Episode 53: Unpacking the Draft Business Case for REALTOR.ca

REAL TIME Podcast

Exploration into turning REALTOR.ca into a for-profit subsidiary of CREA has included the most comprehensive due-diligence process undertaken in CREA history.. It’s about keeping REALTORS® at the forefront, looking at how this invaluable tool could be better leveraged to serve members, and addressing changing consumer needs. The proposed path forward is outlined in REALTOR.ca Forward: the draft business case for REALTOR.ca as a taxable entity.

Understandably, the discussion has sparked curiosity from members.

On this episode of REAL TIME, Janice Myers, CREA CEO, and James Mabey, CREA Chair, answer common questions regarding the draft business case and what the transformation could mean for REALTORS®.

Transcript

Erin Davis: Hi there. This isn't the first time that we have dedicated an episode to a discussion about REALTOR.ca and what's next for its future. Well, for today's conversation, we're doing something a little bit different. Before we look ahead, we're going to peel back the curtains a bit, and I guarantee you'll learn something about REALTOR.ca you didn't already know. I'm Erin Davis, and welcome to REAL TIME. For today's conversation, we're joined by CREA's CEO Janice Myers, and the chair of the 2024-25 CREA Board of Directors, James Mabey, who's also a broker owner from Edmonton, Alberta. Welcome both to REAL TIME.

James Mabey: Thanks so much for having us, Erin.

Janice Myers: Pleasure to be here.

Erin: Thank you. Now in Canada, if you're someone who has any interest in real estate, there's a very good chance that you have heard of REALTOR.ca. And we know that because of the market share. So how did REALTOR.ca come to be? And we'll start with you, James.

James: That's a great question, Erin, and something that we're very proud of at CREA. So historically, of course REALTOR.ca started as MLS.ca and that was way back in 1995 when a group of associations and boards came together to create a single source for listing information for consumers. And because it's a trusted source for Canadian consumers, it has become, of course, wildly popular and meets the needs of buyers and sellers, but also REALTOR® members across the country.

Janice: And I would add to that that, you know, the success has come from that initial collaboration of boards and associations, the community across Canada and and the strategic foresight that those people had to and REALTORS®, of course, had to create REALTOR.ca. And it is really, truly the envy of, of and a prime example of collaboration. It's the envy of the world. So we're very fortunate to have it.

Erin: You would ask a question that would kind of bring to light just what REALTOR.ca is. When you talk with new members. Janice, tell us about those sort of off the cuff but very insightful conversations.

Janice: Well, REALTOR.ca would come up in the context of talking about MLS, the MLS trademark, and what MLS systems are and when. I'd have a group of new REALTORS® just starting in the business, we'd talk about the three pillars of the MLS and what an MLS system is with respect to the data, etc. and then REALTOR.ca would come into the conversation and I'd say, well, so what is REALTOR.ca? It's not the MLS system. And then we talk through, oh yeah, it's the consumer portal. And everybody knew of REALTOR.ca. And when I would say to them that is your industry owned consumer portal. And every single board and association sends data to REALTOR.ca, which is managed by CREA. They would be very impressed.

Erin: I guess so, and it is obvious that this tool has resonated with Canadians. But did its success come as a surprise?

Janice: I guess in a way, I mean, I don't think that everybody thought that, you know, that collaboration, that initial collaboration was going to be so successful. But then the CREA team really worked hard to build it and maintain it and build it into the incredible market share that we have today. And that's really what we want to continue.

Erin: Yeah, anything but an overnight success. It is built and built and built. But what was the initial impact for REALTORS®? James.

James: Um, I think that's a really important thing because it gets at the heart of why we are re-examining REALTOR.ca. The initial impact of having a portal, a single portal for consumers to access MLS listing data was that it really helped members to make sure that their listings were front and center, and that they weren't competing for eyeballs. Even when I started in real estate 10 years ago, or 20 years ago. Almost part of me. I know I look fresh faced, but it's been almost 20 years. You know, you were competing for eyeballs. You were spending a lot of money on advertising to reach consumers in newspapers and print advertising. You know, that has largely gone by the wayside because of things like the internet. And consumers demand to be able to access all of the information in one place online. And that was really the secret sauce of MLS that became REALTOR.ca, and has really put downward pressure on the costs to our members to compete for those eyeballs and make sure that their listings are getting full exposure.

Erin: Yeah. For sure. I mean, $310 seems like a steal of a deal for exposure like that.

Janice: For sure. And not all of that $310 a year goes to supporting REALTOR.ca Approximately 43% of those dues go to support REALTOR.ca. But we are in an incredibly competitive environment when it comes to technology. Consumer expectations continue to shift and change, and we want to make sure that this primary asset continues to grow and innovate for members.

Erin: Yeah, yeah. There's no resting on your laurels at all because the internet has come such a long way since 2008. And has that changed? REALTOR.ca's mission or goals?

James: You know, Erin, it really hasn't changed the mission or goals because, you know, it was created again to create value for members. And that has never changed. But what has changed is how consumers' expectations have increased and the demands on the system have increased. And so, you know, REALTOR.ca has evolved over the years. You know, we have Android and Apple apps. We have the web based experience or desktop based experience. We've moved to a mapping search tool as opposed to drop down menus. So there's been incredible innovation to try and keep up with consumers' demands of the site. And of course, that is a very expensive process to go through. And every time we have to retool REALTOR.ca, we take that very seriously. And faced with what's coming now with artificial intelligence, I mean, that's going to reshape the way that consumers search the internet. And so, you know, with a finite resource like member dues fueling REALTOR.ca, that creates a bit of a problem for the Canadian Real Estate Association to make sure that the tool stays competitive and keeps that market share. That really allows our members to save money as they transact across the country.

Erin: Yeah. And of course, it bears mentioning that this is a not for profit environment, too, when you're talking about the costs of keeping up with everything and staying ahead of everything as you have.

Janice: And we and the team have done an incredible job, there's no doubt about it. But there's so much more, as James has said, that we can do. We need to build on what consumers are expecting in the portal world, some deeper insights into properties looking to provide more consumer insights. A better educated consumer will connect with a REALTOR®. And so these are the types of things that we're looking at that we need to continue to evolve the platform.

Erin: Yes. And it's not just popularity that has grown, but the market share from 25 to 48%. That is incredible. So how has that aligned with changing REALTOR® business needs as well?

James: You know, I think that the online lead world has evolved in quite a long way. So there's a fraction of transactions compared to the number of actual leads that are generated online. And more and more, our members are demanding transaction ready consumers. They're expecting warm leads, better leads. They don't want quantity. In fact, sometimes we struggle to make sure that consumers are getting the response that they desire from our sight and from our members, because the leads aren't seen as being as warm or as good. As for, say, a handshake and a referral from a past client or somebody that you know is in your sphere of influence. And so with that changing landscape, we really just want to make sure that the website is delivering for both consumers and for the members. And that takes constant innovation. And we know we're struggling a little bit with, for instance, younger demographics, people who are new to Canada, people who are just familiar with the REALTOR® brand and with REALTOR.ca specifically. And so it's really important that we continue to keep that up. Innovation will take us a good chunk of the way, but we also just have to make sure we're listening to people, consumers and members to make sure that the site is as good as it possibly can be.

Janice: REALTOR.ca really, really does exist to connect consumers with REALTORS®, and it's all about anticipating those needs and filling that gap so that those, as James pointed out, those sort of ready consumers are there to connect with REALTORS®.

Erin: The listening that you referred to just a moment ago is so important, especially when there's so much more noise in today's online landscape. So what does make REALTOR.ca unique?

Janice: Well, you know, the collaboration between boards and associations that fuels the power of REALTOR.ca to see it be successful. That is really, as James has said a few times, the secret sauce to REALTOR.ca's success. The fact that pretty much every single listing that is put onto an MLS system in Canada feeds up to REALTOR.ca. That does not exist anywhere else in the world. And we were. We are extremely fortunate. So you have that and your and the successful sort of initiatives that the CREA team has undertaken to support REALTOR.ca has led to this incredible market share and one that we want to maintain with some very well-funded competitors coming on the scene. We need to make sure that it remains the primary business asset for our REALTORS® in Canada.

James: And I think it's important to note as well, that REALTOR.ca is a REALTOR®-centric environment. So it's an environment that's designed to bring consumers together with REALTORS®. But again, it's meant to do so in a way that is really member-centric. And that's quite different from a lot of the competitors in the portal space that, you know, really make their money on the backs of agents. So we want to make sure that we remain true to that, that that's always central to the platform. And so I think that it's really important that the portal has really moved from a search-based tool to a research-based tool. And so what I mean by that is that the consumer journey starts a lot before they're actually ready to transact. And so REALTOR.ca is a lot of people's favourite pastime. It's where they explore real estate and shop for real estate. And so, you know, we want to make sure that that's a friendly environment. And so the depth of data is really important. Consumers expect more, you know, the breadth again we're covering the entire marketplace across the country, which Janice already mentioned is super unique. And we've also had an increased focus on making sure that we maintain transparency for consumers, because that also is part of what they are expecting these days. And I think that that's part of the REALTOR® brand as well, is making sure that there is transparency to consumers and that it's not just the deepest source of data, but it's the most trusted source of data.

Erin: And it would seem to reason that a better educated consumer will connect with a REALTOR®, but that can't come without a cost, right?

Janice: There's always more money to spend on all sorts of innovations that will help with that connection.

James: Yeah. You know, members are constantly looking for ways to, of course, prospect for business. And, you know, there's nothing that REALTOR® likes more than sitting at a kitchen table with a buyer or seller, helping them to, you know, make the largest investment of their lives and trying to chart a path forward. And REALTOR.ca has become a really important part of that conversation, whether it's your buyers or sellers, that you've got a place where they can really explore the market and also see that their listing is getting that full exposure. And you know that, again, it's about meeting consumer expectations. And that's a constantly moving target.

Erin: From year to year. I could appreciate that the source of funding could be both finite and fluctuating. Is that about right?

James: That's actually exactly right. It's entirely accurate. And we actually have just seen the first ever reduction in the number of members in the country. And so when we have all of our eggs in one basket, i.e. relying on member dues to fund REALTOR.ca and the Canadian Real Estate Association. That means that you start to have to prioritize things. You can't do all things you know that would allow the site to generate the leads that members are expecting to generate, the quality of leads members are expecting, and also to meet consumer expectations in an environment where, as you pointed out, there's a finite amount of resources. And so, you know, I've served on the technology committee, I've been on this board of directors for a number of years, and it's always a situation where you're trying to make sure that it has the appropriate resources, and it's a prioritization exercise, and we can only imagine. And I think it's important we do imagine what is possible in an environment where there isn't scarcity, you know, where we can really empower the team that's running REALTOR.ca in a new enterprise to move forward and to really not just deliver but exceed expectations.

Erin: And as you examine the impact of decision making for things like new features and priorities. Can you see any areas where we're falling short? Janice.

Janice: We've certainly done an excellent job of getting to the market share that we have, and it's really about maintaining and growing that market share for the benefit of our members. And you know, we, I mean, the research has shown that we're extremely trusted by a certain demographic my age. And the younger people aren't necessarily loyal to one portal over another. And so it is a challenge to continue to get the eyeballs on REALTOR.ca. And there's just so much more that we can do if we have more resources fueling REALTOR.ca.

Erin: Well, can't CREA allocate more funds to REALTOR.ca to help address these areas? Janice.

Janice: You know, there's only a certain amount that we can do with a finite amount of resources. And also, as James has pointed out, we've experienced our first decline in membership in quite some time. And so the balancing of priorities beyond REALTOR.ca, of course, CREA was created as an advocacy organization, and the successes that we've had in that area are really important, particularly in this time of a housing crisis in Canada. The reputation of REALTORS®, professionalism, those are all the things that CREA stands for as well as REALTOR.ca. So, you know, to answer your question directly, there would need to be much more. And this is what's in the business case, is a significant increase in dues to even maintain our status quo over the next few years. So the business case goes through that carefully. What would be the effect on membership dues to maintain the status quo and then what is possible, which is really exciting. If REALTOR.ca were put into a taxable entity and allowed to grow and thrive those revenues.

James: And I think it bears saying as well that the status quo option with a large member dues increase, but that wouldn't allow for the kind of innovation that we're talking about needing in order to be competitive in the marketplace. And so there is a big distinction there to be drawn as well between these two options, where one is essentially maintaining a platform, but probably seeing market share erode versus one where we are reinvesting in that platform and able to do so at scale.

Erin: So speaking of revenue generation, this is something that we've talked about in previous episodes. The case for REALTOR.ca as a taxable entity. And you just released REALTOR.ca Forward – the draft business case. So what is the purpose of the report? Janice, you go first.

Janice: Well, there's the main purpose of the report, which is a business case that lays out two scenarios. One is staying the same and what we call the status quo, and the other is moving forward. And that's what REALTOR.ca Forward is all about. So it signals a lot of careful due diligence by a member driven REALTOR.ca task force, along with the CREA board and experts like PricewaterhouseCoopers. And this is the most comprehensive due diligence process that CREA has ever undertaken in its history to make sure that this is a viable future for REALTOR.ca. So the idea is to look at whether this is a viable opportunity, which the business case clearly points out that it is. And the goal of the report is to prepare an alternative to help reduce the pressure on those member dues and continue to have REALTOR.ca thrive and provide that value back to members.

James: I'm really proud of the work that went into producing this business case. You know, we had so many volunteers involved, and as Janice pointed out, a lot of excellent outside consultations. But, you know, the thing I want to remind our members of, the members who haven't been involved in these discussions, is that we recognize that REALTOR.ca is probably the premier asset of Canadian REALTORS®, and we take it very seriously. You know what we're doing here. It's so important that we get this right. And so, you know, we've been engaging with our boards and associations as well as the members on the street to make sure that they have a say and an opportunity to chime in before we present a final business case to the boards and associations, to the voting delegates at a special general meeting.

Erin: So paint us all a picture, would you? Why the need for a taxable entity? James, I'll hand it back to you for this one first.

James: This is a really important point. So we've had a lot of advice, obviously, from outside counsel, from tax counsel, that there is significant risk to the Canadian Real Estate Association by pursuing different types of revenue. So it's the source and type of revenue that really generates risk to our not-for-profit tax status. And so it's not about whether this new entity is profitable or not. It's actually about the revenues that are generated that create this risk. And so that's why, you know, the vehicle that's being proposed here is a taxable entity. And that's really to mitigate that risk for the Canadian Real Estate Association going forward.

Janice: Yeah. And I would just add that when people hear taxable or for profit, which has sometimes been used, people think that there's going to be money made and what's going to happen with that money? And one of the most important key principles of this is that any excess revenue in any given year is reinvested back into the platform that's actually baked into all the proposed governance documents. So the revenue reinvestment is key. And the fact that it would be a wholly owned subsidiary of CREA and REALTORS® would continue to own REALTORS.ca through their membership in CREA. So it's a wholly owned taxable subsidiary, revenue reinvestment back into the platform. And then the third thing is governance excellence, in which it would have its own board of directors. And that would be the third component. And these were all agreed to by boards and associations before we even went down the road of developing a business case.

Erin: Will CREA membership dues decrease as a result? Janice?

Janice: Well, the business case lays out in the second scenario, it lays out a transition period of about ten years where revenues would ramp up. And the business case examines five key revenue streams And during the time over that ten years, the the percentage of dues that go to support REALTOR.ca would decline from about 43% down to 25%. And so it's not that that would be a dues reduction, but that that portion of that $310 per year would come back or stay with CREA proper to grow the advocacy and the professionalism and the reputation pillars of what CREA is. It's important that CREA continue on behalf of members.

Erin: I'll let either of you answer this as you see fit, but can you walk us through the five key revenue streams? Would you do that?

James: Yeah, absolutely. So I think that members are always keen to know exactly how we would generate these revenues. And so it's important to note that we actually examined about 30 different revenue opportunities. And they were prioritized based on a set of guiding principles. But the five that were shortlisted by a subcommittee of the REALTOR.ca Task Force were advertising revenue from non listing pages, expanding the pricing and the opportunities through the Data Distribution Facility, or the DDF, which members would be familiar with. We also have an opportunity to create a tools marketplace, so we've vetted apps and vendors that our members are already buying services from, and created an environment where that would be available through REALTOR.ca so that members can access those services, which would create some margin dollars for CREA. We already have a really valuable tool called the Insights Report, that members would also be familiar with and the insights that are gathered through REALTOR.ca. And this isn't from the actual data that we use to power REALTOR.ca, but rather the way that people are actually using the tool to search through properties and the trends and patterns that evolve through that. There is an opportunity to create a product for those kinds of data insights for non-REALTOR® members. And last but certainly not least, is the opportunity for us to generate leads for third-party service providers like mortgage and insurance. So those are the five that have been identified in the business case, and there's more depth on each one of those in the business case. So I definitely recommend REALTORS® review that report, which is of course available through our member portal.

Erin: All right. Great recommendation. Thank you. And we kept track. You did all five. Thank you James. So the broader question is what's in it for REALTORS®? Janice.

Janice: You've hit the nail on the head. What is it in it for REALTORS®? Well, some of the things that we've touched on are the ability to have a better educated consumer, we could improve the leads just in terms of the quality of the leads. And we know that this is of great importance to REALTORS®, having that significant marketplace that consumers will continue to trust and go to actually elevates the brand of REALTORS® as well. So I would say there's a lot of things overall that's in it for REALTORS® to maintain REALTORS® market position and to continue to innovate the platform.

James: As a member myself, you know, I'm really looking forward to three things. One, that I continue to get absolutely amazing value for my membership dues, because of course, we'll have a diversity of revenue streams that will help to maintain the funding of REALTORS® without compromising what I'm also getting for the rest of my career products and services. We also have that ability to make sure that I've still got exposure for my listings. So, maintaining that market share so that I don't have to invest in other platforms or tools to reach consumers with the listing content that I want to push through from my MLS system, and also a better user experience for both REALTORS® and consumers and so I know that REALTORS® across this country will understand when I say this. When you receive a lead through REALTOR.ca currently and it just says, “I'd like more information about this listing”, and you know that all the person had to do was click a button to get that to pop up and come into your inbox. You don't treat the lead as valuable as it needs to be treated. And so, you know, things like the ability to customize a lead form, things that will, again, be small tweaks that require investment and retooling those things will become possible. And so even more of the feedback we receive from consumers, but also from REALTORS®, will be able to be implemented into a tool that really delivers on my expectations as a member.

Erin: With REALTOR.ca becoming its own entity, does that change how CREA will operate or what its mission will be? James.

James: No, Erin, it doesn't. So the Canadian Real Estate Association has always existed to make sure that members are well served from coast to coast to coast. And our 160,000 REALTORS® across this country really depend on us for much more than REALTOR.ca. So that's only a part of our third strategic pillar, which is REALTOR® and consumer technology, which encompasses a few other things as well. But there's also two other really important functions that CREA performs. And Janice had alluded to them earlier. One is advocating with the federal government. So CREA is in a unique position, of course, to make sure that the housing file during a housing crisis is absolutely actioned by the government in a way that is beneficial to consumers and to REALTORS® and of course, upholding the REALTOR® reputation. When I put my REALTOR® pin on every morning, you know, it's important to remember that that means something because the Canadian Real Estate Association enforces the REALTOR® code, and that we have members that are subscribing to that high level of professionalism. So there's so much more that CREA does. And I would additionally point out that just because REALTOR.ca would be spun out into this taxable entity doesn't mean that CREA still wouldn't provide that oversight of REALTOR.ca on an ongoing basis, which is still a really important function.

Janice: Absolutely. Yeah. We want to make sure that REALTOR.ca continues to meet the needs of both members and consumers. It's a balancing act, and I would say that our work in advocacy is even more important in this environment. We believe everyone deserves a place to call home and that it offers dignity and belonging. And there's a lot of work along the entire housing continuum to make sure that that happens.

Erin: I know that we've only scratched the surface here today, but if we could, let's fast forward a year from now, what would you hope to be saying to REALTORS® if we were to do a follow up episode? Janice.

Janice: Wow, that's a really great question. I would hope to be saying, look at the growth that REALTOR.ca has undertaken for your benefit and look at the increased market share. I would love to see even more market share. And I would love for us to see action on the housing file at all levels of government. We know that we can't solve the housing crisis in silos. We need to collaborate with all levels of government. So those are the main things, and I would hope that we all continue to be extremely proud. As James pointed out, about the step that we have taken to ensure that REALTORS® primary business asset remains the top of mind for consumers and that we protect it on behalf of members.

Erin: Am I missing anything here? Because to me, it seems there's just no downside for REALTORS®. Only two upsides. James.

James: I agree with you, Erin. I think that there's only upside for REALTOR® members. And, you know, one of the things that the task force and the board have been really careful about is making sure that we're really conservative with our projections. So in a year's time, I would love to be able to tell members that it has actually outperformed our conservative numbers that we've used to sort of make the business case, and that there's even a higher degree of reinvestment back into REALTOR.ca. And I'd love to just talk to members here and say, aren't you thrilled with the way that this site is now delivering for you? And what else do you want us to do with it? Because at that point, we'll have the capacity to really be able to make sure that it is as good as our members deserve.

Janice: It's a pretty exciting time. It's an exciting time, Erin. It really is. Mhm.

Erin: And if REALTORS® are listening to and watching this, only take one thing away from this conversation today, what do you hope it is? We'll start with you, Janice.

Janice: That CREA is going to innovate on your behalf and make sure that you, your primary business asset, is protected and maintained and and grows.

James: I hope we've piqued people's interest. And what I'd really like for them to do is to actually go through the business case and engage with their elected leaders at their local board or associations, so that those folks feel empowered to come to Ottawa, potentially later this year and really dig into the conversation, have a great outcome and allow us to move forward.

Erin: Thank you. Thank you to you both for making the time to join us on REAL TIME and enlightening us even more about what REALTOR.ca is, and the value that it delivers to our REALTOR®, viewers and listeners. We so appreciate it and best of luck to you both.

Janice: Thank you.

James: Thank you Erin.

Erin: See, I told you you'd learn something. This conversation with Janice and James certainly shed light on the future of REALTOR.ca, especially regarding the REALTOR.ca Forward report. Value remains at the forefront of REALTOR.ca mission, making sure REALTORS® and consumers have the best experience possible. I'm so glad we got to learn more about how that value will continue for years to come. And of course, if you liked this episode, please tell us by giving us a rating or a review on your preferred podcast platform. We always appreciate it. REAL TIME is brought to you by the Canadian Real Estate Association, CREA. Production is courtesy of Alphabet® Creative with tech support from Rob Whitehead. Thank you so much for listening and watching. I'm Erin Davis. And we'll see you next time on REAL TIME.