Should the public have access to home prices? A data reformer and a former TREB president square off
At the end of August, the Supreme Court declined to hear an appeal by the Toronto Real Estate Board, putting an end to a nearly decade-long series of legal battles over the fate of Toronto’s Multiple Listing Service, or MLS.
The Toronto MLS is a database of information on homes in the Greater Toronto Area, accessible only to real estate agents who are members of TREB. The MLS contains information on homes that are currently for sale, and it also contains some historical information on those homes—most importantly, their previous sale prices over the years. These previous sales are a vital tool for real estate agents, because they’re useful in determining the fair market value of a property. By looking at past sales, agents can estimate what similar homes will sell for in the future.
Until now, these sale prices have been hidden from the public. TREB agents can access them, and can privately share the information with clients, but TREB has prevented anyone from setting up a website where average homebuyers can access historical sale information without an agent’s help. In 2016, Canada’s Competition Tribunal ordered TREB to allow free online access to sale data, setting off a series of legal appeals from TREB. Now that the Supreme Court has refused to hear TREB’s final appeal, the board will be forced to permit agents to set up websites with searchable sale data.
Some industry observers consider this a victory. No longer will real estate agents be the gatekeepers of historical sale information. Buyers will be able to do their own research, meaning they will, at least in theory, be able to make better informed decisions about how much to pay for a home. But there are many in the real estate industry who aren’t as enthused at the prospect of sale data being freely available on the web. They say putting all that information in the public eye will compromise the privacy of buyers and sellers.
To get a sense of the state of the debate, we arranged a conversation between two real estate brokers with different views on the Competition Tribunal order. John Pasalis, of Realosophy, has long been a proponent of allowing the public to access sale data. Paul Etherington, broker of record at Royal Heritage Realty, was president of TREB between 2014 and 2015, and he remains skeptical of some aspects of the new data regime. Here’s what they had to say.
TREB’s major stated concern with opening up MLS data to the public has to do with the privacy of homebuyers and sellers. What do you make of that? Is it a legitimate concern?
Pasalis: I mean, no, I’ve never thought so. The sale price of a home is not private information. It’s just being made difficult to access.
Etherington: I pretty much agree with John, except for one thing. The only thing I think that should be private is the pending sales. In other words, if I sell your house today and it closes at the end of September, I don’t think that price should be available until the transaction closes a few months later. I don’t believe it’s a sale until it closes.
The Competition Tribunal order covers pending solds, so TREB is going to have to make that information available to the public, no matter what. What’s the harm in having pending sold data out there?
Etherington: If I sell a house for $500,000, if it doesn’t close for whatever reason and I have to resell it, the fact that I took $500,000 could be detrimental to my position when I’m negotiating another offer. Or somebody could see that the house sold for $500,000 and think, “Jeez, I would have paid $550,000 for that.” That person could go directly to the seller and say, “Look, get yourself out of that transaction and I’ll pay you $25,000 or $50,000 more.”
John, what do you make of that?
Pasalis: This has been one of TREB’s arguments recently. The feeling that I have is if that’s TREB’s position, then they should not be allowing their members to view or email pending solds to their clients. When a real estate agent is trying to advise a potential seller what their home is worth, they’re looking at the sales that happened last week. They’re not looking at the closed deals, which usually have sold like three months ago. I mean, you can’t have it both ways. You can’t say that this is private and we shouldn’t be using it, and yet allow realtors to use it every day. And while I appreciate that there’s a risk to the seller if their deal falls through, the reality is that TREB has a process for that. If a deal falls through, the seller can instruct their real estate agent to advise TREB, and then TREB suppresses that sale price.
It’s true that TREB’s realtors have completely unfettered access to this information and always have. Why are they better equipped to handle that data than anybody else?
Etherington: Well, you know, I don’t know that they’re better equipped. I think that for the public, if you ask most of them, they would not want their information out there until the deal closes.
Just to clarify: are you saying you think TREB shouldn’t be making pending sale prices available to realtors?
Etherington: No, I think the realtors should have it, because I think the realtors need it to do their jobs properly. And I think that clients should have access to it also. I just don’t think it should be out there for anyone in the public to see.
Pasalis: So it’s fine to give a prospective client the information because they’re there in person, but a prospective client who’s online shouldn’t have access to it?
Pasalis: And somehow there’s this other standard if you’re doing things online.
There are other jurisdictions where people can look up pending solds online. Nothing apocalyptic has happened in those places, so why should we expect anything different in Ontario?
Etherington: There are certain areas that do publish pending solds, but there are a lot of them that don’t. Now, myself, I believe that TREB should publish solds on their own website. I just don’t think it’s right to do it prior to them closing. And even if they did publish pending solds, I don’t believe that anything apocalyptic would happen. I don’t think this decision is going to change the way real estate is done very much at all.
John, do you think there will be changes in the real estate industry as a result of the loosened data restrictions?
Pasalis: Well, yeah. It’s 2018 and people have more access to information about the mattress they want to buy than about the home they’re about to spend hundreds of thousands of dollars on—
Etherington: But John, they don’t have access to how much the store sold that last mattress to a client for. They know the retail price.
Pasalis: Okay fine, but there are thousands of tools that tell you what every single retailer is currently selling their mattresses for. There’s way more transparency. I mean, one of the common practices in Toronto for realtors is to price homes for significantly less than what they’re worth. A lot of times buyers will email their agent and say, “I really love this home that’s listed for $800,000.” They don’t realize it’s actually probably going to sell for a million, because they can’t see what homes like that sell for. It ends up wasting a lot of their time and their emotional energy. I think online research is just obviously the way forward.
Etherington: I’m not trying to keep the information from the public. Like I said, I would actually publish all the closed sales on TREB’s website. I just don’t think the pending sales should be on there.
Pasalis: If TREB had taken steps to make sold data more available, even in a limited way—like not showing the pending sales, maybe only limiting it to a year’s worth of sales—we probably wouldn’t have had this entire Competition Tribunal case.
Etherington: You’re probably right.
Pasalis: I think the Competition Bureau stepped in because TREB was doing nothing, and I think it’s an important lesson.
Etherington: John, I completely agree with you. During the seven years of that trial, we were told numerous times by lawyers that we couldn’t change anything because the special investigation was on. You’re right, though. Probably 10 years ago the sold information should have started to be put online.
You’re saying TREB’s lawyers were advising it not to change its data practices because of the ongoing tribunal process?
Etherington: We were basically told that we shouldn’t be changing any rules while the trial was on.
Why do you think TREB was so invested in maintaining the status quo, to begin with? Was it really about privacy or were there some other concerns at play?
Etherington: You make a decision and it’s the right decision at the time, or you believe it to be the right decision at the time. Technology changes and time goes on, and now you’re into this decision, the lawyers are in it, and it’s hard to back out. Even five or six years ago, the technology was so much different. The advances every year change things, so decisions that are made 10 years ago or more may in hindsight look like the wrong decisions.
Was there a fear that loosening up the restrictions on the use of MLS would destroy a traditional competitive advantage for TREB’s members?
Etherington: I never had that fear. I’ve been doing this for 34 years, and I don’t think there has been any competitive advantage lost or gained by the fact that these MLS listings are now all over the internet. It’s just different.
John, now that MLS data is getting more accessible, are we going to see changes to the commission structure for realtors, or new ways of doing business?
Pasalis: I think it’s going to raise the bar of what people expect from real estate agents. When people have all this information and they can do their own research, you have to offer a lot more. It’s going to force real estate agents to provide more services and to offer better advice. I think that’s a good thing, because it’s going to allow the top people in our industry to rise to the top. It’s going to be harder for those who are in this part-time and don’t take it seriously.
Etherington: I don’t know that this will improve professionalism any more than it has already been improved. I believe the professionalism in the industry has been improved dramatically over the last number of years with agents doing more, providing better services, better MLS pictures, better tours. But this ruling certainly won’t hurt.
The Competition Tribunal order isn’t a complete carte-blanche as far as data is concerned. TREB’s interpretation of the order is that all the sold data still needs to be hidden in what’s called a “virtual office website”—basically a password-protected web service that people can’t access unless they sign up with an email address. John, is that adequate? Or should the order have gone further?
Pasalis: TREB is definitely well within its rights to send notices to people who are just posting stuff online without requiring a user sign-in and registration through a VOW, because that’s what the order is about. But I mean, I don’t like that. I would have liked to have sold data more public.
Etherington: I don’t think a VOW is much of a protection. I think TREB should publish sale data to their public website, after closing.
So having things in VOWs doesn’t allay any of your concerns about pending solds?
Etherington: No, I don’t think that that level of security is really adequate. Anyone can sign up for a VOW, so what’s the difference in making someone do that, as opposed to just giving them the information?
And the fact that TREB has a process for suppressing sales that don’t close doesn’t allay your concerns either?
Etherington: I think people are going to start looking for workarounds to avoid disclosing pending sold prices. I would hate to find out that 10 per cent of the house sales that are being done are being disclosed incorrectly, because that would ruin the data, in my opinion.
John, is that a concern of yours, at all?
Pasalis: I don’t see the issue. Are there enough people who are really that concerned about other people knowing the sale price of their homes that they would somehow go through the process of taking it off the MLS? The reality is, when a house sells, every neighbour on the street knows what it sold for, and that’s usually what people care about the most: their neighbours and their friends, not some random person who’s looking to buy a home.
Paul, now that it seems like everyone else is going to be doing it, will you be putting sold and pending sold information on your own brokerage’s website?
Etherington: We will. We will put it on. I know some brokerages already have done it. We will do it when the feed becomes available from TREB. Although I don’t agree with the pending solds, if everyone else has got them, we’ll have them too.
And John, what’s the status of Realosophy? Is this information already available on your site?
Pasalis: Yeah, we have the data available. We’ve had it for a little while, but we made it available only for our clients because we haven’t been able to make it public. But we did flip the switch last week.