QUOTE (MonteDobson @ Oct 31 2010, 10:56 PM) Godfried,
If you as a realtor value your time at ~$150/hr, can you honestly say that it takes over 100 hrs between the seller and buyer agents to transact a typical $300,000 property?
Not refuting the fact that professionals of all kinds need to get paid, just trying to get a better feel of the time vs value per property that is involved in a typical real estate transaction.
Hi Monte,
My previous post was made more in geste than that it was made as a serious analysis. But since you bring it up, let`s try to analyze. Most of my sales are from the buyers side since as a starting Realtor I do not have an extensive client base. Also, I focus mostly on small rental properties. So your $300,000 price tage is a bit generous.
A $300,000 sale provides in Alberta a total commission of $13,000 ($ 7000 on the first $100,000 and another $6000 on the remainder). Let`s go through the buyers Realtor.
The Realtor has to spend first time on getting clients through advertising and door knocking and posting on REIN, whatever. In Realtor school the following rule of thumb is given: I have to meet 5 people and handout them my business card or contact information to get 1 lead. I need to have at least 5 leads to get one prospective buyer or seller and I need at least 5 prospects to make one sale. (I may have misquoted this rule a bit but I think I am not far off).
So to make one sale I have to meet 5 x 5 x 5 = 125 people. Would you like to convert that in hours?
So now let`s go the next step. I have a prospect who wants to be shown a house. I sat down with the prospect for typically 2 hours to learn the prospect`s needs, conditions and requirements (some are faster others are a lot slower).
Costs incurred are typically some cups of coffee at $3.00 each plus gas to get to the meeting place and another 2 hours to get ready for the meeting and driving there. In Calgary traffic is truly bad - driving from A to B takes everytime at least half an hour. Sometimes I meet clients in the office, but it is usually better to meet them after working hours in a more neutral area to take of the pressure.
Next you set up the MLS listing search using the prospect`s criteria for a potential property and set up the e-mails with listing updates. I have many clients set up that way and some of those e-mail updates are running for half a year and longer. You have to respond to e-mails if criteria change or being refined. This takes a fair bit of my time since I have to check my e-mails for this daily. So say, per prospect this takes 3 hours on average from first meeting to purchase (if we ever get there).
The searches are used to learn more about the prospect`s preferences and the prospect uses them to select potential places for showings. Typically, we try to visit 4 places on a `showings day`. Once I am informed what properties the prospect may be interested in, I make appointments and set up a schedule. Typically that takes about 1 to 2 hours on and off work. The next day, I meet with the prospect in a pre-showing meeting and we go over the purchasing process (many of the prospects have no clue) point out the need for pre-qualifying with a mortgage broker, refering to mortgage brokers, filling out and explaining forms. Explaining Agency Relationship, commission structure, explaining and signing a Buyer-brokerage agreement, going through the properties to be shown. This takes typically 1 to 2 hours (the latter usually on the first showing day, on subsequent days it is often just under an hour). Now we`re ready to visit the showing places, typically each showing including driving takes 3/4 to 11/4 hour. So now we`re 4 hours on the road. Then coming back to the office/meeting area and dropping of the clients. So a showings day takes typically 8 hours plus gas, coffee and antacid tablets.
Most clients require 4 showings days. So that is 4 x 8 is 32 hours.
The client is ready to write the first offer. You do a CMA (2 - 3 hours) for similar properties in the area. You do a title search. You collect data on the condo corp such as the survey plan. Next you write a first draft offer. Total time 4 to 5 hours. Next you meet the clients go over the offer and discuss the purchasing conditions. Make sure the client has lined up a building inspector, a condo doc reviewer, a lawyer and is pre-qualified by a mortgage broker. Often you provide last minute referal lists. Sometimes the offer is delayed because not all the ducks are lined up. So including transportation time and arranging meetings, doing an offer takes about 10 hours - especially the first offer). Next you contact the seller`s realtor and explain the offer and set up a way to deliver. Sometimes we deliver in person, other times we just fax. Average delivery time 1.5 hours. Now you wait for a reponse.
Sometimes the counter offer is done verbally because the constant scribbling on purchase offers and sending back and forth would take many hours. This way, it is a lot faster. Overall the negotiating process to accept or decline takes 5 to 10 hours. Lots depend on whether buyers and sellers are easily reachable or are out of town.
Typically I write 1.5 offers before one is accepted. So per offer it is about 15 hours work and with 1.5 offer make that 23 hours.
The offer is accepterd, Yahoo!. We have to scan and send all contracts and documentation to my brokerage. These include true copies of the purchase contract, Agency Relation form, Buyer brokerage form, Fintrac, Receipt of deposit, copy of deposit cheques, print out of listing. This has also to be send to the buyer. 3 hours
Arranging for home inspection with seller`s Realtor, home inspector, seller and buyer. 1 to 2 hours.
Forwarding property information to mortgage broker and discussions of buyer`s financing particulars to ensure the mortgage gets approved. I had a client for whom we had to send this data to several brokers before a final mortgage commitment was achieved. Typically 2 hours.
Forwarding purchase contracts, listing info, etc. to Buyer`s Lawyer (1 hour)
Obtaining condo documentation (1 to 10 hours) depending on the situation - typically 4 hours including finding a condo doc reviewer and sending them the data.
Attending home inspection 2 - 3 hours.
Talking to buyer, seller`s realtor and experts to ensure conditions and dealines are met - 5 hours.
Writing condition waivers - 1 in 4 fail (all work done for nothing) 2 hours.
Hehe. Closing date is coming. Last minute issues, pre-possession inspection. Sometimes no time - other times 10 hours. On average 3 hours.
Did you ad that all up? I come up with 85 hours for a typical succesful sale, not counting all the failures.
So that is the buy side. How much do I get for that? 50% of $13000 = $6500 or $76 per hour. This does not take into account my CREB membership, RECA Member Ship . MLS fees, Broker fees, car and coffee fees. And the potential legal liabilities that a realtor unavoidably incurs. Typically, my after sh.t-take-home is around $3500.00 or I am netting on a succesful deal $41/hour. If I include the failures (remember the 125 people I have to meet before making a sale, I would work for less than minimum wage)
You know, this is why I said to my friends, considering the efforts it takes to sell a bl..dy property, I would be much better off working as a geologist. And now with all this Competition Bureau BS, I decided that being a Realtor is not worth it. I learned an awful lot about real estate and as such it was a very valuable journey. But really, just reading the bad rap Realtors get on this site, who in their right mind wants to be a Realtor? In my eyes many (there are crappy ones) Realtors are worth their money and much more.
PS I vaguely remember Adam (HousingRental) claiming that his Realtor wrote 80 offers before Adam had a succesful buy.