December 8, 2016 | salespersons
At first glance, it really doesn’t seem to make much sense. Was there a miscalculation? Is this a “post truth” post? To that I say: Nope, it’s the facts. As of 2016, according to my simple calculations, there is one real estate salesperson for every 131.5 Greater Toronto residents.
If you’re skeptical, here is how I crunch my numbers:
First, I took the number of real estate agent in Toronto Real Estate Board that has currently grown to 46,000 real estate salespersons. That is up almost 12,000 (35%) from five years ago. I have taken the population of the Greater Toronto area with a population of 6,049,000 as of 2016 and divided it by the number of agent in the Toronto Real Estate Board. This includes Toronto, Halton, Durham, Peel and North York. And there you have it: 1 real estate salesperson for every 131.5 Torontonians.
The research behind this comes from the very talented past President of TREB, Mark McLean. You can find a more detailed blog if Mark’s findings here.
From my calculation based on Mark’s numbers, some obvious questions arise. So, I thought I would try to answer some of these questions to the best of my ability in a sit-down interview with myself. So, allow me to do a little question and answer period. Me interviewing me.
DAVID: Why are there so many agents in Toronto?
DAVID: Well, as I see it, there are two reasons. First, I think there is a popular perception out there that real estate is easy money. To the average Torontonian it seems like a good way to make a living.
The reality is that the average agent in Toronto would be living below the poverty line.
25% of them do not do a single deal in a year. That’s 11, 500 agents that do not make a dime but still pay out all of the board dues, insurance, licensing fees the fees to their brokerage. Those agents are not even breaking even. Another 16% or 7500 do 1 deal a year. Again, a very tough way to make a living.
That’s 41%of all Toronto agents at 0-1 deals/ year.
On the very top of the spectrum, there are 15 agents who do over 200 deals as year. How is that humanly possible? Well, it’s not just one agent doing all the work. It’s their team. For every deal made by a team member, the team leader achieves a sale with a portion of that sale going to that team leader.
I also believe the current job market has some instability to it. So, when someone is downsized, replaced by a robot, find they are not fulfilled in their job, given a package or are planning on retiring, they look to real estate as their next or supplementary career because there is a perception out there that it is an easy job to transition into. Also, there are a lot of folks who do real estate part time.
Some firemen, for example, are often real estate agents on the side.
The perception is often that real estate appears to be a way to make a good income with little training involved. And for some, with the right experience and approach, it is a good match and a good way to make a living. For many, that is not the case. You have to believe that if there is one agent for every 131.5 people in Toronto, then there is going to be some fierce competition. 70% of all Toronto agents will drop out in two years.
DAVID: Why has the number of realtors grown so much over the past five years?
DAVID: I find that the number of agents usually grows with the performance of the real estate market. So, if the Toronto market is growing and increasing in value over the last five years, then the number of real estate agents will grow as well. I think people just like to be near things they perceive as growing and successful.
If the real estate market would ever change and prices were to decline, then the number of real estate agents would go down. The irony is that the more agents there are, the more difficult time incoming agents will have breaking into a very full market. Don’t get me wrong. Some newcomers will be a great addition, but I think it is becoming more and more difficult for newcomers to build a business, especially they are a part-time agent.
DAVID: What does this high number of real estate agents in Toronto mean for buyers and sellers?
DAVID: It means that buyers and sellers should vet their real estate agents very carefully. I’m all for giving the new people a chance, but a buyer and seller should make sure that their realtor has some experience, something they can bring to the table to help them land the right property in this market. Over the past five years, I have been surprised at how many real estate agents do not seem to have enough experience to complete the paper work correctly. Part of that blame has to be with the brokerages they choose that offer low brokerage fees and limited training.
DAVID: Do you think that the huge number of real estate agents in Toronto creates a perception that the professional designation is too easy to obtain?
DAVID: The academic requirements to become a real estate agent are not as rigorous as some other professions, but the courses do largely cover the things you need to know. Our training is around the rules of working in real estate, but most of the experience comes from working in the field. That’s where most experienced agents built up the bulk of their knowledge. I think real estate would work better with an apprenticeship for newcomers.
DAVID: And lastly David, do you see the number of real estate agents in Toronto changing any time soon?
DAVID: I imagine these numbers will only increase more unless there is a change in the market or the perception of the profession of real estate as a place to be self-employed and make money. The high functioning agents who can work full time in this profession will remain a minority for years to come.
DAVID: Thanks for your time today, David
DAVID: The pleasure is mine. Please let any readers know they can send me any questions they may have on this topic.