It’s a fair question, right? I’m sure it’s even something you’ve asked yourself in the past.
Why is it that #realtors get to take a huge cut of my home #sale (or purchase) and effectively drive the price of housing up?
Why do they all feel entitled to 2.5% (in #Toronto) for their services (and sometimes more)?
Do they have some special set of skills?
Do they have an education that is difficult to get?
So – the overarching answer to all those questions is the dirty little secret that realtors and their associations do not want you to know of. Here is an excerpt that I came across while researching for this post:
#Real estate agents do not charge as much as they do because of the time it takes to actually sell a house. They charge a lot because it takes work and money to #market, it is hard to get licensed and become a real estate agent, they have to pay for dues and #insurance and real estate agents usually have to split their #commissions with their #broker.
The time it takes to sell a house
In Toronto, this is a myth. The time it takes, even in a buyer’s market to sell a house is really short. On average, well-priced and well-maintained homes in Toronto (in desirable locations) sell within weeks at the very longest, often within one week (or weekend).
It takes work and money to market
Sure it does, everything takes work. The work that goes into #marketing a home (by the vast majority of realtors) is borne by #MLS itself, not the #realtor. The realtor often gets their admin staff to upload a bunch of information to MLS and within a few hours, there it is. It’s the largest market for homes in Ontario and no one even comes a close second.
Now some realtors will also provide you with things such as brochures, websites, feature sheets, etc… These are all things that cost nearly no money whatsoever (for instance, I get my brochures designed and printed for less than $1/brochure). Websites may cost a little more, however if the realtor owns a hosting contract and has a decent template available, they can get your website up and running in a few minutes for under $10 total. That leaves feature sheets… Well, most realtors give you a print out from MLS itself, and the ones that wrap that information in their own template are doing so because their #brokerage has provide this for them.
Want to know another little secret about the marketing of your property? The major reason realtors are marketing the property is not for your sale, but it is to let the public know that they are active in your area. This is the same (and only) reason that realtors hold open houses – they very seldom actually sell your home at these and if you’ve been to one, you are very likely to meet very disinterested professionals (that is, if you come with your own representation, if you do not, they will fawn over you).
It is hard to get licensed and become a real estate agent
Really? Is it? Sorry, I have a engineering background and have many peers who are PhDs and MDs. Those are difficult licenses to get, not a realtor’s license. In Ontario, the bar has now been set a little higher than it was before, however the courses / education undertaken to become a realty professional are laughable at best. If you were to attend one of these classes, you would find the level of aptitude quite comical.
Being a broker myself, the curriculum is a bit longer for me to reach this level and even with the, apparent, high level required to pass (it takes a 75% to pass), there are so many tools available to prep students that it makes the multiple choice exams easy.
Case in point, you are allotted 3 hours for each exam and I have yet to required more than 70 minutes.
They have to pay for dues and insurance and split their commissions with their broker
Yes, this is true. Here is what you pay yearly for your TREB, OREA and CREA membership.
| CREA/OREA Registration | $400 | One-Time Only |
| TREB Membership | $859.65 (incl. HST) | Annually |
| OREA/CREA Fees | $474.60 (incl. HST) | Annually |
These dues include all the insurance required for a realtor in Toronto to operate. There is no such thing as a per listing charge that they incur, there is not listing of images charge or anything like that. In total, a realtor is paying (for their membership) approximately $1350.
In regard to splitting with their broker, this is mostly true. Realtors do (often) have to split commissions with their brokerage. This is, however, a point of negotiation for the realtor when they first become independent contractors of that brokerage. If your realtor tells you that they are paying a hefty commission split with their brokerage you should be asking yourself:
This realtor couldn’t negotiate a fair deal for themselves, will they really be able to negotiate on my behalf?
What is a realtor’s main purpose then?
To market themselves. If you take a trip, in any suburb, and look at all the bus signs, park benches and small billboards, the overwhelming majority of them are sanctioned by realtors. Ever wonder why that is?
There is nearly ZERO differentiation among them and visibility is truly the only reason you might pick one over another (and familiarity or referral from a friend).
So what do you do as a consumer?
The tricky part of this is that there are rules in play and brokerages, such as ours, that give you a menu based approach to buying realty services. We charge you for exactly what you require and only that.
What we’ve found is that our clients who can navigate a lot of the work themselves can use our tools, our Artificially Intelligent Systems and our online forms to sell their property while saving (on average) $18,000 (when comparing the average sale price of a Toronto home and the average 2.5% commission charged per realtor in the deal).
