Mr. Talbot,

While I agree that there may be some separation of agents into ‘higher performing’ and ‘lower performing’ segments, this reflects an INTERNAL problem with the industry, which has existed for several decades given how long the split-commission structure has been in place. And if it’s such a problem, why has the number of registered agents been increasing over the past two decades in proportion to selling prices? Why are new people getting into this field if the chances of them making a decent living are only 1 in 5, as you imply?

Your own observations lend credence to the need for change in the compensatory structure of the industry – if there’s so many agents / brokerages ‘struggling’ as you suggest, then would it not be better for agents to charge for their services on an hourly basis, reflecting the amount of work done providing value towards their clients’ interests, along with a commensurate degree of accountability (i.e. liability and culpability)? This of course would mean that each client would pay each of their own agents directly, for the value of services provided, which in turn must be demonstrably justified for each hour worked. In this manner, agents/brokers are paid for each hour they work; they no longer depend on a sale in order to ‘eat’.

I’m also puzzled at your assertion of ‘extreme lack of inventory’, and its relation to the record revenues and profits reported in the article. It is the total sales volume that lends to revenues and profits (as the article has clearly shown), not the amount of inventory relative to demand (the latter of which has been highly influenced by the presence of non-essential buyers in the marketplace anyway).

Hi Dennis. Thanks for taking the time to response and provide this extra information. I recently watched “Boom and Bust” with the guess being Tim Hudak (former PC Leader) who is now the CEO of the Ontario Real Estate Association. You would think by listening to him speak, they ( the governments, OREA, TREB, etc.) are doing everything they can to promote housing affordability. They’re working with local, provincial and federal governments to find solutions. The truth might be – for this to have taken off over 2 decades ago and only gotten worse, just lip service. Yes, we do need to push back and start writing to our PM’s, MPP and RECO etc.. Make suggestions until they hear the same thing enough times to know it’s what people want.
I was born and raised in Toronto. My parents were immigrants. I have two kids in their early 20’s. My fear is they may never experience the joy of homeownership if this issue isn’t resolved. I have nieces and nephews in their 30’s and 40’s in same boat. Homes need to be deemed as shelter, not an investment. Corporations shouldn’t be allowed to purchase single family homes. Trudeau needs to be made accountable for his election promises and ban foreign ownership. Not just for a 2 year period but until this “lack of supply” is remedied. Also, if all REA’s work for the Seller, how can a Buyer stand a chance at paying a fair price for a home? Split this service and watch the commission rates get a lot more reasonable really quickly! Where’s my popcorn maker?!

It would be challenging at best to break down the stats. We can not take to the full number and divide it by the number of Realtors to get an average income. The article refers to the financials of the real estate business as a whole. I think they would find that the majority of Realtors make far less than what is perceived by the general public. Most folks think that Realtors are ALL just rolling in the money. While some are, there are others that have lost a huge amount of their income because of lack of inventory and for those who worked with mostly first-time buyers and lower-income families. Do not get me wrong this is a good article.

Article reiterates the official statistics.

ThErE iS sOmE rEaLiTy.

Tell me you’re a real estate agent without telling me you’re a real estate agent.

Hi PW – actually, in Ontario, there is a ‘real estate regulator’ by the name of RECO – the Real Estate Council of Ontario. They are supposed to enforce the rules under the Real Estate and Business Brokers Act (REBBA), which is now changing to the Trust in Real Estate Services Act (TRESA). I wrote to the Ministry of Government and Consumer Services advising them of necessary changes to how the real estate industry is regulated, and to their credit, I did hear back from the Minister’s office. But they just wrote back saying ‘thanks, but we got it handled’, indicating that they were protecting consumers very well with the proposed changes under TRESA. However none of the revisions actually changed the ‘modis operandi’ of the industry — the incentive structure is still the same, hence the shenanigans will continue. Funny thing is that most of the changes were promoted by OREA (the Ontario Real Estate Association) – the organization which represents (and profits from) agents and brokerages. So which changes do you think they DIDN’T want to see happen? And I wrote to RECO as well, asking about enforcement of the new ‘Code of Ethics’ under TRESA, and they wrote back saying ‘We don’t know; we’ll just enforce whatever the law says’, without stating how they’ll do it. They just washed their hands of any sense of social obligation, pushing me back to the Ministry.

I empathize with your realtor experience; I’ve been disappointed more than once in both buying and renting housing. It’s just that most people don’t realize that you actually don’t need a realtor to buy or sell real estate – there are quite a few ‘do it yourself’ services that are quite good, and help you take control of the process.

Unless you and I and many, many others start screaming at the appropriate provincial agencies and elected leadership on the need for changes, and which ones would be beneficial, it won’t happen. I can’t speak to government’s interests, but I can say that there are many special interests with deep pockets are well vested in keeping things just they way they are (if not worse for the end consumer). It’s too bad that no elected leader sees this issue as a prime opportunity to become a Canadian Icon (not just hero), by doing right for the working majority. Could you imagine being credited for safeguarding housing affordability for ~40 million Canadians, for the next several decades into the future (particularly when the OECD says our economic outlook is nearly dead last of all the countries they look at for the next 40 years)? Hmmm ….. maybe I should run for office.

You make valid points here. I was able to list my own home on MLS using a mere listing. I “had to” offer 2.5% commission plus HST to the Buyers agent if I didn’t want to be boycotted by the industry. Even so, it took me 2 months to sell my own home using the same tools, why? When the deal closed, I paid the RE Agent $35,877 in fees and paid my lawyer, who went to school for what – 5 years – approximately $2500 for the paperwork. Realtors do not add any value for what they do. If anything, they are the ones manipulating the markets with the help of the government. In today’s day and age and with the use of the Internet, paying a REA 5%-6% of your investment or life savings is criminal. No, you do not need a REA to sell your home! Agreed!

What I’d like to know is why is this still going on and what will it take to change it? Two telecom companies can’t come together without being subject to a monopoly review by the CRTC. Why do we not have a similar agency to regulate this industry? Probably because our government needs the HST generated by the sale of sale of real estate to continue the ruse that our economy is growing. Shameful!

I’ve written about this before, but there is room (at least in Ontario, based on my experience) for the operating model of the real estate sales industry be (forcibly) changed. To this extent, we can enhance consumer protection regarding residential real estate, by changing the compensation structure for the real estate sales chain — the current split-commission system only serves to foment paranoia / euphoria in the minds of buyers, all to interest of agents, with no consequence. In my view, minimum policy changes should include:

a) ensuring that buyers / sellers / landlords / tenants each pay each of their own agents / representatives directly for the value of services performed, on a fee-for-service basis; and

b) forbidding any commission-based remuneration as a primary basis of payment. The current split-commission based compensation structure only incentives both agents / brokerages to push the price up as high as possible, with the fastest turnover rate, in order to make the best profits. I haven’t seen justification as to why agent / brokerage compensation should be proportionate to the selling price – where is the value & accountability?

If one really wants to test who is principally responsible for instigating bidding wars, how about simply taking agents / brokerages out of the entire negotiation loop? After all, you don’t actually need them to buy or sell real estate – you can easily do it yourself in conjunction with a competent real estate lawyer (who you pay directly for their services, and therefore are obligated to work in your interest, and can be held to account for it). What buyer, who needs a home, actually wants to pay more than the asking price – none! But it IS in the interest of both buying and selling agents to see this happen.

The current split-commission based compensation structure only incentivizes both agents / brokerages to push the price up as high as possible, with the fastest turnover rate, in order to make the largest profits. Having read the (Ontario) OREA Buyers and Sellers Agreements, I’m seeing little (if any) value provided for the fees charged, nor any accountability / liability for the services performed or the consequences of not fulfilling said services, and I have never seen how the services provided are justified as being proportionate to the selling price.

We know that the ‘real estate profession’ has issues; see the on-line Globe and Mail article of May 4, 2021 entitled ‘How is this legal?: Real estate sales tactics under fire as Canadian home prices spiral out of control’, and the on-line Global News article of March 2, 2020 entitled ‘How do we follow the money? Canadian real estate gets ‘abysmal’ anti-money laundering grades’.

Notwithstanding money laundering, accountability by real estate services can only be achieved when the buyer’s and seller’s agent are paid directly by each of their clients, for the value of services provided (in accordance with specified performance standards) on a fee-for-service basis. Otherwise, the realtor and brokerage shenanigans will continue — as evidenced by all the stories on the ‘net — because the current rules and laws are simply not working in the consumer’s interest; they’re working in the interests of the profession.

What does this mean?