Re: Forecast 2002: You asked people, “If you could change anything in Canadian real estate in 2002, what would it be?” The people you asked were general managers, presidents or vice-presidents of real estate companies or franchises. Apparently these are people of great knowledge and influence in real estate. No wonder we are in such a mess!
They don’t seem to know what is really going on. For example, I read in a previous issue that there were 90,000 Realtors in Canada in 1990, and now with a greater population and more homes to sell there are only 60,000 Realtors. That means 30,000 people were laid off. If that were the aircraft industry or any other, I’m sure that would be reported on CNN 24 hours a day for months! But our experts don’t seem to think this is a concern.
Many of the writers wanted a Canada-wide MLS system. What a waste of time and energy. I, and most Realtors, are not interested in knowing about homes that are more than a 30-minute drive from the office, and why would we care about homes that are 2,000 and 3,000 miles away?
Several writers suggested we encourage younger people to come into the business because less than 15 per cent of Realtors are under 40 years old. Why would young people want to come into a shrinking industry? The reason most of the Realtors in the business are old is simply because they are too old to get retrained for employment in other careers, and subsequently are forced to stay in real estate.
What I think is the most important thing we should change in 2002 is COMMISSIONS!
I started selling real estate in 1983 and from then until 1991 I never had a problem getting sellers to pay six per cent commission. In most cases it was never even questioned. Since then, many things have changed to push commissions down. Here are four of them:
1. As a result of income tax policies, most Realtors changed from being employees to independent contractors, and as a consequence they were in effect running their own businesses and immediately started giving themselves a smaller pay cheque. Perhaps they were trying to copy Wal-Mart’s strategy, thinking that by selling for less money they would sell more homes and beat the competition. But it didn’t work. Almost everyone else started to cut commissions to compete.
Just pick up a copy of The Real Estate News and you'll see ads offering to list your home for 0.75 per cent, and other ads where Realtors are offering to pay a buyer up to one per cent of the purchase price of a home if they buy it through them! What is next? Why don't the broker/owners of companies enforce policies to stop this?
2. Well, back 10 to 15 years ago most salespeople worked on a split — let's say 60/40 with 40 per cent going to the broker. Nowadays many broker/owners have changed their splits, paying the salesperson 90 per cent, 95 per cent or 100 per cent of the commission in return for charging fees for services and deducting a set amount from each commission cheque. As long as the broker receives his $200 to $1 ,000 a month in office rents and services and a $500 to $700 fee from each transaction, he doesn’t care what commission the salesperson ends up.
3. Real restate boards stopped disclosing on the MLS the total commission being paid, so salespeople listed homes for whatever commission they could get and offered three per cent to the co-operating broker. This was gradually reduced to 2.5 per cent minus marketing costs, and now you can see commissions on the MLS being offered at two per cent, and others as low as $500.
4. The government, no longer satisfied with making buyers pay Land Transfer Tax on the purchase of a property, introduced Goods and Services Tax, which is payable on commissions, solicitor's fees, CMHC fees, appraisal fees and inspection fees, so it has become more expensive for people to buy and sell a home. These additional fees must be disclosed when getting the listing signed, and in many cases the salesperson ends up lowering his commission because of them.
Well, that's what I would change in 2002 if I could. But I am just one person. What are our general managers, our presidents, our vice-presidents, our broker/owners and our leaders doing about this? What are all our associations doing about it? If something isn't done soon, there won't be enough money coming in to pay everybody who is feeding off the salespersons’ commissions.
Graham Millward
Associate Broker
Sutton Group Professional Realty
Brampton, Ont.
