Lets talk about the Elephant in the room also known as the “Out of Town Agent”

I believe there’s an elephant in the room that we haven’t been talking about. Well let’s be honest here, Realtors have been talking about it behind closed doors for some time, but there’s a fear in talking about it publicly. There's a fear of coming across as slandering or  being anti-competitive; which are two big no-no’s in our industry. As a result we’ve all been keeping mum on the Elephant in the room; the Out of Town Agents. When I say Out of Town Agents I’m referring to anyone who is selling real estate in an area that they either do not reside or are not a member of that area's local association of Realtors. This blog isn’t meant to put anyone down I will happily cooperate with any Relator when it comes to selling my client's properties. I think of myself as an advocate first and real estate broker second, and feel it’s time to start speaking up and exposing this issue that I believe is tarnishing our industry and putting consumers at risk.

This is an issue that is just too big to cover off in one blog, so I invite you to join me on my little exposé-series of the “Out of Town Agent”.

Let’s start with what’s happening and why. For the most part the out of town agents are coming to Northumberland are from the GTA, i.e. the GTA agent list their sellers home in their local market place and then that same agent will follow them down to Northumberland to represent them in their purchase. Based on figures from the Northumberland Hills Association of Realtors, sales from out of town agents are increasing by approximately 3%-5% a year and last year represented over 20% of transactions[1].

Based on the average home price in Northumberland vs the average home price in Toronto  agents receive less than half the commission on a Northumberland sale vs a Toronto one[2]. So it begs question; why an agent would travel over 2 hours and do twice as much work for half of the earnings.

Well for that let’s looks at the facts and stats. The Toronto real estate board currently has over 35,000 Realtors and based on 2013 total volume of sales that would equate to an average of 2.5 sales per Realtor[3]. Now when you look at the average commissions paid out to a cooperating brokerage and factor the average Toronto Realtor would be making less than $24,000 a year[4]. That’s barely minimum wage! After you factor in the high cost of living in the city, the average Toronto realtor is someone who's not making a lot of the good old mighty dollar. Now you also need to look at what we call the 80/20 rule in real estate; 20% of agents are doing 80% of the business. So that’s certainly not to say that all Realtors in Toronto are making less than minimum wage, as there are a lot of very successful Realtors in the Toronto market. When you account for the “top producing” agents that are doing 100 plus transactions a year, that 'average earnings' figure could be even less than $24,000.

So I use the watering hole analogy. Why are the Toronto agent traveling in herds to Northumberland? The same reason why an elephant will trek 11 kilometers a day in for water in a dry season; too many agents in the city have caused a dry spell and they are willing to travel a great distance to survive.

Now when it comes to your largest investment, who do you want representing your interests; a knowledgeable, successful, local agent or a starving elephant?  

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[1] Based on sales data from the Northumberland Hills Association of Realtors 2013              

[2] Based on an average sale price of $550,700 from the Toronto Real Estate Board August 2014 and an average sale price of $279,625 from the Northumberland Hills Association of Realtors July 2014.

[3] Based on the Toronto Real Estate Boards reported number of transactions of 87,111 and total number of registrants 35,000 in 2013.

[4] Based on an assumed typical 70/30 split of fees for an agent, a commission payable to a cooperating agent of 2.5%, and average sales volume of 2.5 transactions per year.

The opinions expressed in this blog are solely those of Jacqueline Pennington and do not represent those of the Northumberland Hills Association of Realtors or RE/MAX Lakeshore.  

Copyright © 2014 Jacqueline Pennington. All rights reserved.