It’s been a while since I’ve put some time into a good, hard, rant.
Well, the topic of conversation today is one that could get any experienced Realtor going, and honestly, I think this post is long overdue.
With now over 40,000 licensed Realtors in Toronto, we’re seeing the quality of the “average” Realtor fall-off, in my humble opinion. There are a lot of reasons why, of course, but I believe that many Realtors hang on to a substantial number of mistruths and fallacies before they even get their license.
Today, I’d like to detail ten of those mistruths, and if you’re thinking about getting into the business – please, for the love of God, take what I’m saying to heart…
Mistruth #1: You’re Going To Make It Because You “Have To”
I hear this all the time from rookie agents.
“I’m going to make it, trust me – I have to make it.”
And so says every 18-year-old girl from Tulsa, Oklahoma who takes a bus to Hollywood to become a star, and she’s going to make it; she “just has to.”
“I have to make it – I just have to! I left a really good paying job to come and sell real estate!”
Well, that was either really smart on your part, or really careless.
A lot of agents come into the business and believe that they won’t fail, because they can’t fail. And I don’t mean “can’t” in a sense as though it’s impossible, but rather because they believe that they’ve put all their eggs in this basket, and doing so is enough reason to make it.
When I was a kid, I used to stare for hours on end at the Sears Catalogue and then close my eyes and hope really, really hard that when I opened them, the G.I. Joe Battleship would magically appear in my bedroom.
I was four-years-old. I didn’t know any better.
But many rookie Realtors come into the business, full of piss and vinegar, acting like they can’t fail, because “this is it” for them. They act as though once they walk through the door of a brokerage, there’s no turning back.
But this mindset helps rookies develop bad habits, since they convince themselves, “I won’t fail, because I can’t fail,” when they should be busy learning the ropes instead of dreaming of a Hollywood real estate ending.
Mistruth #2: All Brokerages Are The Same, And Commission Is What Matters
Not true.
I can’t name names here, but there are a LOT of really crappy brokerages out there, and I can’t understand why any new Realtor would go join them.
I mean, I know why, but I can’t understand why. It all has to do with commission.
When I started at Bosley Real Estate in 2004, I was on a 60/40 commission split. Some people told me I was crazy, since I could have signed up with ABC Realty and got a 90/10 split. I’m sure today, there are business models that allow a 100/0 split, with a set-fee per transaction.
Well, I didn’t want to work for ABC Realty then, and I certainly don’t want to now.
Rookie agents need to understand that building a career in real estate takes time, and how much you make, and keep, in your first, second, or third year, means absolutely nothing if you’re planning on working in this industry for 30-40 years.
I chose to work for a top brokerage, with more experienced ownership and management than any company in Toronto, who has a training program for new agents, and who provides constant guidance and support. The Bosley “brand” has a value, just as J&D, Chestnut Park, Royal LePage, et al do as well.
If rookie Realtors are looking for the cheapest brokerage with the best commission split, then they’re going to end up so far behind the 8-ball, it might be impossible to battle back.
Mistruth #3: You Can Work From Home!
Ever see those banner ads, pop-up windows, or even flyers on hydro poles that say things like, “Make $170,000 working from your home computer”?
Well if you’re skeptical, it’s for good reason.
And I’m of the opinion that a rookie Realtor should be in the office every single day, and NOT working from home.
Experienced agents – fine, work from home. You’ve already made it.
But rookie agents won’t learn anything from home. The office is where the conversations happen.
“Did you see that listing on Withrow? Whaddya think it’ll go for?”
You don’t get that working at home.
“Hey anybody heard about bed bugs at that condo called “Groove?”
Want to ask a question to an experienced agent? Want support from a manager? Want help with anything? You don’t get that at home.
The discount brokerages WANT you to work from home. They encourage it! But that’s because it costs them money to have desks. They want to rent 600 square feet, put a girl at reception, and have nothing behind the wall but a fax machine. They want virtual agents who work from home, don’t come to the office (because there often isn’t one), and pay them a split of their deals.
Trust me, rookies – you need to be in the office. It’s no coincidence that the new agents who work in the office every day end up making it…
Mistruth #4: Your Friends & Family MUST Use Your Services
Raise your hand if you personally know three or more Realtors?
All your hands are raised. My dog even raised her hand as I typed this…
I can’t tell you how many clients I have that say, “My cousin is actually a Realtor, but we grew up together, and, um, well, I know him, you know?”
Or how about, “My buddy from school just got his Realtor’s license, but I really don’t want to use somebody new for a purchase like this. Just, um, if he ever asks – say you were the agent referred by my company, and I had to use you. Okay?”
Just because you are a licensed Realtor doesn’t automatically mean your friends and family are going to buy and sell through you. If you think you’ve earned their business just by association, then you fail to grasp just how monumental a transaction this is for them.
Mistruth #5: Your Brokerage Will Give You Leads
Will they?
Really? Is it in their best interest to give leads to you?
Here’s a question, and answer it honestly: Who has a better chance of converting a lead into a sale – you, who has been licensed for six weeks, or one of the top agents in the company?
If it sounds unfair to you, then go become a social worker.
The brokerage doesn’t “owe” you anything. They are in the business to make money, and if the phone rings, and somebody says, “Hello, I would like to buy a house,” the best chance the brokerage has of converting that phone call into $$$$ is NOT giving it to you.
This isn’t unfair. It’s just reality.
Mistruth #6: You Just Have To Do THREE Deals At $1,000,000
I constantly see rookie agents doing open houses for established Realtors, for $2,000,000, hoping that one day, eventually, somebody will walk through the door and buy that house!
It’s never going to happen. That’s not the way things work in reality.
I heard a new agent say, “I don’t need to scratch and claw and do 40 transactions – condos and houses, sales and leases, entry-level crap. I just need to sell three houses at one-million-dollars, and that’s $75,000!”
Theoretically, I suppose.
But I don’t know of a single agent who has done three deals in a year, and all three were $1M.
If you want to work in this business long term, you WILL do leases for $1,200 per month, and take a $600 commission, which could be $400 after your split. You WILL do sales at $250,000, you WILL do houses and condos, and you will NOT be able to live off three high-end deals per year.
Nobody is going to help you. Nobody is going to magically walk into the open house and buy the house you’re standing in. It’s not that easy.
Some Realtors will spend 52 Saturdays and 52 Sundays opening $2,000,000 houses, thinking, “If I do this for 104 days, I’ll eventually get lucky.”
Never happened.
There’s no “luck” in becoming successful.
Mistruth #7: A Dollar Is A Dollar
So, so far from the truth.
Let’s say that you make $85,000 in commissions in your first year as a Realtor. That’s a lot, right? That’s much more than you made at your last job?
Well if you’re on a 70/30 split with your brokerage, you’re down to $59,500. Still a lot, right?
Don’t forget – becoming a licensed Realtor costs you about $5,000, and your OREA, CREA, RECO, and TREB dues are another $5,000. So you’re down to $49,500. But that’s good!
If you don’t spend $10,000 in your first year on your photos, business cards, open house boards, marketing and promotional material, courses, and other items that will help you get started, then I’d be shocked. So now you’re down to $39,500.
And what’s the cost of all those feature sheets and print-outs you bring to open houses? And the photocopies? And the countless other office expenditures you endure at your brokerage on a daily basis, as well as at your home office, and when you’re trying to do business? Another $10,000?
When all is said and done, that $85,000 gross commission is more than likely going to put $25,000 in your pocket, and that’s before you pay CRA.
I can name hundreds of expenses that a Realtor will incur (we haven’t even talked about what you spend on a listing – photos, video, virtual tour, floor plans, home inspection, staging…), and if a rookie Realtor thinks that $85,000 in commissions in his or her first year is enough to live on, they’re dead wrong.
Mistruth #8: You Don’t Have To Work 7-Day Weeks
This goes hand-in-hand with my mistruths about working from home, or making it “because you have to.”
If you think that you’re going to be successful in the industry with the highest failure rate, by not working every single day for the first 3-4 years of your career, then you were either born rich, and have a lot of yacht-club friends to sell houses to (this happens a lot in this business….) or you’re completely and utterly delusional.
Do you know how many Realtors come to the office at 9am, drink their coffee, walk around the office and make idle chatter, and then leave at 1pm? What the HELL do they do with the rest of their day?
And is it any coincidence that these people haven’t sold a property since January?
I’ve been in this business for going on eleven years, and only now am I at the point when I have a day off: Sunday. I work six days, and most of them are 12-hour days. But that’s the life! And that’s how every other person in every other industry works!
How many of you work 60-hours? Most of you who are reading this? You work 80-hours? Awesome – keep it going! This is what it takes! Show me an investment banker who leaves at 1pm, or a lawyer who says “Peace, Out” to his office at 3pm every day.
I’m fascinated by these Realtors who work 3-4 hours per day, and then bitch and complain about how tough the market is, and how they’re having trouble finding clients. It’s always somebody else’s fault, right?
Mistruth #9: All Realtors Drive Fancy Cars
Quick math here – if you owned a $1,000,000 house, but you had a $1,000,000 mortgage against it, how much equity would you have?
Don’t tell me you’re a “millionaire” or that you “own a million-dollar-home.”
Just because a Realtor drives a Mercedes, doesn’t mean he or she makes money, is liquid, is good at his or her job, or all of the above.
I know many, many successful agents who don’t drive fancy cars. The Sotheby’s agent who beat me in multiple offers last night was sitting out in the parking lot in her Fiat.
Don’t judge a book by its cover, and don’t assume that after you get your business cards printed, you need to go lease an Audi.
Spend that money on your business, not your image.
Mistruth #10: Getting Into Real Estate Is A Great Way To Get Rich!
Every office has poor Realtors. Even mine, to be perfectly honest.
I work for a top brokerage, who attracts top agents. But there are still full-time Realtors in my company that will gross less than $20,000 this year. It’s unavoidable.
And do you know how many of the 40,000 licensed Realtors in Toronto gross less than, say, $30,000 in a year? HALF, I’d say. Probably even more. And once they pay their split, and expenses, they’re flat broke.
That’s a lot of people, who spent a lot of money to get started, and lost out on a lot of income from their previous job, or other potential career path.
These HGTV shows that take place in NYC and L.A. make it look like every Realtor is rich beyond belief, but that’s entertainment, not reality.
Real estate can be a career, but it is not a get-rich-quick scheme.
Just ask that to the 20,000+ Toronto Realtors who are wondering how they’re going to make their next mortgage payment, or pay next month’s rent.
–
Phew!
How’s that for a Friday piece?
Sorry for the longevity – 2200 words and counting. But I could have written double, and I probably could have come up with 20-30 mistruths.
This was a long week, folks. I’m looking forward to a Sunday on the couch with Phil, Rory, Bubba, Ernie, Dustin, Zach, and maybe even Jose Maria, who knows.
If you don’t know what I’m talking about, then clearly you aren’t a fan of bowling…
Have a great weekend, everybody!
Jonathan
at 9:13 am
Nice rant David! I think I get that you think it’s too easy to become a Realtor. So what do you think should be done about the situation?
As you say, it costs about $10K to become a Realtor and another $5K per year to maintain your license. That’s pretty cheap compared to, say, going to University or buying a Tim Horton’s franchise, so I’d say the barriers to entry are pretty low. Also, it seems like brokerages never fire their poor performers – is that because the cost of having a Realtor on staff is so minimal? The combination of easy entry and lack of forced exits seems like a recipe for having a huge number of Realtors who just scrape by.
Is the answer to require more training so that new Realtors are more qualified and more dedicated? Is it to jack up the annual dues? Or encourage brokerages to cull the weak performers so they can focus on the top performers? Or just accept things the way they are, understanding that there will always be a lot of churn at the bottom and a resulting number of sellers & buyers represented by inexperienced agents?
David Fleming
at 1:47 pm
@ Jonathan
Brokerages only fire their poor performers if the agent has a desk, in actual office space, that could be filled by a better-producer. But these “virtual offices” that have no actual space will never fire agents, because they all work from home. That agent can do zero deals per year, and won’t get fired.
The barriers to entry are very low. You need to be 18 years old, a resident of Ontario, and be able to write a cheque and pass a test. Do you know the area of a square? In English, or not? Even if you don’t, the tests are multiple choice…
I’d hate to sound like a Debbie Downer, but I don’t think anything can be done to fix the industry. Any chances you, or I, or others would want to make would be called “anti-competitive,” since the Competition Bureau wants to open the industry to any and all business models.
The other day, I tried to book a showing for a condo listed by a discount brokerage. I was on hold for ten minutes before a voice came on and told me to leave a message. I did, and I never heard back from them. I can’t convince sellers not to list with these brokerages; it’s completely up to the public to decide on the business model they want to hire. But I do feel as though there should be minimum standards, otherwise we are so far from being a “profession” that it’s just a joke.
Kyle
at 9:28 am
Even though i don’t work in real estate, nor do i want to (Mistruth #8 is reason enough for me!). I find this stuff fascinating and am really curious about the behind the scenes workings of the industry. Like what does it take to be a good agent? What’s the vibe in most offices among agents (comraderie or competition)?, Or the truth behind these real estate teams, where there’s a very experienced agent paired with a very junior agent (often it’s someone related to them)? Or how does the commission split work when an agent is representing him/herself in a transaction? Anyhow i love this blog for the variety of topics, and in my opinion this one has more mileage. Keep up the writing.
David Fleming
at 1:51 pm
@ Kyle
Interesting point raised – about competition vs. comraderie.
Most offices are competitive. Some are downright dirty.
But at higher-end brokerages, there is a healthy, happy competition, based on respect.
At my firm, there are nine of us who work in the lower level aka “da basement,” as opposed to the other two floors which have 25 agents. We are a very tight-knit group, very helping, very involved in one-another’s business. We all know what each other are working on, who has which clients, etc. We help each other and push each other, and we’re genuinly happy for one another when things go well. This is VERY rare, and I’d hesitate to say that we have doesn’t exist anywhere else.
ScottyP
at 3:15 pm
You should write a book, DF. Seriously.
jeff316
at 10:05 am
“When I was a kid, I used to stare for hours on end at the Sears Catalogue and then close my eyes and hope really, really hard that when I opened them, the G.I. Joe Battleship would magically appear in my bedroom.”
When I was five I just *knew* that there was a Teddy Ruxpin waiting for me up in our attic. (We didn’t have an attic.)
ScottyP
at 3:17 pm
That’s an incredibly frightening story.
Joe Q.
at 10:19 am
Teddy Ruxpin — well that’s a blast from the past.
David, how’s about posting a link to your article from last year that described the distribution of “activity” (sales per year) among TREB Realtors?
Joe Sammut
at 12:06 pm
Lots of parallels to the Mortgage Broker industry. Thanks for sharing David and being so open and honest with your industry.
Cliff
at 1:41 pm
And I still want to be an agent. 🙂
David
at 2:57 pm
David,
It’s good to see an insider explain things and tell the brutally honest truth. I have a few questions:
Point #8: If you work 12 hour days, almost 7 days a week, how does your wife react to this and do you ever have time for a personal life?
Points 4 & 5: If it’s not a good idea to do business with friends and family, and your brokerage doesn’t provide leads, just where do you find them? Cold calling and knocking on doors doesn’t sound like a very good strategy.
I love your blog and read it almost everyday. Keep it going 🙂
Alex
at 3:06 pm
I disagree that everyone in all industries works 7 days a week. In my field (programming) only two types of people work 7 days a week: slackers and keeners. Slackers are slow or just not that good at their job and need to work extra to get their tasks done on time. Keeners take on way too much extra work and side projects, but they often enjoy this stuff so I don’t know if it counts as work. Everyone else works a normal 40 hour week (unless something big comes up) and enjoys their lives 🙂 You can make as much money as you want, but you only have a limited time on this planet, so I’d spend it wisely. I’d hate to think my industry is unique, and everyone else is working themselves to death. I enjoy what I do, and often I do side projects that are programming because I like making things, but I also take time to spend with my friends and family and just relaxing sometimes. I hope other people are able to do that as well. I’ll never be a CEO or able to afford a mansion, but I don’t need a lot of material things anyway.
ScottyP
at 3:22 pm
I agree Alex. I think most people tend to exaggerate the amount of hours they work.
And if anyone doesn’t believe me, check out the DVP Northbound at 2:30pm on a Friday, or the pedestrian traffic around Union Station at 4:30pm on any weekday. Were these people in their offices before the sun came up? I doubt it.
But as for David, he writes 4-5 blog posts a week on top of everything. I don’t doubt that he’s one of the few who actually works hours as long as he says he does.
JG
at 3:16 pm
Excellent write up! Enjoyed reading it. And I second Joe Sammut’s comment – a lot of parallels to the Mortgage Broker world.
As for Sunday – I’m looking forward to the ever ‘smiling’ Dufner! love that guy.
CondoMadness
at 3:41 pm
I agree, having a good real estate agent is so importnat in both buying and selling a condo.
I am seeing many purchasers buying into troubled condos that their agents should have warned them about. I guess for some agents, a sale is a sale.
Realtor
at 7:54 pm
Selecting the right brokerage is important for a new agent and for an agent that makes it part of their branding. New agent needs a lot of hands on training and one on one guidance in order to complete the first few transactions, but after that the need for an old school brokerage is greatly exaggerated in your blog. Most brokers are glorified trust accounts and answering services/appointment setting centers and in my experience some of the ones that have lower fees managed to attract enough agents to do enough volume so that they can do those things right. Most she-she brokers in this city have answering service that is a nightmare to deal with on the weekends….
I have never had a client that required a service that I did not provide directly. Best practice is to pick the realtor you trust and the brokerage that he or she works for should have little to no impact on that decision.
KellyB
at 9:19 am
Great article! I’m one of those people who are switching careers and this post gets me excited! I’ll check back in 6 months to let you know if I still feel that way! ha ha!
ryan burton
at 1:24 am
good points, even if somewhat condescending. But there are some hard truths here.
TorontoRealtor
at 7:41 pm
I would agree with you if this were the 1980’s, but today it’s the agent who is the most important part of the transaction, not the Real Estate Company.
Heather
at 9:12 am
well said David!! 🙂 I like this rant.
Belinda
at 5:59 pm
Thanks for your blog and you are spot on!! I am one of those “rookie agents”. I was one of the lucky ones that went in with what I thought were my eyes wide open (turns out they were half open) LOL. This is a second career for me so I wasn’t completely green. I was educated as an RN and spent 25 yrs in sales in the Pharma industry. Also very competitive but you have a guaranteed base salary. I got packaged out in a merger and used my buyout to launch my “new” career. I approached my first 3 yrs as if I was paying for university LOL. I knew it would be expensive and I wouldn’t make much money. It is like building a business and of course a good reputation. I interviewed 3 brokerages to find my best fit (very cocky of me but I didn’t realize it at the time). One brokerage basicly told me that in so many words…didn’t go with them. I was very fortunate that I chose a brokerage with top producers that took me to lunch and have since taken me under their wing. I am just finishing my 3rd yr. and am just starting now to make a “living” (not a fortune but decent). When I first started in our brokerage some of the less successful agents warned me about the highest producers. I like to form my own opinions so I kept an open mind. I have come to realize that there is a lot of jealousy of top performers and misconceptions. After observing these successful agents I realized they work their butts off!! Any comments I hear now I respond with “any one who works that hard deserves to be successful”. Top producers don’t steal leads…they just prospect more and take it a step further. I have earned the respect of these top producers and i cover for them on vacation and have become the “unofficial” buyers agent for the Top producer. Clients are going to list or sell with the agent they trust and have confidence in and frankly they like. I worked with an agent before I was licensed when my husband I purchased a house. I told him I was thinking of getting my license and he gave me the best advise ever. Take care of your customers and find the right house for the right people and the money will follow. That is starting to happen for me. I have clients calling me that have heard of me from past clients. I try not to think about the money. I try to provide excellent customer service and go above and beyond. Sometimes I get burned but that is life. I truly believe in the “Golden Rule”. It is hard work but will pay off in the long run. University takes 4 yrs to get a degree and then you start….same as real estate…4 yrs of hard work with integrity and you will be successful…just my 2 bits from a Rookie ;))
Umer
at 1:54 pm
Too much exaggeration and misconceptions in article. Right at home is discount brokeerage and they sold more homes than anyone else in 2013. If someone relative is a real estate ageng then there is no harm in buying or selling gbdough him and people do that. They mostly do like tbat.
Fawad
at 4:08 pm
I agree Umer
Chris
at 3:52 pm
Good article and those are points that would probably stand to in most industries.
I am no fan of real estate industry. I believe that the industry has done itself a great deal of harm by allowing just anybody to become a real estate agent. As a result you have a huge number of marginal players and to be honest most of them add very little to the equation.
My wife and I have bought and sold four properties in the last few years and all without the help of a real estate agent.
There are some good ones out there and I have met a few I would happily deal with.
The problem is that there are too many that are substandard.
The other problem is the 5% commission. I know the agent doesn’t make the 5% and depending on their split and their costs, their portion will be much less. But as a seller you are still faced with a 5% commission which is a big nut.
To me it seems as though the big real estate companies have spent a great deal of money convincing everyone that you have to list and buy through their company. Why do I care that RE/MAX operates in 120 countries and has 20,000 agents. All I care about is the one local agent that is going to sell my house. And I don’t care which company they work for. Let’s face it these companies are there to make money so when it cost them so little to hire below average agents, what do they care.
There are so few really good agents that the top ones could all come together and form their own company, independent of any brand-name brokerage and they would do extremely well. And without their talent the brokerages would go broke.
Jen
at 6:47 pm
Micheal Antczak is my Remax agent and he took the stress off of us he hired a guy for small repairs and had our whole house painted, staged and cleaned. A photographer took photos and a video and our house sold !!! All this and advertising costs were covered in his part of the commission and he screened everyone that entered our home so that we could feel secure. I think it is very important to have a pro sell your home. We once tried to do it ourselves and got slot of shady calls and stress and low offers. We couldn’t have staged and cleaned like Mikes team did for us. We have busy lives and he was FABULOUS!
Fawad
at 4:08 pm
I like the rant, thought it was stretched too far. This may have been the case if it was 1995 and the sales rep was right of high school. However, with today’s technology, lead generation system, and previous work experience – preferably marketing, you can make a good career out of this. I work full-time, I do real estate part time. I just started this week and I will come back in 6 months and provide you prove how it is done.
Thank you for this article. I enjoyed reading this although it is not Friday YET!
Have a great day everyone.
Shah
at 2:02 pm
Update on this?
Nav
at 5:27 pm
So Fawad – either you are busy making money or already jumped the train..which is it? 6 months..err its more like 3 years 🙂
Michael
at 11:22 am
Thanks for this rant, puts things into perspective!
Jen
at 6:41 pm
Michael Antczak is my agent and he is very down to earth and cares about his clients. He is an amazing negotiator and helped me buy my dream home. He works for Remax ALL OVER THE GTA. call him if you want a stress free experience (416)399-4221. Super nice guy
robert Holbrook
at 3:08 pm
Excellent – truthful article.
Joanne dimovitis
at 6:49 pm
Great article and so well written and thought out! Very, very informative – truth! Thank you!!! I wish I had read this BEFORE enrolling in the OREA Realtor’s course which is now 5 segments (and not 3) before you can be licenced to sell.
This, for me, is a second career, although my background is heaving in real estate from every aspect. Legal, construction, development, environmental.
With my background experience and knowledge – I thought – okay – this would be a good place to go from here and make some money!
The course is brutal!
My challenge right now is trying to not only finish the courses and pass Commercial Exam – but to decide on a brokerage which you made some very good points on! It’s not all about the commission!
Thank you for your candid description and “rant”.
I am grateful!
Joanne D