Do you know that when you contact a real estate agent and ask them to provide you with a service, you are asking them to immediately spend their own money to help you? Why is this?
To properly answer this question, let’s take a look at the real estate industry, its regulatory framework, and how the industry, agencies, and the agent operate in business.
First, the Canadian economy has a goods-producing and a service sector. The service sector accounts for about 70% of the jobs in Canada and the real estate industry is a service-based industry that is part of the service sector. As with any other service industry, real estate agents provide services to consumers. They do so in anticipation of being paid for their real estate services.
Second, real estate is highly regulated by many different laws and regulations. As well, real estate agents who are also REALTORS® are bound by a written Standards of Business Practice. Of the more than 40 laws that apply to real estate, the Law of Agency is one that must be explained by an agent to a consumer at the first opportunity because it defines the relationship than can exist between that agent and the consumer. This law must be explained by the agent before providing professional real estate services to the consumer.
Third, real estate agents work on a commission basis. This means that they do not get a salary from the agency (for example, RE/MAX) through which they are licensed. As well, they do not get paid until after a consumer completes a home and/or property purchase or sale. Until that time, all of the time taken and money spent helping a consumer is provided by the individual real estate agent. It is very conceivable for a real estate agent to provide services to a consumer for a period of months or even years before being paid for their time and money.
So, when consumers contact a realtor and ask them to do something for them, the request often starts costing the real estate agent money. The cost may be small at first but it always increases with time. As well, many different small costs can add up to significant costs. As anyone in business knows, time is money.
Following are a few typical examples:
1. A consumer contacts a real estate agent through the internet and asks to be sent more information on a home or property. Gathering the information takes some time and, depending on the type of information requested, it may also cost money. Real estate agents have access to databases and not all database access is free. Some cost money to access and search;
2. A consumer contacts a real estate agent and asks to be shown a number of luxurious Comox homes. This request will cost the real estate agent time and money. The agent must fit the showing time in their personal schedule and they must then arrange with the seller or seller’s agent for the home to be shown. If the home is local it may only take an hour out of the day of the realtor to make the arrangements, drive to the home, show it, and then return to the office. If the home is any significant distance away from the office, it very easily could take 2-3 hours out of the day of the agent to accommodate the request;
3. A consumer contacts an agent and asks them to drop by their home to assess its market value because they are considering putting it up for sale. This could easily tie up 1-3 hours of the agent’s time and cost some money.
Fourth, it is important for consumers to understand that real estate services are defined in law. The showing of a home or property or the provision of advice on price are two examples of professional services. REALTORS® are obligated to explain the Law of Agency to consumers before providing professional services to them. As well, federal regulations require real estate agents to collect personal information from buyers and sellers.
Fifth, the June 2012 change in the Law of Agency made it possible for real estate agents to exclusively represent buyers or sellers in the vast majority of instances. Designated Agency is less restrictive than Limited Dual Agency as it applies to listings held by the real estate agency through which the real estate agent is licensed.
Sixth, the real estate process is not like the car buying process. Any consumer can walk onto a car lot and ask to be shown a car. If the consumer asks to drive that car they are generally asked to provide, as a minimum, some form of identification. In this example, the car sales person is trying to sell you a car as their customer. While there are instances when a consumer could be considered a customer in real estate, most consumers become clients of the real estate agent. Yes, there is a significant difference between being a real estate customer and a real estate client. There is also a very big difference between walking onto a car lot to view a car and asking a real estate agent to show you inside of someone’s private residence. Real estate agents are licensed professionals with professional obligations and liabilities.
So, do not be surprised if a real estate agent asks you to come to the office for a few minutes to meet you before they are willing to commit their time and money to responding to your request. They do not get paid to give out free information and advice to consumers, and they do not get paid to show homes. Competent agents do, however, provide a wide range of professional and valuable real estate services to buyers and sellers throughout these multistage processes. But, they do so in expectation of being paid when a purchase or sale completes. Real estate agents can and often do incur significant expenses each and every month to stay in business. If they worked for free they would not stay in business very long nor would any other person in business.
When you start to get serious about buying or selling a home contact a REALTOR® for help during the multistage home buying or selling process. Aim high for peace of mind. Contact Brett to be your Comox Valley REALTOR® and guide to buy or sell your next home.