Are cut commissions the way of the future?

by Olivia D'Orazio29 Sep 2014
Realtors don’t want to hear it, but yet another among their ranks is suggesting that the path to future success is paved with low commission rates.

“The business model for the large real estate brokerage is a lot of middle men,” Realtor Don Hewie of Commission Wise tells REP. “In Ottawa, 100 agents could easily service the city. The reason commissions are so high is because they have to feed the herd. So I [achieve] higher volume, but lower commissions and often the same service – MLS listing, signs, lock boxes, phone calls.”

The move is just one more way that agents are working to remain competitive and secure new listings, a telling sign of the state of an industry where several thousand real estate agents work in the Ottawa area alone.

But many Realtors are divided over the idea of cutting commissions – a practice that is quickly gaining traction as sell-by-owner and agent-assisted listings increase in popularity.

Alexandre Alves, a Realtor with Kingsway Real Estate Brokerage, is rooted firmly in the full service-full commission camp. He says that those looking to buy or sell a home will get the type of service they pay for.

“It is what it is,” he tells REP. “If I’m charging the full five per cent, [the client] is getting all my effort. If other Realtors want to cut commission and just let the property sit on MLS, that’s fine.”

In the end, Alves says he’s not worried about losing his business to real estate agents like Hewie, who can often save sellers thousands of dollars.

“I work strictly on a referral basis,” he says. “I haven’t had [the issue of cut commissions] affect me.”

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