The real estate business is highly regulated, highly competitive, and expensive. Most people will understand that real estate agencies, like any other business, have significant expenses associate with running a business.
What is not well known is how the business side of real estate operates at the individual agent level. While agents are required to be licensed through agencies in order to provide people with real estate services, in many cases they operate as independent contractors. As such, they are not employees of the agency, they do not get paid a salary by the agency, they incur many different expenses of their own to stay in business, and they only make money when they complete home sales for buyers or sellers.
People in business know that there are many expenses associated with running a business. These expenses are both fixed and variable. Fixed expenses are those associated with being in business. Variable expenses are those associated with the provision of products or services. Real estate is one of the many service-based industries in Canada.
Once real estate agents are licensed, they have to generate business to stay in business. The agency does not do this for them. They, and they alone, are responsible to do this. With any business, it takes money to make money, to stay in business, and to be profitable. A few of the real estate agent fixed expenses include, but are not limited to, the following:
- Annual licensing fees
- Annual professional insurance fees
- Annual professional association fees
- Annual membership fees
- Annual accreditation fees
- Annual tech fees
- Monthly real estate board fees
- Monthly management fees
- Monthly agency fees
- Monthly online marketing and advertising costs
- Monthly system fees
- Monthly utility bills
- Monthly equipment fees
- Office equipment expenses
- Office supplies
- Office expenses
- Motor vehicle expenses
- Ongoing Professional Development course fees
- Salaries of assistants
Some of the real estate agent variable expenses include but are not limited to:
- Marketing and advertising homes for sale (online, print, etc.)
- Personal marketing
- Agency fees
- Motor vehicle operating expenses
- Motor vehicle maintenance expenses
- Travel expenses (courses, meetings, etc.)
When you engage an agent, you are engaging the capability, expertise, knowledge, and competency of that agent. While these aspects often vary with each agent, some agents developed them through years of education, training, experience, and expense. Additional expenses are incurred to maintain and improve upon individual agent capabilities and knowledge through ongoing education and training.
Yes, real estate agents do incur many different fixed and variable expenses to be in and stay in business, and to provide real estate services to people. For buyers, agent expenses go far beyond the gas spent driving people around. For sellers, agent expenses go far beyond the cost of a few newspaper ads. Fixed expenses can easily add up to thousands of dollars a month and more. Variable expenses drive expenses even higher.
Real estate agents are willing to incur these expenses for serious buyers and sellers. When buyers or sellers are not serious or committed to near term transactions, agents must make business decisions in favour of those who are in order to stay in business and to continue to be able to provide real estate services to people who need them. Generally, the longer it takes to do something, the more it costs, and there is a “break-even” point for every transaction. As the old saying goes, time is money and this is no less true in real estate than any other business.
When you need to buy or sell a home in the Comox Valley, turn to Brett Cairns at RE/MAX Ocean Pacific Realty for help.