The Realtor and You
Your Costs: Their Costs

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Carolyne (Realty) Corp.
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     (or Where does all the money go?)

Realtors sell houses for a living. For starters, no one pays to put gas in their cars, the cost of the vehicle and its insurance. Real estate agents are not taxi-drivers (well, there are some part-time agents who drive cab for a living but that is another subject), or City tour guides, although most agents are pleased to offer such service when required by someone new to the area. Much of a real estate agent's job description is administrative work, no matter how many assistants an agent has. A certain amount of communication can "only" be done by a licensed agent. A license is very expensive to acquire, along with the continuing education courses that an agent must take in order to keep a license active.

Agents must have all the accoutrements that run an office, just like where you work, privately: a computer, a fax machine, a photocopier, a printer (often more than one); some carry pagers, PDA's and laptops, instant messaging machines; digital cameras, virtual tours, air miles, marketing materials, advertising, web sites, and email ISP contracts; supplies of Board forms that each agent pays for, cartons of paper, printer ink and toner cartridges, often by the case. Secretaries, personal assistants, answering services, and other in-house salaried staff must be paid for, along with a sharing of commissions between each co-operating agent and their appropriate brokerage houses. Revenue Canada takes a share of every commission earned, and Canada Pension fees must be paid as well. Although gst must be paid and is collected on every commission earned, staff must be paid to fill out all the required reports. Hours, every day, must be spent searching the MLS systems for related information on your area. No one person pays an hourly rate to the agent for this type of work. It's just part of the whole package that the commission pays for.

Each agent must pay for mandatory insurance programs. Real Estate Boards and Provincial and National Associations charge massive fees for Realtors to belong to each one (mandatory participation), because they in turn have a business to run that requires that bills be paid along with the salaries of their related staff. Agents pay to run those associated businesses. Office rent has to be paid, and all the operating costs like hydro, heating, taxes and other related expenses just like you pay where you live and/or work. All these costs are supported and paid for out of the commission that an agent earns. It seems like a lot of money that the public pays, and it is. Usually you pay no money to a Realtor up front, so the agent fields all the expenses from his/her own pocket, often over a period of months, until such time as a pay cheque arrives, often many months after the consummation of a purchase or sale. Example: you buy or sell a house in February and you are scheduled to move in June. The agent can look forward to getting paid sometime in July, and must budget accordingly. When all is said and done after the sale or buying of a house, there is often very little left for the agent to spend on his/her own personal family needs. Although all sales commissions are deemed to be negotiable, due to the Competition Act and we are not permitted to discuss commissions among ourselves due to the fear of being accused of price-fixing, as with any sort of buying power, you always get what you pay for. Out of desperation the agent will sometimes agree to work for less, just to provide for his family a little bit for that one more month, hoping that soon he will make a "big" deal and make up any difference. Seldom happens. Some agents do work part-time, often when someone else in their family has a "real" job, and their commissions pay for personal pleasures such as family vacations. Many licenced agents are choosing to work as paid assistants to top performers, having their commissions totalled into the top producers' earnings, electing to be paid on a more regular basis, themselves.

Many would-be very good agents leave the business regularly as they figure out their "real costs" of being in the real estate business, when they discover that it is nothing like they imagined, and no one told them how expenses could ruin their lives before they even get started; kind of like student loans and start-up costs that other professionals have, that have to be paid back for years, before they start showing a profit in their own professional practice. It often takes a new agent about three years to start showing a real profit, if they are seriously into the business as producers, ones who are prepared to spend a lot of money initially up front to get their own name out into the marketplace.

Many agents are available 24/7, unlike in other professional practices, and they work very hard, often behind the scenes. The public has no way of knowing what is really going on as the agent tries hard to locate the perfect house for you, or the perfect buyer for your listing. In the up markets agents can earn a higher than average living, but in a down market there often is no income at all. A high percentage of listings never ever do sell, even though the agent has had the expense of carrying the listing and any related marketing costs. Even the costs for installing and removing signs is most often paid by an agent. Many do it themselves to cut costs. Some Realtors are fortunate enough to work in family teams, but when the production is divided among four or five family members, no one individual really has done a massive amount of business or has a lot to show for the hours invested, after all is said and done. The great Realtor works with plenty of kindness, patience and understanding, often needing to wear several hats at once, such as counselor, advisor, confidant, putting his/her own personal feelings aside in order to remain professional at all times, in all circumstances.

Finding the Right Realtor - Do You Know How?

Treat your Realtor right, and you will find that the person you have hired to "represent" you, will go to the ends of the earth for you and won't permit you to put yourself in any jeopardy, by giving you the best possible advice; sometimes the best advice is simply - take it to your lawyer. In a divorce situation for example, the Realtor, regardless of how he/she may feel, cannot "take sides", and must work with the real estate related "facts" only. No matter how many hours he/she has worked in a given day, a Realtor must always "keep his cool" and attend to the matters on the table; must be prompt and efficient and "do the job", because a "job" it is; usually his/her only one. So far as can be researched, a job where all the financial risk is borne up front for what can be several months, by the agent, with no cost to the public, if in the end "nothing happens."

Remember: your best investment in real estate is your choice of the Realtor you hire to "represent you." Many apply for the job you are offering. If you are selling, you will sign a listing contract with a Realtor to be "your" agent. If you are buying, be sure to sign a Buyer Agency Buyer Broker contract committing a Realtor to be "your" agent; know that they are working "for you." Ask "your agent" to spell it all out for you in clear language that you are sure you understand. Don't rush. Don't be afraid to ask questions. There are no dumb questions, except the ones that don't get asked. Allow at least an hour and maybe two to discuss your options. To do business in today's environment and protect your interests, agents cannot do their jobs in fifteen minute meetings. Permit them to do their job. Allow them enough time to work "for you".

*Copyright Carolyne Realty Corp. May not be reproduced by any means without written permission. Protected by International Copyright Law. All rights reserved.

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1998 by Carolyne Lederer PLEASE NOTE: this material is copyrighted by Carolyne Realty Corp. and may not be reprinted or duplicated in any form without the written consent of the copyright holder.