The numbers are in, and I found them quite surprising. Every year for the past few years, I’ve compiled a set of local market statistics for Metro Vancouver. I’ve found an interesting and somewhat challenging trend. In fact, I even wrote a white paper on the subject if you want to dive a little deeper.
Here’s the trend:
Between 2013 and 2023, the costs of doing business have been relatively stable. Yes, some costs are up for sure, but the basic home marketing (photos, floor plan, video, MLS listing, etc.) has remained consistent, somewhere around $500. Yes, you can blow the budget if you have an incredible service offering with staging, cleaning, decluttering, and more. The core services, however, are pretty much the same.
Realtor income is directly tied to house prices
During that same period, I watched average commissions rise massively. Analyzing Metro Vancouver real estate data, I calculated the average commission rose from $8,055 to $15,206 between 2013 and 2023. That is an 89 per cent increase over 10 years. The reason is really simple.
Realtor income is directly tied to the housing price index. As the value of homes rises over time, realtors charge a percentage of that value. As a result, they’re earning higher and higher fees per sale.
On the surface, this looks like an amazing part of our business. Our costs are relatively stable. Our per-sale commissions are up. So maybe, just maybe, it’s time we ask a few difficult questions: Are we justified in charging the fees we charge today? Do we provide value that is commensurate with the services we offer? Does our business model still work today? Why or why not?
It’s no secret there is always downward pressure on commissions. Whether you’re charging 7.0 per cent on the first $100,000 and 2.5 per cent on the balance or a flat fee of 5.0 per cent, all realtors face price objections from clients regularly. Are consumers right to press for discounts?
Don’t get me wrong; I’m all for high-value businesses charging high-value services. But, when costs have been stable, realtors clearly succeeded at a lower price point, yet per-sale revenues have risen; where was the win for the consumers? Or do you think they have been forgotten in the rush of the marketplace?
“Don’t get it twisted either; I’m not suggesting we’re overpaid. In a dynamic marketplace, there is room for luxury, discount service providers, and everything in between.”
Let’s add a few startling facts to the mix. In the same research, I found that even though per-transaction commissions are up, the average income of a realtor in Metro Vancouver is just under $66,000 per year. The average number of sales per individual in 2022 was 4.3.
Rising interest rates through the latter half of 2022 and into 2023 have definitely slowed things down. When you look at the top 10 per cent, average earnings are approximately $383,000. If you decide to look into the bottom 90 per cent, you’re a few hundred dollars over $30,000.
I think it’s time we turned our critical lens on ourselves; we need to have a very serious, very open conversation about the value we provide and the rates we charge for a customer to realize that value. It’s time we took a look at the business model we embrace that creates massive success for some and some significant struggles for many.
Don’t get it twisted either; I’m not suggesting we’re overpaid. In a dynamic marketplace, there is room for both luxury and discount service providers and everything in between.
If we’re going to be true professionals and care for our customers, what matters most is that we answer the question, “Does the price tag match the value?”
For more, read Cameron’s whitepaper, ‘The Disconnect Between Realtor Earnings and Consumer Costs.’
Cameron has worked within the real estate industry for over a decade. With early success in sales and winning a handful of local and corporate awards, he transitioned to the management side of the office. It was in this phase of his career that he found his strength. He has consistently worked on business development for brokerages since, consistently recruiting 50+ realtors per year, coaching and developing new realtors and designing custom brands and business strategies for senior realtors. Today, Cameron continues in this work, helping offices and realtors consistently grow their bottom line through implementing results-orientated processes.