Pros and Cons about pursuing a career in real estate at this time.

[GraceCondos]

CN Tower is referring to the agreement CREA has made with the competition board. It allows realtors to offer limited service for lower fees. Essentially some home owners may choose to hire a realtor for $X to simply list their property on MLS but not market it or negotiate offers.

That service will probably appeal most to sellers who previously planned to sell privately, as it gives them more exposure.

There will be some consumers who want that and others who will still want full service representation.

 

[simuls]

I think it will be very hard for an RE professional to convince me that they will find me the difference between $149 and the $30 000 fee on my $600 000 home. RE agents need to drop to a 2% total (1+1) commission structure so they go back to average amount of compensation they received 8 years ago - the old days of paying for ads in papers, condo guides, etc. are past - there is very little marketing expense in selling a home and very little out of pocket expense as well (only in promoting yourself as a realtor and I shouldn't pay for that as a consumer). Consumers do most of the hard work now anyway in researching, knowing what they want, where to find it, etc.. As Friedman said, "the world is now flat" - it's just taking some industries longer to realize it.

 

[GraceCondos]

^^^
I've done it many times! As an example, my client was offered $620k privately and due to the marketing/staging we provide, we secured him $708k. He walked away very happy, even after paying me. Keep in mind he was a Commercial Realtor himself - so he was savvy. CAnd there are more stories just like that from the past 20 years!

But I won't try to convince you because it sounds like you have your mind made up.

But we digress from the posted topic...

 

[drewp]

CN Tower is referring to the agreement CREA has made with the competition board. It allows realtors to offer limited service for lower fees. Essentially some home owners may choose to hire a realtor for $X to simply list their property on MLS but not market it or negotiate offers.

That service will probably appeal most to sellers who previously planned to sell privately, as it gives them more exposure.

There will be some consumers who want that and others who will still want full service representation.

Where can I find more information on this. Would that work against me as someone new breaking into the industry

 

[cdr108]

^^^
I've done it many times! As an example, my client was offered $620k privately and due to the marketing/staging we provide, we secured him $708k. He walked away very happy, even after paying me. Keep in mind he was a Commercial Realtor himself - so he was savvy. CAnd there are more stories just like that from the past 20 years!

But I won't try to convince you because it sounds like you have your mind made up.

But we digress from the posted topic...

the marketing would typically be included in the commission;
however, are you saying your firm provides free staging as part of your services, or just staging advice?

 

[rbt]

I think it will be very hard for an RE professional to convince me that they will find me the difference between $149 and the $30 000 fee on my $600 000 home.

I find myself wanting to pay an hourly rate plus expenses. Essentially the same as I get paid for contract work, and pay out for lawyer fees, etc.

$100/hour for a knowledgeable realtor would be appropriate for residential. This, of course, would be paid whether I end up selling the property or not, etc.

Commissions annoy me because I know I am paying for the 3 other guys that dicked the realtor around.

 

[CN Tower]

^^^
I've done it many times! As an example, my client was offered $620k privately and due to the marketing/staging we provide, we secured him $708k. He walked away very happy, even after paying me. Keep in mind he was a Commercial Realtor himself - so he was savvy. CAnd there are more stories just like that from the past 20 years!

But I won't try to convince you because it sounds like you have your mind made up.

But we digress from the posted topic...

So after paying a 5% commission he netted out $672600 instead of his first non-marketed offer of $620,000. Not bad.

Question is, under the new rules he could pay a couple hundred bucks to get on MLS, hire a fluffer to stage it for $5000 and probably get the same $700k+ offer. When you say 'marketing' I assume you mean uploading the listing onto MLS and then marketing yourself in the weekly real estate sections right? I can't imagine there's much added exposure for the individual properties there. Who doesn't go to www.mls.ca today automatically when searching for a house? Even my grandmother is familiar with it!

See to me your role in that deal was 99% fluffer and 1% real estate agent/tech support uploader. I'm sure you earned your fee for fluffing but you were paid an enormous premium for it.

 

[cityboy]

So after paying a 5% commission he netted out $672600 instead of his first non-marketed offer of $620,000. Not bad.

Question is, under the new rules he could pay a couple hundred bucks to get on MLS, hire a fluffer to stage it for $5000 and probably get the same $700k+ offer. When you say 'marketing' I assume you mean uploading the listing onto MLS and then marketing yourself in the weekly real estate sections right? I can't imagine there's much added exposure for the individual properties there. Who doesn't go to www.mls.ca today automatically when searching for a house? Even my grandmother is familiar with it!

See to me your role in that deal was 99% fluffer and 1% real estate agent/tech support uploader. I'm sure you earned your fee for fluffing but you were paid an enormous premium for it.

I'm not an agent....but that was rude. You don't know what he does day to day to earn his commisiion so don't belittle one's profession unless you have experience working in it. If you don't find value, do it yourself but spare us with your comments.

 

[drewp]

I started this thread to get some information on what I could expect to encounter getting into the industry, not to bash my potential profession. I understand the hatred that realtors receive. They do make a very good commission on a sale of one home, but I am sure building their client base does take time and money. I am one of those people who think that realtors do get an inflated commission for their services. I didn't really have a great experience with my agent as I did most of the grunt work. Every industry has duds, and I think realtors are unfairly targeted. I understand why, but for those who don't work in the industry or had a bad experience with one,is it fair to judge them as a whole? I have had some bad doctors in my life, do I think all of them have it to easy, no! To make unfactual statements to a profession makes we wonder a little about about yourself

With the new changes maybe those "bad seeds" will soccumb to the ever adapting markets, and to be honest with you I am gladl. But there are good ones out there who want to help people with one of there most important stages of there life like myself. All this debate and negative talk about realtors gives me the motivation to change an industry that seems to have too much criticism. Yes granted i understand why, but please don't judge people or industries from hearsay.

I like thei dea of finding creative strategies that can give the consumers more control on what services they want. To me this is the key component to building a business. If someone needs me only a fraction of the time, then they should pay for that, but this is where client service will be essential for realtors in this industry. If you don't have the people skills, market research, communication, and negotiating skills then they will not request more services from you. I think the industry will be more like a taste test and when they taste something they like they will want more. So finally hard work will reap the rewards. Not only does this give the consumer power, but give the good real estate agents the same power becuase there services will be requested more often.

And those so callled realtors that have it easy, will have to bust there asses. Works for me!

 

[CN Tower]

I'm not an agent....but that was rude. You don't know what he does day to day to earn his commisiion so don't belittle one's profession unless you have experience working in it. If you don't find value, do it yourself but spare us with your comments.

My comments are wildly misinterpreted. I have tremendous respect for realtors and the hard work they put into their jobs. Most realtors I know are wonderful people. I do not believe, however, that $35,000 in commission is reasonable compensation on the sale of $700,000 home south of the 401 that probably takes start to finish 20 hours of work. That the market accepts this (until now) is simply baffling to me. Personally, I don't fault the agents for this gross imbalance but the disingenuous real estate brokerage firms and their oligopoly tendencies.

 

[drewp]

so CREA passed the new flat fee service "a la carte", does this change the industry for newcomers like me?

 

[GraceCondos]

so CREA passed the new flat fee service "a la carte", does this change the industry for newcomers like me?

It means you can decide what type of Realtor you want to be. Low fee brokers have always been out there. There is just more press because of the official CREA vote. The US has had this change in place for years and it hasn't greatly affected how Realtors work.

Cn Tower - Don't judge a man until you've walked in his shoes. If you think I only put in 20hrs of work into selling a property, you've obviously never met me or talked to any of my clients. How can you judge the way I market people's properties for them if we've never met?

And with regards to our income; don't you believe in risk/reward? We have no pension, no guaranteed bi-weekly salary, no health or dental coverage, no security. Did you know that in 09 the average Realtor sold 3 properties? We're not all making millions. But some are, because they're the top of the industry. So if they are smart enough to build a successful business where they sell 50 homes a year, don't they deserve their income?

The market will speak and we will allmsee how this change is reflected in the industry. I personally believe that the people who were already private sellers will jump on the low fee service to add MLS.ca to their portfolio of online listings. If it was that easy, we would have loat our jobs years ago.

Here's an interesting question: What happens to MLS.ca if the big real estate brokerages stop using it?

 

[mig174]

I find myself wanting to pay an hourly rate plus expenses. Essentially the same as I get paid for contract work, and pay out for lawyer fees, etc.

$100/hour for a knowledgeable realtor would be appropriate for residential. This, of course, would be paid whether I end up selling the property or not, etc.

Commissions annoy me because I know I am paying for the 3 other guys that dicked the realtor around.

You're joking, right? The realtor is barely out of highschool...

 

[CN Tower]

Cn Tower - Don't judge a man until you've walked in his shoes. If you think I only put in 20hrs of work into selling a property, you've obviously never met me or talked to any of my clients. How can you judge the way I market people's properties for them if we've never met?

And with regards to our income; don't you believe in risk/reward? We have no pension, no guaranteed bi-weekly salary, no health or dental coverage, no security. Did you know that in 09 the average Realtor sold 3 properties? We're not all making millions. But some are, because they're the top of the industry. So if they are smart enough to build a successful business where they sell 50 homes a year, don't they deserve their income?

Grace,

I look at it objectively. If 20hrs is too little then tell us the average. It's tough to defend the model. The average Toronto home sells for about $500,000. That generates $25,000 in commission. What does a seller get for that $25,000? In my estimation it is mostly exposure on the MLS, paperwork that an owner could probably do himself, and then it's just down to prepping the house for the public and showings. I agree with RBT. That work equates to a service function that should be reduced to a per hour rate. $100/hour definitely sounds fair and reasonable considering the barriers to entry to the profession.

 

[interested]

I do not wish to bash R/E agents either but I have to concur with CN Tower on at least one thing. Prices have increased 100% in the past decade and Realtors commissions have stayed at the same percentage. I have to wonder if the current model will be as strongly defended if housing drops 30% or will the new norm be "we need 7% commission now".

The commission based model was designed to allow for the fact that if there was no sale, the person trying to sell would not be saddled with a fee.

However, the commission model has unduly enhanced realtors commissions at the expense of buyers and sellers.

We can argue what a reasonable salary would be for a realtor and we can certainly agree there are all sorts of inconsistencies in what people make. Eg. Stock brokers making commissions (but note now there are alternatives) whether they do things right or wrong, pro athletes making millions, stock options to former Nortel employees that made their salaries look irrelevant(as one of my manager neighbours told me though I have alot fo sympathy for those who did not exercise them and then were being asked to pay based on their deemed value), lawyers (some at $1000/hour) etc.

However, removing these "what I consider outlyers, then I would ask what I think is a reasonable question.

Doctors make on average about $150,000/year with no benefits working 55 hours/week. Takes them 8 to 12 years and more of university and a level of responsibility one would argue is higher than realtors. Lawyers while some charge inordinate amounts and have done very well in the past decade still make on average I believe $300/hour. No pension or other plan. I believe alot can't even pay their insurance and they have much more overhead to run a legal office than to run as a broker. Average wage in Ontario around $40,000. Family around $60,000.

My point is that if one looks at this, and please let's be fair when we say the average realtor sells 3 properties in Ontario my question would be how many agents have licences and "don't practice", how many are in it "part time" and what does the average full time realtor make.

Then my next question would be what is the level of expertise/knowledge required to do this job. Does it compare to a doctor, lawyer, C.A., engineer and with respect to those professions or others is it even fair to compare these professions with real estate agents as professionals? The level of education certainly and complexity and time to achieve these other degrees are hardly comparable.

As well, how many commission jobs are there that the commission stays constant. Often, when people are doing more volume, the % goes down. I would equate increased house prices with more volume. Yet the commission stays constant.

The reality in my view is that CREA so vigourously defended the MLS because it knows it was one of if not the single biggest factor in getting a house sold.

The bundled selling is unfair when phone/internet/cable companies do it and when they force you to take on more services. It is similar with real estate.

All the above said, I suspect on average real estate agents will make more money now. The 1/3 or so (my estimate may be way off) who do this part time and can no longer make "spending money" for simply listing a house or having a part time hobby will get out of the business.

I unfortunately believe that there will be a marked increase in the price to list on MLS and now the discounters will suddenly raise their MLS listing fee to say $1000 from say a $149 or whatever they are asking. I believe some agents will actually increase their prices for what they do so that full service may actually go up.

I am concerned there will be effective collusion between the big brokerages to set "guidelines for fees" which will mean the cost of everything will increase further.

Agents will continue to try and get the most for themselves (it is after all human nature) and have succeeded with this agreement in putting themselves if the initial reports are correct into transactions even if a buyer reads the MLS ad and the seller and buyer would agree on the price. The agent will have to be inserted into the process since the seller can't be contacted directly and the seller will have to agree to pay a commission "to be negotiated". Agents will argue that they want more and certainlymay make it difficult or discourage their client from the listing where the vendor refuses to give say more than 1 or 2% if the agent wants 3%. I hope my understanding is wrong but it sounds like this based on the preliminary reports.

One note to Grace: While I appreciate your "insight as to properties that sold for far more than the person would have got privately" one has to know the particulars. I have had the opposite experience where the agent on 2 occasions told me I overpriced the property. In the first instance, I was told I overpriced by 12%. I got a full ask within 30 days because the agent did not appreciate the uniqueness/value of the property.
In the second case, different location, different agent: I received in last years down market 2 lowball bids. In each case, the agent told me "that is market". The market was changing in March 2009 and the agent did not realize it. That morning I received a 3rd lowball bid. I am well capitalized was not under pressure to sell. I told the agent we would have 2 offers by the end of the weekend and open house. I was wrong. We had 4 bids and the house went for full with no conditions. I could have taken an offer for more but it was conditional. This happened the same day I was told to take the 3rd lowball offer. And we are talking about a difference of 17% that the agent wanted me to accept that morning vs. what I received that evening.
My point is that it works the other way around as well.

I acknowledge I am perhaps more experienced and knowledgeable than the average home buyer/seller. (I am afterall older and have been through the process numerous times). However, I have had good and bad experiences.

In the second case, I will acknowledge that the open housing in a hotter neighbourhood made the difference but the first case I pointed out was in fact just the MLS getting the person in the door and the buyer wanting the property.

One final note: Both agents were experienced. In fact, one was in the top percentile of agents for a major R/E brokerage and the other very well known in the neighbourhood in which the property was being sold.

My conclusion as for the commission model is that I like CN tower would rather agree to a fair market rate for the service and pay it whether or not the house is sold. You do the work as a realtor, I pay the rate. Furthermore, there should be differentials. Top agents should be charge more and the individual can decide if he wishes the $100/hour or the $50/hour agent. "You will get what you pay for in a good or bad fashion".