raise awareness of the brokerage and bring in a pool of prospects for salespeople to work with while selling the bank of listings held by the brokerage. How will property owners handle the buyer interest that they cannot parlay into an offer to purchase?

If the commission structure and service delivery model changes substantially, what will change with it?

• Under traditional commission standards, list prices were set to net sellers, after commission, what they needed and wanted to make a move. If the cost of selling drops substantially, won't prices drop in tandem?

• Real estate brokerages and their salespeople are licensed to offer their services under Agency Law, which makes them responsible and liable for the entire transaction and its repercussions. Clients, under seller agency or buyer agency, must receive complex and all-encompassing fiduciary duties, which include the following:

  • Good Faith, that is to put the client's interests above all else, including commission, but excepting the law.

  • Competence, which requires an above average level of knowledge and skill regarding all aspects of real estate.

  • Obedience to the client's instructions, again within the law. This includes knowing what should legally be done to protect the seller even if the seller does not ask specifically for that help or advice.

  In exercising their fiduciary duties, brokerages and salespeople are responsible for collecting all the details regarding the real estate and for creating a contract with no loose ends, while negotiating to achieve all the terms important to the client. This contract must also not have any loop-holes for the other party to slip through if they change their mind about buying or selling before the transaction closes.

Don't consumers deserve the same ongoing professional foresight and proactive input about the "health" of their real estate that they seek for their personal health? The industry's and professionals' continued silence on the impact to the valuable agency relationship they offer to consumers is hard to understand. If the real estate industry does not put the value of professional services and input first, is it a surprise that consumers don't?

How will these special services and the related complex legal liability continue to be offered to sellers and buyers if fees are dramatically lower or services are broken down into components and rebundled into service packages? Yes, the price of services matters, but where is the benefit if real estate becomes a "buyer beware" marketplace like retail sales?

Canadians can look at other countries to see how real estate and consumer protection legislation has evolved for their citizens. This transition is more complex than just repricing consumer services. The level of consumer protection available to sellers and buyers may become collateral damage in this commission battle.

We will watch with interest, and continue to report on overlooked opportunities and misunderstood advantages for buyers, sellers and owners. The impact will be extreme in some markets, and almost invisible in others. Some real estate brokerages will reinvent themselves to address pricing issues; others will concentrate on added value and expanded services to fill other niches in what may become another corner of the financial services industry. For real estate professionals who performed a handful of transactions annually, this industry may lose its appeal. For those who have built service-driven careers, real estate will continue to offer rewards, just in different ways.

Published: November 2, 2010

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Futurist and Strategist PJ Wade is "The Catalyst" - intent on "Challenging The Best to Become Even Better." PJ earned this title by translating the dynamic impact of Boomers and their multi-generation families into relevant insights that start people thinking and taking action—in business and in life. Author of 8 books and more than 1800 published articles, PJ encourages individuals to become their own futurist. PJ writes and speaks about the insight, knowledge and solid decision-making skills that professionals and their clients need to live and work in this vortex of change. For instance, since PJ knows that home is headquarters for the new decades-long "unretirement," she wrote the popular book "Reverse Mortgages: Best Friend, Worst Enemy...Your Choice!", which is filled with suggestions and cautions on protecting, building and managing home equity. Her new business book, "What's Your Point?: Cut The Crap, Hit The Mark & Stick!" will be published in 2012. As The Catalyst, PJ provides strategic communication, client appreciation and advanced education services to the financial, tourism, lifestyle and service sectors - and the clients they serve. A frequently-quoted financial and business commentator, PJ is a thought-provoking strategic speaker who offers practical, real-life suggestions on leaving "the box" behind and embracing Forward Thinking - a talent she regularly demonstrates in this column. For more on keynotes, blogs, books and information on a range of 21st-Century topics, visit TheCatalyst.com.