RAHB as an “efficient” market?
Have you ever taken a minute to think about what RAHB’s role is in contributing to the “efficient” real estate market in the Burlington, Hamilton and outlying areas?
RAHB is a not-for-profit corporation that offers services to advance member interests. I think most members (RAHB has 3,085 at the time of writing) would agree the MLS® System is the single most valued RAHB service since each member’s livelihood depends on it. However, to thoroughly understand the total value offered, we need to go beyond thinking of the MLS® System as just a single service. Rather, we should also consider the two complementary services that go hand-in-hand to contribute to making RAHB’s MLS® System an efficient marketplace: the first is the MLS® Rules and Regulations and the second is our Professional Standards and Discipline process.
Rules and Regulations are needed to set the ground rules by which the market will operate. Without rules there would be chaos. Participants need to know the rules and abide by them in order for any marketplace, some may say exchange, to work efficiently and fairly. Rules and Regulations provide the input structure to the market.
Professional Standards and Discipline services are needed to encourage market participants to follow the rules, and when they do not, these services provide appropriate disciplinary measures with the aim of motivating that individual to abide by the rules in the future. Some may think of these services as market output services to correct inappropriate behaviour and encourage application of the rules and regulations, again with the aim to create a fair and efficient market.
Now let’s look at three market descriptions. Do the following sound familiar?
The organization likely descended from the Association of Brokers…. twenty-four … gathered at the Masonic Hall …– summarized from Wikipedia
[The organization]… does not own what is traded. Instead, it acts as a market where …buyers connect with …sellers – summarized from Investopedia
The primary function of [the organization]… is to help provide liquidity; in other words, to give sellers a place to “liquidate” their … holdings. – summarized from Investopedia
Could those descriptions outline how our association and MLS® System began, and how the association works today? I think they could. However, they are actually describing stock exchanges in general and, in the case of the first quotation, the Toronto Stock Exchange, or TSX, in particular.
There are additional similarities between our MLS® System and the TSX. Brokers (or participants) using the TSX are all licensed under the oversight of a regulatory body that enforces Ontario securities law. That governing body – the Investment Industry Regulatory Organization of Canada (IIROC) – has rules all licensees must follow, and the TSX has additional rules and regulations that those market participants must follow. These rules create a level playing field where participants know what they have to do, what’s expected of them and how they must serve their clients.
In addition to the rules, there is also an enforcement or compliance process that comes into play when rules are broken, for what good are rules where there is no way to make sure they are being followed? In this column last month I touched on that exact point.
So what does all this have to do with RAHB?
The financial marketplace governing structure sounds very similar to our industry’s structure with the Real Estate Council of Ontario (RECO) setting overall rules for real estate registrants to follow, and RAHB having additional rules and regulations associated with using our MLS® System.
RAHB’s MLS® System has evolved to have much in common with the financial services market, or exchanges. We have created an efficient marketplace for the trading of real estate, and that marketplace has clear rules in place to ensure everyone – members, buyers and sellers – is treated fairly. We have also created a mechanism for enforcing the rules – that is, a discipline process.
Our MLS® System is the real estate exchange for our market. Rule-setting and ensuring compliance to those rules are two integral components to make this market both efficient and fair for all.
On a different note, I hope to see you at the RAHB Annual Charity Golf Tournament to be held on May 18, 2017 at the Beverly Golf and Country Club! The tournament is raising money for two local women’s shelters: Halton Women’s Place in Burlington and Interval House in Hamilton – both great causes.