As Vancouver property prices continue to soar, entrepreneurs are vying to enter the market with a bag of new tricks for homeowners looking to sell.
They are having varying degrees of success. With 106 franchise units, PropertyGuys.com is a popular service throughout the rest of the country, and in parts of B.C., but it is nowhere to be found in Vancouver.
His service helps owners sell their houses on their own, without an agent, by connecting them with the Multiple Listing Service, some marketing services, an appraiser, photographer and a lawyer, to make the transaction happen. The homeowner shows the house and handles any offers, with a lawyer’s help. It means they save on the listing agent’s commission, which can run around $18,000 for a $1.2 million home.
The company will soon open operations in Quebec and thus be established coast to coast. But in Vancouver, where listings often receive multiple bids and sell within a day or two, the process can be too daunting for a homeowner, says Mr. Melanson, who is based in Moncton, N.B. Elsewhere, it’s usually a question of just sticking a sign in the lawn and putting the house listing on Realty.ca. In Vancouver, there are way more variables that make people nervous about listing on their own. You’ve really got to know the market.
“Greater Vancouver is our biggest void in the country,” Mr. Melanson says. “We operate really well in normal markets, when Mr. and Mrs. want to buy a newer or bigger house and someone else wants to buy up. We’ve grown our business in that environment. We are not present in Greater Vancouver, not because we don’t want to be, it’s just because we’ve never had a mandate to serve entrepreneurs who want to go head to head with real estate agents there.
“We think we’ll get there. We just need it to be in very strong hands there, so folks there will understand the market, and the sophistication of that market because of the international component.”
Propertyguys.com really got going in 2010, when the Canadian Real Estate Association and the Competition Bureau agreed to allow brokers to post on the MLS on behalf of people wanting to sell their homes, for a flat fee. Before that, only real estate agents could post on the MLS as part of a full-service deal. Without a listing on MLS, it’s virtually impossible to market one’s house.
Mr. Melanson, who is not a real estate agent or broker, has worked out agreements to access the site through a variety of brokers within each province. But in Vancouver, it’s not as easy as just accessing the MLS.
John Andrew, real estate professor at Queen’s University, argues that the super hot Vancouver market should make it easier for a homeowner to sell without an agent.
“A lot of the benefit to having an agent is the network they bring to the table,” he says. “They are able to pitch it to colleagues in their office and in the city, and that becomes less important if you are in a bidding war.”
However, the downside is a lot of preparation, knowing the market, and receiving offers. It would require a few days off work. That’s not for most people.
“If you have your heart set on a particular agent, and they are connected, to the neighbourhood, I am the first one to admit that [hiring an agent] is money well spent. A lot of people shouldn’t try to do it on their own,” he says.
“And with values as high as they are, most people just say, ‘You know, I’m making so much money on the sale of my home, the commission, which is scaled proportionately, is affordable. And I don’t want to screw up the sale of a $2 million home,’ that sort of thing.”
But most people don’t realize that negotiating about commission is an option. In a high stakes market such Vancouver, commissions ought to be negotiable, Prof. Andrew says.
“As the value of the home goes up, [agents] don’t muscle down as much as they should. Anything in excess of $1 million makes for a competitive industry, and most agents would be very happy to get that listing – especially in Vancouver, where they know they will sell that asset quite quickly.
“This is the something the industry doesn’t like to talk about: that those commissions are absolutely negotiable. Your real estate lawyer actually works at a lower hourly rate than the real estate agent does.”
Homeowners should be interviewing three or four agents and asking if they’re prepared to offer a commission at a competitive rate, he says. “Make it a bidding war, just for the listing.”
If the thought of that makes the homeowner uncomfortable, there’s a new remedy for that as well. An unlikely group of four neighbours in Oakville, Ont., came together at a backyard barbecue last year and started comparing the commissions they’d paid on their new home purchases. When they discovered how greatly they varied, they saw an opportunity for homeowners.
Sharn Kandola, a digital marketer, knew how to get an e-commerce business off the ground. So she and her team formed an online auction where agents could bid down on their commissions in order to win the lead on a house listing. Homeowners and agents are strictly anonymous. The agent’s find out the postal code, the square footage, the number of bedrooms and bathrooms, and type of building. Then, they have 24 hours to bid on the property. Whoever bids lowest wins the lead, pays a $170 fee, and then gets the contact information for the homeowner, who is also notified. They then meet and, if they click, the agent gets the listing.
It’s called feeDuck, and it launched in Vancouver in July, but it has been running in Toronto and Ottawa since beginning of the year. With business doubling each month, the service is now moving into all major cities, with requests coming from U.S. homeowners and real estate agents as well. Not bad for a start-up launched by a digital marketer, a high school teacher, a hospital administrator and a finance guy.
Ms. Kandola expected a cold reception from Vancouver agents, who are probably dining “on lobster,” she says, laughing. But she’s been surprised by the interest. “We’ve had a big interest from Vancouver from the beginning. Maybe because there are so few properties out there, and the market is crazy, and there are so many agents.
“That would explain why we have such a strong presence there already, and we only launched a few weeks ago.”
She says agents from all the major players are on board, including Sutton Group, Century 21, Re/Max and Royal LePage. Agents have to be experienced, and have a decent website too, because homeowners will expect that, she says, adding that unqualified agents have been rejected, which has ticked more than a few of them off.
Considering the low inventory of listings across the Lower Mainland, it’s no wonder the service has taken off. The Real Estate Board of Greater Vancouver just released stats for August that show a 26.2 per cent drop in listings compared to August of 2014, and a 5.3 per cent drop from July.
“Their model is they get a number of experienced agents competing for your business,” Prof. Andrew says. “It’s a bit like a mortgage broker. You hire a mortgage broker and they get paid to find the best deal on your behalf.”
And because it’s anonymous, word doesn’t get out that an agent is willing to lower his or her commission. And previous clients won’t feel cheated that they paid full commission.
The two outsiders trying to tap the Vancouver real estate market aren’t millionaires so much as average business people. Both companies are run by average homeowners. Ms. Kandola says her team will be having a serious talk soon about whether to give up their day jobs to run the business full-time.
“We hit it off a lot quicker than we expected, some big decisions need to be made,” says Ms. Kandola, adding that feeDuck gives a portion of its profit to Habitat for Humanity.
Mr. Melanson, who’s also a market analyst, concedes that he can’t fathom aspects of the Vancouver market, such as having to spend more than $1 million just to live in house. He says he spends a lot of time analyzing the Vancouver market, including the impact of foreign buying. In Moncton, his house cost $200,000. He owns two properties that haven’t gone up in value in a decade — unthinkable for a Vancouverite. He says he wouldn’t mind a boost from foreign investment if it raised Moncton prices five or eight per cent.
“If I lived in Vancouver today, I don’t know how I could buy a house. Could you tell me where I could go find a house that cost less than $200,000 please, because that’s what I would need for my growing family? That’s what we have here, with a big backyard. And we think that’s a lot of money. How could we ever live there? What would we do for a living? We’d have to change careers. I think. That’s how we talk about Vancouver.”
He’d also like to see data on foreign buying in Vancouver. He’s heard talk about how only the high end of the market is affected, but that doesn’t make sense to him.
“I don’t buy this high-end market argument, when it’s followed up with, ‘but no one knows. We don’t measure. We don’t look. There’s no proof.’ Doesn’t that sound like the jargon around tobacco companies in the 1970s when they said there was no proof?”