The Canadian Real Estate Association (CREA) is making moves to, in theory, enhance transparency for realtors and consumers alike, but the details of its dealings have been rather opaque.
With the recent rollout of its open offers system -- a free service powered by Australian property technology company Openn Negotiation -- CREA boasts its users can now access real-time offer tracking on every property's REALTOR.ca listing. What hasn't been advertised, however, is that in just a few months time, realtors will have to pay to utilize the same version of Openn they're being given access to now, and that once they do, Openn plans to monetize market data, allowing a third party to profit off Canadian real estate sales and offer data in a way that has -- until now -- generally been prevented.
In March, CREA announced the official Canada-wide rollout of Openn across REALTOR.ca -- Canada's most-visited real estate listings site, owned and operated by CREA -- following what Openn described as “a successful pilot program in 2022 in select Canadian markets.” The pilot, which took place in two unnamed markets, didn’t use live listings, Openn told STOREYS in March, noting "the product was not ready through most of the pilot stage.” Instead, the pilot "used a testing box to get feedback while the product was being advanced."
STOREYS has since learned that one of the two participating boards was the Real Estate Board of Greater Vancouver (REBGV), while the other is an Ontario board, the location of which Openn could not confirm due to a non-disclosure agreement. Duncan Anderson, Chief Technology Officer and President of Openn North America, said that in total, about 30 agents from Vancouver and 15 from Ontario were involved in the pilot. Immediately prior to the March launch, roughly 17 agents had signed up with Openn and the software was used for 20 live listings.
Here Come the Fees
The initial rollout of Openn will be free to all agents, with the intention of having "Openn and CREA support a large-scale campaign leveraging success stories" throughout April and May, according to an Openn conference presentation. Openn notes that CREA will "be actively promoting the Openn platform to its REALTOR members" and that “Openn will focus on adoption and learnings during this period."
This free version of the software, however, is just temporary, and is intended to "drive rapid scale," with Openn planning to charge a subscription fee beginning in July for that same access. In an Australian Securities Exchange (ASX) announcement from March 21, Openn said it has not yet finalized the pricing model in Canada, but that it expects the premium subscription to cost agents approximately $50 per month.
Anderson says that there will likely be at least two subscription tiers, with the $50 subscription being the pricier of the two. The premium version would likely provide "lead generation tools alongside more sophisticated analytics and other things that really draw value for the agents," he says.
When asked why it was never communicated to members that Openn would ultimately be a paid service, Patrick Pichette, Vice President of REALTOR.ca, told STOREYS, "We never communicated anything that it was a free service either."
When asked whether there is a revenue sharing agreement in place with CREA,Anderson said there is no commercial agreement at the moment but that they expect to have one in place in the coming months, the details of which have not been finalized. Pichette on the other hand seemed less certain about a future commercial agreement, noting that "lots of people get excited when they partner with us."
"They can say what they want about the future, but there is currently no commercial deal in place," Pichette said of Openn.
Even so, one way that CREA would have, theoretically, profited from the Openn partnership is clear. As part of the existing partnership, a proposal was drafted by Openn to issue CREA 14 million unquoted stock options, set to expire 24 months from the date of issue, with a minimum price of $0.35.
At the time the agreement was made, Openn's stock was climbing and nearing the $0.30 mark, making the $0.35 price point seem reasonable. The stock, however, has since fallen significantly over the past 12 months, hitting lows of $0.05 in recent weeks. Pichette says CREA has not yet exercised the options. Without a significant improvement to the stock price, it would stand to reason that they wouldn't want to.
The partnership with Openn comes as CREA looks to transform REALTOR.ca into a standalone for-profit entity, but Pichette maintained that "the move to Openn is in no way connected to the monetization." CREA itself is a not-for-profit organization and has traditionally funded REALTOR.ca through a combination of member dues and revenue from services including its Data Distribution Facility, which allows members to have their listings distributed to partners connected with REALTOR.ca.
CREA Head of Business Development Andrew Jackson noted during a recent episode of CREA’s REAL TIME podcast that the shift to a for-profit structure is fundamentally about allowing CREA "to grow revenues and to access new levels of funding -- funding that’s really needed for the business." Pichette, agreed, saying additional revenue will go towards helping REALTOR.ca stay competitive and improve various facets of the site, including commercial real estate and rentals.
"There's all sorts of heavily funded companies moving into the industry and, don't get me wrong, this is great news for members and consumers that there's so much innovation coming in, so much funding coming in -- it's going to mean better tools, it's going to mean more useful platforms for members -- but if we want REALTOR.ca to still be relevant in this ecosystem, you know, 10 years from now, we really need to grow our revenue base," Pichette said.
REALTOR.ca's annual operating budget is currently somewhere in the ballpark of $25M, Pichette says, which includes operation of both the desktop and mobile sites, a broker/agent exclusive app, and IT security.
The partnership with Openn was CREA's idea, initially approaching the tech company back in the fall of 2021.In an interview with STOREYS in June of last year, Openn’s Director of Operations for North America Eric Bryant said that although the company initially thought their North American expansion would focus on the United States, he was approached by Jackson, as well as CREA's Manager of Industry Development Rob Reyner, about bringing the platform to Canada. Pichette says that at the time, there were no established Canadian or even North American products that could offer the same service as Openn.
A Data Monetization Loophole
As it stands, neither CREA nor any third-party listing site is able to sell the data it acquires from listings on REALTOR.ca -- that data belongs to local boards whose MLS systems share listing information with REALTOR.ca. But by bringing Openn into the equation, it changes the game a bit.
Realtors using the open offer software will have to specifically sign up for Openn's service, providing listing information directly to Openn. An investor presentation from April 2022 covering Openn's North American expansion states that the "pathway to monetise data is understood," and that their strategy has been "designed for scale adoption to unlock this value."
Pichette said that he cannot speak to what data Openn may or may not collect for monetization purposes, and that he is not privy to what agreements about data sharing realtors would be making with Openn. Anderson, however, said that conversations about data monetization have been "had all along" with CREA.
What Openn will be monetizing is not the listing data itself, but rather depth of market data -- something Anderson says is unique to Openn and doesn't exist elsewhere in a structured format. In a 2021 investor presentation, Openn notes that its platform captures "every bidder, every bid, number of bids, per bidder, bidding increments, and the ultimate price under competitive tension." Data analysis based on these points will then be provided to realtors who subscribe to Openn as well as some third parties.
"To give you an example, let's say you were a bank, and you're into risk modelling for a particular area and you were looking at property prices from, say, January to July, and in that timeframe, they had remained pretty stable. That's what current data can tell you. It can tell you what the median price is, it can tell you what listing volumes are. We're not interested in that," Anderson said. "We're interested in the underlying support for that median price. So, what I mean by that is in January, there may have been six buyers within 10 percentage points in the final sale price. Whereas in July, there's only two. And so, the sort of analytics that are available to us around risk modelling, the standard deviations between buyer patterns, that sort of thing."
Anderson made abundantly clear Openn's focus on protecting personally identifiable user data, saying the company has invested heavily in security. He also notes that any data shared with third parties removes all personal information and is presented as aggregate data.
In the past, local boards haven't necessarily taken too kindly to outside entities trying to mess with the exclusive lock they have on MLS data. The Toronto Regional Real Estate Board (TRREB) pursued legal action against two companies it says circumvented protection measures to access MLS data, per a CBC report, asserting its control over one of the most valuable services it offers to TRREB members. In this case, however, TRREB believed the companies were using listing data taken directly from TRREB's MLS, which would not be the case with Openn.
Openn estimates that across all of North America, its data and affiliate partner initiatives have a total revenue opportunity of $115B.
Canadian Market Domination
Openn's documentation makes clear that it's "ready to cement its place as the go-to solution for transparency in the Canadian property market," with its sights set on having 3,000 agent users by the end of June 2023 and 25,000 subscribers by the end of 2024 -- a possible $15M in annual revenue.
Interestingly, CREA is simultaneously making moves to ensure more listings are put through the MLS. The association passed an amendment to the Realtor Code at its AGM in April that would make it an ethical obligation for realtors to put listings on the MLS within three days of publicly marketing a residential property. This will prevent realtors from publicly marketing an exclusive listing.
Openn is also eyeing partnerships with local boards to provide them with a product similar to what's being offered through REALTOR.ca.
"We're in the early stages of discussion with key boards around the country, some of which have been assisting with us with piloting, they've been very helpful there," Anderson said. "I can't really comment too much on what those relationships might look like because it's too immature at this juncture."
Openn has been in contact with the country's three largest boards, and appears to already have support from at least one of them: Greater Vancouver.
“We strongly support enhancing data transparency within the housing market. The best way to do that, in our view, is to innovate the tools and technology that Realtors have so that they can best serve their clients," said REBGV CEO Jeff King in a statement to STOREYS. "To this end, we’re exploring a variety of products, such as Openn, with different partners in the profession to ensure our members and the clients they serve are making the most informed and effective housing decisions possible. This research continues and we are assessing our options as this work evolves."
The Canadian Real Estate Association has since responded to this article with an Op-Ed.