Are you sure you want to become a real estate agent?

real estate agent

I meet people all the time who are thinking about or on their way to becoming real estate agents. Sometimes (often) they are young and energetic, attractive and attracted to the so-called lifestyle of the rich and famous, making their own hours, driving a Beemer and dressing well, strutting their stuff, negotiating hard and winning for their clients the most (or least if you’re a home buyer) money in the least amount of time. They’ve watched those TV shows. They’ve learned. They want to work for Remax because Remax is #1. They want to work for Keller Williams, because K-Willie has the best training. They want to work for Peak, because Peak has the lowest desk fees and the best commission splits. They want to cultivate their own team and then take tropical vacations. They want to make big bucks.

I asked a real estate broker when I first got my license, knowing that the failure rate for new agents is so high, “why do so many fail and so few succeed?”

He said, “most have failed in their previous jobs too”.

That was it. There is a certain amount of bluntness with old time realtors.

So, I thought, “that means if an agent has succeeded in his or her last job, then they will succeed as a realtor too”.

The guy who was rebuilding my front porch’s sister is becoming a realtor. So is my dry cleaner’s son. With real estate being on everyone’s mind, it seems that everyone wants to get into the business. I often get emails and chat messages from people that are either writing their real estate exams or thinking about signing up for the courses. I always tell them that it is not really like TV. Statistics tell a different story.

There are over 1,500 realtors in Waterloo Region. That’s a lot. But in Toronto, there are 42,000. That’s a lot more. That’s one for every 260 potential home buyers and home sellers. Most people know at least a couple of realtors, at least the lucky ones do.

In Toronto, the average detached house is worth a cool million dollars. At a 5% commission, split with the the cooperating brokerage, minus say 10% to the brokerage, and agent has just made $22,500. Sell three houses a year and you are pretty much at a living wage. That’s a good thing because 57% of agents sell three or fewer houses a year.

But wait, there’s more. Outside of Toronto proper (say in the 905 area code) house prices are lower. Also, agents sell condos and townhouses and condo townhouses and duplexes too. The average commission is likely half of the $22,500 stated above – suddenly the majority of the realtors are not making a living wage. So lets say an average Toronto area realtor makes six sales a year. That’s the statistic my broker recently told me.

 

Agents recording six sales a year might make $82,500 before expenses, which can lower their gross income to between $60,000 and $75,000.

About one-third of registered agents don’t sell anything, while those who become wealthy are usually in the top 1 or 2 per cent.

 

In a lot of things there is a 80/20 rule. I don’t think that exists in real estate, but for the sake of this post, let’s be generous and say that 20% of the realtors make 80% of the sales. That is going to be a tough nut to crack for a new agent.

The same ratios for Toronto area are likely true for Kitchener Waterloo agents as well.

So why am I taking the time to write this? Because brokers are not going to tell you what you are up against. Agents are the commodity for brokerages. More agents mean more fees. Brokerage know that some will swim but most will sink, some will win, but most will fail and the brokers will be there to help and collect fees as they do.

1 Comment

  • Working with a real estate agent is like being in a short-term marriage – one thats highly charged and very stressful. You just don’t want to layer anything else onto the relationship, which is why finding someone who is emotionally and intellectually suited to you is so important. but anyhow thanks for this wonderful full blog, looking forward to your next blog.

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