Anyone in the real estate field is acutely aware of the changing conditions in markets across the country.
It's no secret that home prices in Canada's largest city are, for many, shockingly high. People both in the city and outside of it have watched in awe as prices continued to rise. And, even as things have started to cool lately, the cost of a home in Toronto is still one of the highest in the country.
One thing that many people don't understand is the role that real estate agents play in setting prices. For many, they believe it is solely real estate agents who are to blame for setting prices high so they can make their own commissions higher. Apparently, real estate is just easy money.
Anyone in the industry will tell you that is not the case.
In reality, though prices are high, real estate agents aren't necessarily making an unreasonable amount of money and market conditions can also make it more difficult in some ways to make money. If you are looking to get started in real estate in Toronto or want to relocate to the city, you may be wondering just how much a real estate agent actually makes in the city.
In this article, we will look at some of the factors that affect how much real estate agents make and try to answer the question of how much real estate agents in Toronto make.
Real estate agents in Toronto generally take the same commission as other areas in the province. The total commission amount for a home sale is usually in the range of 3.5%-5%. Now, naturally, this will have to be split by the buyer agent and seller agent. Generally, buyer agents in Toronto will take home a 2.5% commission, whilst the seller agents have a more negotiable rate. This rate can range from 2.5% to as low as 1%.
Just what does that translate to in terms of how much money the agents get? To figure that out, we are going to take a look at some recent data from the Toronto Regional Real Estate Board (TRREB).
To start, we will look at a more profitable example. According to TRREB, the average price for detached homes in the City of Toronto was $1,947,975 in April of 2022. Assuming a home sold at that price for a 5% commission, the buyer and seller agents would take home about $48,000 each. If the seller only took 1%, they would get about $19,479.
What if the property for sale was a condo apartment rather than a detached home, which sold for an average of $820,835 in the City of Toronto over the same month? In that case, each agent would take home about $20,500, while a seller agent with a 1% commission would take home about $8,200.
Overall, on the higher end, agents can make a pretty handsome amount selling homes in Toronto, though things are not necessarily so clear-cut in terms of how much they actually take home. Consider the fact that agents must also cut their commission with their brokerage and pay for all sorts of expenses like marketing, licensing, and transport.
At the same time, there are many sales in the lower price ranges of $700,000 and below – not everyone gets to sell the $2,000,000+ homes. At this level, with a 1% rate and a brokerage split, your commission can come out to be much less than it may seem, even with the elevated prices.
It’s not easy to tell exactly how much a real estate agent will make with any certainty. After all, the job is famously very variable in terms of how much an agent is capable of making depending on both their own initiative, their skills, and sometimes pure luck.
Luckily for us, the Government of Canada tracks some average salary amounts for different occupations and supplies them through their job bank website. So, just how much does a Toronto real estate agent make and how do they compare to other areas?
Looking at a national level, the median salary for a real estate agent is about $46,000 a year. In Toronto specifically, the median is a bit lower at about $44,000 a year. However, on the high end, the website lists a salary of $134,700 nationally and a higher salary in Toronto at $144,500 – almost $10,000 more a year. Compared to the rest of the province, Toronto agents make a comparable amount to other Ontario real estate agents with a slightly higher salary on the high end.
Comparing the average commission amount and the median income can tell us a bit about how many sales an average agent makes in Toronto.
With a median salary of around $44,000 (and taking into account the brokerage split), the average agent may sell around two or three detached homes a year, or about four condominiums. For the higher end of the range of $144,000, this may come out to around five or six detached homes, or around 12 condominiums. Of course, agents may sell any mix of properties and may make more or less per property based on a commission rate and property value so these numbers will vary.
This also tells us that a significant number of agents in Toronto may only make one or two transactions a year, with very few making more than 10 and some potentially making none at all.
At the same time, many agents who work in Toronto will live here too. At a median of $44,000 that puts a real estate agent below even the average salary in the city by some measures which can mean not much money left over after the cost of living in the city is considered.
For an agent making the median wage who wants to buy their own home and saves about 10% per year, it would take them over 50 years to save the required amount (assuming prices don't go up – they will). This also challenges the myth that real estate agents drive up prices intentionally, because after all they will have to pay those prices as well, and the gains on commissions don’t make up for the growth in prices.
How does a Toronto real estate agent's salary compare with the rest of the country? In Vancouver, agents make more on average with a median of $55,000 and a high salary of $146,000 a year.
In a more affordable city like Calgary, you may expect agents to make less, and this is true in part. On the median level, agents in both Toronto and Calgary are pretty well matched, making about $44,000 and $45,000 a year respectively. However, on the higher end, Toronto agents make more, with Calgary agents taking in about $124,000 a year.
The common belief is that because home prices are high in Toronto, agents must be making a ton of money. This is not the case as the numbers above can easily show. In fact, agents in Toronto and Calgary are matched in median income, despite one city being much more expensive than the other. What many fail to take into account on this topic is the impact of competition on an agent's job.
Toronto prices are high because there is so much demand for homes and so little supply. Agents only get paid when they successfully close a transaction and with so many agents chasing so few homes, there are many who do not get that payout. This means that while commissions may be high, income is far from guaranteed.
This also hits on another point that there are simply so many real estate agents in Toronto, meaning competition among agents is incredibly high. According to the Toronto Regional Real Estate Board, they represent about 66,000 real estate salespeople and brokers in the Greater Toronto Area (a significant majority of the 82,000 real estate professionals represented by the Ontario Real Estate Association, and a little under half of the Canadian Real Estate Association’s 150,000 members).
Meanwhile, the board reported about 121,000 sales in 2021, the highest sales year on record. What this means is that for every person who could transact in real estate, there were only about 1.8 sales each in the city for that year. Even among these sales, for every $1.9 million dollar home, there are plenty of lower-priced sales which fetch lower commissions.
Now, not every person who is a part of TRREB may be actively working in real estate or may have other jobs such as a broker, meaning there may be more sales per agent. However, on the other hand, there are those agents who close on far more than 1.8 transactions a year, leaving even fewer for the rest.
Furthermore, with so many agents, there may be competition for clients. What this means is that in a hot market like Toronto, many seller's agents will offer lower commissions in order to stand out amongst the rest.
Buyer agents even get in on the competition, with some offering cashback options, splitting their commission payout with their clients. Both of these serve to cut the actual payout that agents get even further.
With real estate being so hot, there are many more agents getting into the field every year. With an increasing number of agents and prices and sales on the decline, competition may get even steeper between agents as more agents chase fewer sales. Competition can be even harder if you are only a newly licensed real estate agent and many may even be forced to give up on real estate altogether and pursue other careers.
Overall, I would say the idea that real estate agents in Toronto make incredible amounts of money off the back of the booming real estate market is likely a myth. Based on available data, the average agent makes a pretty modest amount and is on par with many other areas of the country.
Obviously, there will be those who do much better and there are certainly those who do make really good money working in Toronto real estate. However, these agents are more likely to be doing well for other reasons than simply inflated home prices. The top agents in the city make the most deals, meaning they have to put in the most work and they get clients by having a track record of consistently good work.
At the same time, the top agents must also work hard to manage their schedules and workload, and work on their marketing tactics to ensure they can continue to reach more clients. All things considered, there is a lot of money to be made in the city of Toronto, though it is never a given.
The good news is that many agents get into this field because of a certain attitude and work ethic that makes them want to push themselves to work as hard as possible. For those with a tenacious work spirit, smart business practices, and a bit of luck, you can certainly make money.
That being said, if you feel like you need to work in Toronto if you want to make money, think again. In some ways, the high levels of demand and competition will only make your job that much harder, while other areas can offer similar incomes without the hassle. More than anything, it’s an agent's particular working style and discipline that will make them succeed, rather than being located in any specific area.
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