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Saturday, August 19, 2006

Formal Complaint Against Comfree Under Fair Trading Act

The Alberta Real Estate Association has made a formal complaint to the Alberta government under the fair trading act. The journal has decided to cover this news today and my comments about the article are in italics below...

ComFree's barbs draw complaint by realtors
Website 'misleading,' Alberta government told
David Finlayson, The Edmonton Journal
Published: Saturday, August 19, 2006


EDMONTON - The battle between real estate agents and upstart ComFree has reached a new level, with the Alberta Real Estate Association making a formal complaint to the government about the company's "misleading" statements.

The 35-page complaint to Alberta Government Services under the Fair Trading Act details statements on the Edmonton ComFree website that the real estate association says "may mislead or confuse" consumers.

ComFree, short for commission-free, charges people selling their home privately a set $595 fee to advertise it on their website and in their magazine, and is in competition with licensed real estate agents in the hot housing market.

The complaints against ComFree include:

- Claiming to have 25 per cent of the Edmonton market, when a consumer survey showed 85 per cent said they listed their home with an MLS real estate agent.

And don't forget land titles records show over 90% of sellers listed their home with an agent.

- Saying a licensed agent charges $1,000 an hour, leading the public to believe these fees are standard practice.

- A "grossly misleading" statement that implies a real estate agent takes all the homeowner's equity in fees.

When in fact studies show that homes sold privately sell for 16% less on average than those homes sold with an agent (source, NAR survey of home buyers and sellers, 2005).

- Saying it performs the same services as an agent for a fraction of the fee, when the company is not licensed to trade in real estate.

And if they perform the same services, they should have to follow the same rules that real estate agents follow. Real estate is a heavily regulated industry and Comfree skirts those regulations by claiming to only be a marketing company. How then can then perform the same services as an agent?

- Claiming customers saved more than $600,000 in fees in three weeks when in fact commission rates or fees are not reported by the listing brokerages.

- Saying real estate agents operate out of self-interest, when they owe a duty to their clients and must follow their instructions.

Real estate agents are required to provide a number of fiduciary duties to our clients, first and foremost is loyalty, meaning the client's needs come first. Sure, there are some bad seeds out there, but being part of a heavily regulated industry those bad seeds are found and disciplined

Alberta's 11,000 licensed agents want the government to set rules preventing ComFree from issuing misleading or unsubstantiated statements.

"They say they have 25 per cent of the Edmonton market, but how are they measuring that? Our stats, which we get through land titles, show 91.8 per cent of sales are though MLS." Edmonton Real Estate Board president Madeline Sarafinchan said.

Don't forget how many comfree homes don't sell and end up listing with an agent. Do those homes get counted by both comfree and the board? We hear it time and again - many homeowners try comfree only to list with an agent for a higher price and net way more money in the end, including the money they wasted paying comfree up front.

Real estate agents' commissions have always been negotiable, so there's no way ComFree would know how much their clients are saving, she said.

Private sales have always been a factor in the Edmonton market, and agents can deal with that as long as it's a level playing field, Sarafinchan said.

"But they are saying things that are largely unproveable and carrying on a negative advertising campaign. All we are asking for is fairness."

Travis Holowach, ComFree's Edmonton franchise owner, said the real estate agents are just whining because they're losing money to a company that does a better job.

"We've taken 30 per cent of their market in three years and they can't take the competition," Holowach said.

Yet another example of and untrue and misleading statement. They can't even keep it true in an article pointing out their false statements!

"You don't continue to grow by misleading the public. We've got an unbelievable number of testimonials from clients who think we do a great job, so let the public decide."

Holowach said he's glad the board has finally complained to the government after talking about it for the three years he and wife Erin have had the franchise, and he's confident it will be dismissed.

"Now we can finally put this to rest."

Something tells me it won't be dismissed...

ComFree reports it had 566 new listings from Red Deer north in July, up 68 per cent over July 2005. A total of 454 homes were sold last month, making 2,644 for the year to date.

That's nowhere near the real estate board's numbers (14,909) which only include the greater Edmonton area, not Red Deer, or Fort Mac or anywhere else "north of Red Deer".

It claims sellers have saved $59.5 million in commissions since the Edmonton franchise opened in 2002.

Holowach said that number is based on the usual seven-three commission split charged by realtors -- that is, seven per cent on the first $100,000 and three per cent on the rest. Realtors may say commissions are negotiable, but it doesn't happen very often, he said.

Holowach is sadly misinformed and again misleading the public in his statements. Commissions are negotiable and many transactions do not follow "the usual 7-3 split". Our company has had dozens of different agreements with our sellers this year alone, and our sellers have made out very well - check out our recent sales stats at www.justsoldedmonton.com.

Holowach said he gauges market share by simply comparing listing inventories.

Lets see... 14909 copared to 2,644 doesn't exactly equal a 30% market share, it's 15%...and don't forget we're comparing Edmonton to everything north of Red Deer. Oh, and what percentage of their listings actually sold and how many sold below market value? We'll never know...

Eoin Kenny, a spokesman for Alberta Government Services, would say only that the department is reviewing the complaint.

dfinlayson@thejournal.canwest.com

HOW THEY WORK

ComFree, launched in Winnipeg in 1996, charges a flat $595 fee which includes advertising a home on its website and in the magazine, a lawn sign and highlight sheets for potential buyers.

The seller must decide what the property should be listed for, and ComFree does not give sales advice other than how best to present the property to potential buyers.

Homeseekers can go on an e-mail alert list so they're notified if a property they might be interested in comes on the market.

Real estate agents say that if you use a realtor you can be certain all your interests are protected in a complicated transaction.

They say they know the pulse of the current market, provide clients with an expert assessment of the value of their property, help them understand all offers and know how to negotiate an acceptable sale price.

But they don't give any sales advice...

And the Multiple Listing Service puts the property front and centre in the real estate market across Canada, they say.

A note to David Finlayson: next time you are going to report on Comfree and the real estate board, do give us a call. We'd be more than happy to share our stories of satisfied clients that we've helped purchase Comfree homes well under market value, I'm sure they'd love to tell you themselves. We could also tell you about people who tried selling their home themselves to no avail, and ended up listing with an agent for more than they were asking, and sold above list price, more than covering the real estate fees they were concerned about before listing with an agent. Some actual examples may bring some more credibility to your article.

A note to our readers: not all agents are created equal, and not all agents provide the same service. If you are considering selling (even if you are considering selling on your own) make sure you interview more than one agent, read our article on the top 10 questions to ask the agents that want to list your home. If you are considering selling on your own, read our article Tips for Selling on Your Own.

Get a free online evaluation of your home.

6 Comments:

  • At 9/15/2006 02:31:00 PM, Anonymous Anonymous said…

    I've never seen such a group of whinners get this much attention since the school yard bully demanded milk money. Comfree and other companies like them have operated under unfair circumstaces since day one. Now that agents are feeling the pinch, they are crying foul. Real Estate agents have been masters of "propaganda" so its' a joke to see them make this type of complaint. Real Estate agents are once again exercising their might to try and squash this "pro-consumer" movement. As a Canadian, you should be very suspicious and interested in the outcome of this case. The government has protected this "cartel" for far too long. Let's see if money from agents buys this decision. Ask yourself one thing; Whos' the victim? Oh ya, poor real estate agents. Consumers are certainly not complaining. The real estate act is ment to protect "consumers" and not to help agents maintain their quazi-m onoploy over rela estate.

     
  • At 1/03/2007 02:22:00 AM, Anonymous Anonymous said…

    I can only speak from experience. I came to Canada from Australia and bought a house, 15 months later needed to return to Australia. I contacted a real estate agent who gave me a valuation on the property and the fees expected. The fees were not offered to me as negotiable and I couldnt afford to take that sort of money from our equity. Therefore thought I would try to sell privately and a work colleague told me about Comfree. I placed my home $8,000 higher than the given valuation and had an offer for full asking price within 8 hours of the house going onto Comfree web page.
    I can fully understand Realtors crying out but it is healthy competion in a market they have held the monopoly for such a long time.
    The complaints are because Comfree DOES offer an excellent service for a fraction of the cost, so who are the winners and who are the loosers??

     
  • At 1/10/2007 04:48:00 PM, Anonymous Anonymous said…

    Holowach said he's glad the board has finally complained to the government after talking about it for the three years he and wife Erin have had the franchise, and he's confident it will be dismissed.

    "Now we can finally put this to rest."

    Something tells me it won't be dismissed...


    Guess what? It did get dismissed.

     
  • At 1/10/2007 05:31:00 PM, Anonymous Anonymous said…

    Where did you hear that?

     
  • At 3/21/2007 02:14:00 PM, Anonymous Anonymous said…

    I pounded a "for sale by owner " sign in my lawn and had a phone call 15 minutes later. I got the real estate sales info from StaplesĀ® and sold my house for $34 000 more than my Century 21 listed neighbor. Our houses are identical. He hates me.

     
  • At 3/22/2007 11:29:00 PM, Anonymous Anonymous said…

    One thing you need to consider with ComFree. They say that Realtors charge too much, but Realtors are only paid on the successful sale of a home that their clients are happy with, otherwise they would not have signed the offer. Comfree gets paid whether the house sells or not. Who are they to talk? When people pay the fee that ComFree charges, and if not successful use an agent, does ComFree refund the fee? OF COURSE NOT! Hypocrites! I work with many for sale by owners, and based on my experience over 85% of the people advertised on Comfree end up listing with an agent. The ones I have worked with have also ended up netting more at the end of the day then they would have otherwise. MLS stats prove it. I would give examples but this is confidential information, and being a Realtor in an extremely regulated industry I may not release any of this information. Although I wish I could, so that the public would finally have the facts instead of the false and misleading statements that are provided by various anti-Realtor media. Another thing that people lose sight of, is the extreme liability that Realtors take on when selling a home. By listing through a Realtor, you can gaurantee that if something does go wrong, for example misrepresenting a property, it will not be you that gets sued. Everything comes back on us, and it is going to take a few people selling through ComFree to get sued for negligent or innocent misrepresentation in order to drive this point home.

     

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