Re: Larry Simpson’s March 29 letter, “Real estate market infuriating.” The frustration among property buyers the past two years is palpable. I get it. But as a real estate salesperson, I take exception to some of the feelings he expressed about my profession.
First, we are a tightly regulated industry. The Real Estate Trading Act regulates our industry and creates the self governing body, the Nova Scotia Real Estate Commission, which administers the Act. The NSREC is there to protect the public.
When one uses words like “conspire,” it connotes a very serious allegation which is in contravention of our bylaws. Salespeople and brokers can be punished quite severely by NSREC when complaints are registered and investigated. It may be beneficial to visit the NSREC website and read up on the bylaws, the act and also read decisions on cases of salespeople being disciplined.
Second, the public in general may not necessarily understand agency and how it works. If you notice, I’m calling myself a salesperson. Language is extremely important in our industry. I work for a common law agency and when a house is listed or a buyer signs a brokerage agreement, an agency relationship is created with the brokerage and I’m licensed to act on their behalf. The brokerage is the agent in my case and I’m its licensed salesperson. It’s very important to make that distinction. Now, there are designated agency brokerages, too, in which the rules vary, but once again, these nuances are explained on the NSREC website and should be explained by your salesperson via our handy Working With The Real Estate Industry information form.
Third, this idea of “fat commissions.” It appears the public at large thinks we are all getting rich. As real estate salespeople, we are self-employed. Being self-employed entails all the same pitfalls as any small-business owner, including competition.
Imagine owning a restaurant in a city with 1,100 restaurants selling the same food as yours. In tight market conditions like this, it can be tough to get listings and if you have buyers, it can be tough to be the one in 100 who wins the bid.
Imagine owning a restaurant in a city with 1,100 restaurants selling the same food as yours. In tight market conditions like this, it can be tough to get listings and if you have buyers, it can be tough to be the one in 100 who wins the bid.
We all only get paid on closing day. If a salesperson isn’t getting deals, they aren’t getting paid. If an agent is fortunate enough to close a deal, that commission isn’t for them; it’s for the brokerage.
Then it’s split up. Say a house is listed with brokerage ABC for a five per cent commission. In the agreement, it can be specified that a portion of that percentage can be shared with cooperating brokerages to aid in the sale of the house. Many still split it 50-50, but more often, it’s becoming a case of the listing brokerage keeping the bulk and offering less to cooperating brokerages.
For this purpose, let’s say two per cent is offered to the cooperating brokerage XYZ. Say, then, your salesperson got your offer accepted and the property closes, the two per cent then goes to the brokerage XYZ, where it is then split between the brokerage and the salesperson. That split is negotiated when the salesperson joins the brokerage. Some places do tiered splits based on gross commission, others do straight splits that never change. But say the split is 60-40; this then means the two per cent of the sales price is further reduced to 1.2 per cent.
But wait! We’re self-employed, which means no deductions or income tax is taken off, so it is incumbent upon us to put money away for tax time. It’s responsible to set aside 20 per cent for tax purposes. That leaves 0.96 per cent for actual income to the salesperson.
Let’s apply this to a sale price of $400,000. The take-home money on that would be $3,840, which doesn’t sound half bad! But don’t forget a closing can take a month, or two, or more. Remember, salespeople don’t get paid until closing day.
If they have to wait two months for their pay, that means they have to carry the cost of living and operating the business that amount of time, too. So $3,800 evaporates quickly in two months when there’s gas, groceries, rent or mortgage, car payments, plus all the professional dues, advertising, and on and on.
It’s not all sunshine and lollipops selling real estate. We do, in fact, work very hard, like any small-business owner, to stay afloat.
It’s only in this past couple years where we have experienced this boom that it could be called “good times” in the industry. Traditionally, it is a buyer market or balanced market. What we are experiencing is an anomaly, for sure. It will eventually go bust again. Such is the cycle of real estate.
Last, I will agree on one point with Mr. Simpson: blind bidding should go. Once again, what we say, and when we say it, is very tightly regulated around multiple-offer situations. We cannot in fact tell people to offer more. You can have a bidding war to the bottom just as much as a bidding war to the top, depending on the house — but buyers naturally assume more people involved means more money needed to win.
But buyers never know if they offered over and everyone else offered under. I do agree that is unfair, and I support the Home Buyer Bill of Rights proposed by the federal government. Bidding should be open and transparent.
If you think something untoward has occurred in a transaction, you should reach out to the salesperson’s broker and discuss. If you are not satisfied with that conversation, then reach out to the NSREC to escalate your complaint further.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
