Earlier this week, I met with a potential seller client to discuss listing his home for sale.
We had a conversation about commission and it went a little something like this:
Seller: What’s your fee?
Me: Six percent, if I thought your home would be difficult to sell. But, since I’m pretty confident I can sell your home relatively fast, I’ll only take five percent.
Seller: Five? (taps his fingers on the kitchen table, thinking) So, if you sell my house for $400,000, you get $20,000?
Me: I don’t get to keep all of it, but you’ve got the right idea.
Seller: That seems a bit…steep. Can you do any better, Brent?
Any better? Part of me wanted to reply with, “Better? Are you kidding me? Do you have any idea what selling your home involves?”
But, of course, I was polite. I simply grabbed a pen and paper and began to break down for him exactly what a typical real estate transaction (in my market) looks like.
To begin, let’s assume I list your Fort Erie home for $399,000.
A different agent then sells it, after 30 days on market, for $380,000.
The total commission payable (5%) would be $19,000, of which half ($9,500) would go to me and the other half ($9,500) would go to her.
That’s not a bad pay day, right? $9,500 for roughly one month of work? $9,500 just for putting a for sale sign on your front lawn?
But, hang on.
Let’s consider a few things.
First, I don’t get to keep all of that commission. I pay one split to my brokerage and another to my team leader, both of which cover tools, software, rent on my office, photocopies, business cards, and advertising for me — all which I, in turn, used to list and promote your home.
Part of my fees covers a portion of salary expenses for our administrative staff, too, as well as allowing me to trade in real estate using the RE/MAX name and logo, which help to build trust and credibility in the local marketplace.
Long story short? My portion of the commission ends up being $6,175.
That’s still not bad, right?
Well, not so fast. We’re not finished just yet.
Even though I wasn’t the agent who ultimately found a buyer for you, I invested a considerable amount of time and money promoting your listing over this past month. Between…
- organizing and promoting open houses
- daily door knocking
- late night, weekend, and early morning showings and phone calls
- newspaper and Facebook ads
- direct mail and print materials
…well, you get the idea. These are just some of the things I did in order to sell your house.
This short list doesn’t cover everything, though. For instance, it doesn’t account for the gas and wear on my vehicle, which I used to show your home to potential buyers, not to mention finding potential buyers for you.
In fact, according to my best estimate, I spent about $1,000 out of pocket promoting your listing. If your home hadn’t sold, I’d be out that money and you would owe me $0 for my efforts and expenses.
Thankfully, it did sell, and I’m now left with $5,175. That’s assuming, of course, that I didn’t purchase some sort of closing gift for you (which you might have expected me to do).
Oh, and get this. According to the Niagara Association of Realtors (NAR), the average realtor in 2018 was involved in just 4.56 real estate transactions. That’s roughly one new transaction every three months.
Yes, that’s right. If I profited an average of $5,175 per transaction and I completed 4.56 transactions this year, I could expect to make $23,598.
Out of that $23,598, I’ll still have to pay…
- professional fees and dues to CREA, OREA, and NAR,
- for errors and omissions insurance to RECO, and
- for various continuing education requirements.
Depending on the year, this will add up to several thousand dollars. For the sake of argument, let’s assume that, after dues, insurance, and education, I’m left with $20,000.
Now, let’s assume that I’ll work 50 weeks this year, taking off two for vacation, and that I plan to put in only 35 hours a week (a laughably low figure).
That means I’ll end up working this year for just over $11 an hour.
- That’s less than minimum wage ($14) in Ontario.
- That’s less than a full-time coffee shop employee makes, and that employee isn’t forever at risk of being sued the way I am as a realtor.
Yes, even an honest mistake in paperwork or an innocent misrepresentation (something I honestly believed to be true but turned out to be false) could open me up to litigation.
Now, quite fortunately, agents of my brokerage, on average, are involved in more than 4.56 transactions each year. An average of 17.95 in 2018, in fact, which is almost four times the average member of our local real estate board.
In other words, through a lot of hard work, effective time management, and persistence, it’s possible to earn a significant income in real estate.
No one (least of all me) is denying that.
But to pretend that we, as realtors, are a bunch of selfish, greedy pigs is absurd.
A career in real estate means long hours, constant rejection, inherent risk, rampant competition, regular scrutiny, severe regulation, loss of privacy (in a small town), and periods of inconsistent income.
Many realtors in Ontario break even or lose money, and a surprising number of new realtors choose not to renew their registration at the end of their provisional period (the first two years).
Am I complaining? Absolutely not. I love my job. I love all of its challenges and rewards. I love the people of this town, too, and I love engaging with my local community. I love helping others achieve the dream of home ownership. I really, truly do.
But will I take a pay cut in order to win your business? Not a chance. I’m worth every penny and more. And no part of me feels greedy for saying so. Not one little bit.