Tuesday, February 16, 2010

Enjoy competition? Becoming a realtor is for you! Part III

Finally, how competitive is it to be a realtor? Extremely

Do not feel bad about this, I don’t. But be aware.

In Alberta, to become a realtor you have to follow an education program that is approximately 3 to 4 months long on a full time basis plus you need a high school diploma. The program tuition and exam fees amount to roughly $7000. You have to do 3 or 4 major exams. Once qualified, you have to do annual mandatory professional development (typically a 3 days to a week or so of education every year). This can often be done in classroom or on-line.

You have to be licensed by RECA and accepted (in particular when doing residential) by the local real estate board. You also need some gadgets to access MLS and to be able to enter properties for showing. This amounts to $2000 in the first year and $1200 to $1500 in subsequent years. You must be associated with a brokerage firm such as Royal LePage Pinnacle or Royal LePage Solutions. This costs you about $1000 per month.

You need to advertise, have open house signs, pay gas to drive your clients around (and fuel the clients with coffee) as well as an accountant and numerous other standard business expenses. You have no fixed working hours and may work until deep into the night. Clients do not come running into your arms – you have to do extensive marketing for yourself. Typically you should not count on any income during the 3 to 4 months of education nor during the first 6 months or so when starting up. That means, you may need to live close to a year without income to become a realtor.

80% of the properties are sold by 20% of the realtors.
In Calgary there are right now 4000 active listings and over 5000 realtors with negotiable commissions. The average house sells in Calgary for $330,000 or so and it takes currently about 2 months to sell a place. Many realtors want a commission of 7% on the first $100,000 and 3.5% on the remainder of the sales price. So total commission per house sold is around $14,000 to be divided (often equally or somewhat equally) between buyer and seller realtor. Assuming a 50/50 split this would amount to $7000 per realtor, from which he/she has first to deduct all expenses. So say the realtor’s take-home is $5000.00 per house sold.

So per month right now, 2000 properties are sold in Calgary. 80% or 1600 properties are sold by 20% or 1000 realtors. The other 4000 realtors sell 400 houses per month. That is 1/10 of $5000 or $500 dollars per month if you are one of the lucky 80%. Wow, that is some monthly salary! No wonder that a large proportion of realtors quit in the first year and many more won’t make the five year line. I can’t think of a more competitive profession.

Don’t get me wrong. I love being a realtor, especially since it is my second or semi-retirement career. I love investing and I love helping other people on their way toward achieving their personal Belize (life vision). I see myself doing this another 30 or 40 years from now. I visualize myself at 92 in a wheel chair racing out in front my clients in a show home. Squealing enthusiastically and pointing out that the kitchen has a top-of-the-line dishwasher. But above all, I love the excitement of the deal and helping others on the way towards fulfilling their dreams. After all, as Don Campbell pointed out this Monday night at the Red and White Club in Calgary, it is not about retirement and sitting at home or being bored on the golf course. It is about having the financial strength to do what you want to do. Eh, even Tiger Woods gets distracted playing golf 24/7 as we have recently learned.

No comments:

Post a Comment