This is for you, if you are considering a career in Real estate sales. Real estate agents are independent sales people who run their own businesses governed by the Law of the Business Broker Act of 2002.

To become a licensed real estate agent a series of three courses are taken and then there is an articling period of two years during which they work with a brokerage and take an additional three courses. The six courses cost about $600 dollars each so the total start up expense with be about $1800 plus $1800 = $3,600 There are ongoing courses based on a two year cycle after probation ends. The courses are recorded and credits are earned. Each credit costs about $30 and 18 credits are needed before the cycle repeats.

There is no leniency for forgetting. Licensed salesperson’s  are responsible for maintaining their good standing or their license is terminated. During the time a new licensee begins working with a company there is the expectation of guidance and continuing instruction from the brokerage with the practical part of working with buyers and sellers, signing representation contracts and closing sales transactions. There is certainly a lot to learn in a short time frame! Most companies will offer some training. In my experience a lot of training is needed to prepare people who have limited experience in general sales, after all, a successful real estate business is built on relationships with people as opposed to knowledge in house construction or renovating.

Expenses as a Real Estate sales person. There are ongoing expenses of licensing fees, insurance and membership fees for the Ottawa Real Estate Board, the Ontario Real Estate Association and the Canadian Real Estate Association. There are also fees frequently called desk fees and they are paid to the Brokerage for training and telecommunications and additional resources. I’m suggesting these ongoing expenses would be about $300 per month. There are also commission splits to the company and they would occur when sales finalize.

Generally speaking, beginning licensees will be offered commission splits of 50/50 60/40 and 70/30. It is important not to put too much emphasis on the commission split arrangement. Consider the complete package of services offered by the company; the history, the education available, the company culture and the ethics of the company will over time to be more important for the beginning Salesperson.

What is meant by company culture? To start with the history of the company and its relationship to the city will be important. Small things like hours of operation, the way incoming calls from the public and other agents are handled and the training the front desk people have is extremely valuable. One office opens at 8 am to 9 pm weekly compared with offices that close up at 5 weekdays and noon on the weekend. Then there are offices that have a recording machine at the front desk. There is never a receptionist on duty! Imagine wanting to visit a new listing with a buyer client only to be told by a machine that your call will be dealt with promptly!

Companies that give back to the community or promote the agents who add value to noteworthy causes help indirectly all real estate agents appear as caring and engaged professionals. I regularly offer sightseeing flights to fundraising events such as the Spring Time in Paris fundraiser ball in sponsorship of the Children’s Hospital of Eastern Ontario. The company I work with has donated financial support to many of my fundraisers.

The size of the company will also be an important factor. It might be thought that a smaller company with under 40 salesperson’s  would be desirable. Yes! On the other hand a larger company should be able to afford more services and attract more accomplished professionals who in turn act as models of successful business practice for new licensees. Working in isolation is not recommended at least in the first five years of being licensed.

Another consideration is the average age of the sales persons where you may be working. In Ottawa the average age of a real estate sales person is 59 years. Some companies attract a younger group. Average age and company retention are important factors in choosing a real estate company. One company has an average of 37 years. Big difference from the average! That means younger people, more energy, new ideas, more activities, more attractions to keep members. Yes!

Currently there are about 2600 licensed sales persons in Ottawa. They sold about 11,000 homes last year or about 4 homes each. The average price of homes fluctuate per month however if the average home was about $340K it would generate a commission of $8,500. The average licensee would then earn about $32,000 with the four sales. Generally speaking the “break even” point is selling six homes. This means generating $50,000 in commissions will pay expenses after which there is income to live on. This simplistic formula is not a true picture of the industry but it provides a guideline. A better expectation of sales activity would be where an agent makes one sale per month and earns $102,000. per year. High producing licensees will sell two homes a month or 40 homes and earn about $300,000 per year. A person selling 40 homes a year would be doing very well depending of course on the value of the home sold. licensees selling higher priced homes earn substantially more per sale than they would selling lower priced homes.

There is simply a maximum number of transactions a person can manage before hiring a personal assistant becomes a necessity. Most never reach this level of success and choose different careers after two years. Finally there are real estate teams with even higher sales units. One hundred sales a year would generate sales amounting to $700,000 or more. The highest producing real estate teams in Ottawa sold upwards of 300 homes last year and they consist of up to 12 licensees and several non-licensed staff.

This may all look very exciting, yet there are very real costs to building a business and maintaining it through out a year where heavy borrowing may be required to pay expenses such as Revenue Canada, HST, advertising, promotions, fees, vehicle expenses, and technical expenses at times when little revenue is generated especially at the beginning of the year. Can you imagine having to pay your income taxes at the end of March when you haven’t even made one sale during that period! The high cost of running a real estate business means that in a start up situation an outside salary or an additional salary is very welcome to lean on while the business grows.

The splitting of commission with a brokerage varies among companies. It usually has a cap of about $20,000 after which 100% goes to the agent. One company has instituted profit share program where 48% of monthly profit is returned to agent for life. This is an attractive program as there is no support, retirement or pension fund when an agent decides to stop working, is injured or shifts to another line of work. After a successful career, it is very difficult to sell a personal real estate business unlike other businesses.

The average age of a licensee in Ottawa is surprisingly 56 years old, however the largest number of sales are generated by a younger group aged about 34 years. Young licensees in their 20 are also successful. The most important factor in success is networking with family, friends and existing relationships and asking them to support you with referrals or introductions. Ask them the following question: Who do you know who is interested in buying or selling a house in Ottawa this year. Follow up with all your contacts regularly. Soon, relationships will strengthen and you will find yourself on course for an exciting career in Real estate sales.

Any thoughts or questions? I’m available to answer questions about a real estate career. 

Call or email if fine. Tel:613-722-3733 or email:  melder@kwottawa.ca
Content written by Martin Elder. Trademarks owned or controlled by The Canadian Real Estate Association. Used under licence.