High real estate commissions: because you’re worth it?

by Olivia D'Orazio30 Mar 2015
The upcoming spring market will arrive hand-in-hand with high real estate commissions – and increased public scrutiny over agents’ paychecks.
“I understand the public is frustrated, but that stems from real estate prices,” says David Fleming, a real estate agent in Toronto. “We don’t control prices, the demand in Toronto for property does. The public takes the frustration of high prices out on agents.”
Indeed, the market dictates an agent’s salary – which is significantly lower in some markets. For instance, in Nova Scotia, where the average price of a house in 2014 was $215,146, an agent would make $3,227.19 based on his or her portion of a three per cent commission.
However, in Ontario, where the average price of a house is about double, at $430,984, that commission take rises to $6,464.76. Agents in British Columbia – where real estate prices are the highest in the country, at an average of $568,405 – take home about $8,526.08 per transaction.
Consumers often see those earnings, coupled with quick selling times and low DOMs, and assume agents are being remunerated far too generously. As a result, an agent’s image suffers.
“They’re also frustrated with how much we make,” Fleming says. “But again, it’s a free market. So if the market commands I list a property for $3 million, then that’s what I’m ‘worth’.”
On the buying side, however, agent David Oey says the commission sales reps get from a successful purchase must be factored across a longer period as higher demand for a limited supply increasingly extends clients’ search times.
“Normally you’d get a call, respond to it and sell them a home in two months,” Oey, who farms western Toronto, says. “But now you have to work with them for four to six months before they buy. It’s a longer gestation process and a more calculated, academic approach.”
In the end, Fleming says the clients who understand the value a licensed and professional real estate agent aren’t so concerned with that agent’s commission. He likens it to brokerage desk fees.
“I personally believe in the full-service model,” he says. “That’s why I pay a higher desk fee because I believe in it. It falls back on the consumer to make the right decision.”

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