Low Commission B.C. Real Estate Agents

As technology makes it easier to research, buy and sell a home, the commissions paid to real estate agents should be coming down. They’re not – though that might be about to change?. Bob Dymont doesn’t sound like a revolutionary. He’s too soft-spoken, too diplomatic, too avuncular. And yet, in real estate, he’s done nothing but overthrow the status quo for the past three decades.?

Bob Dymont, who helped lead real estate innovations at Remax and Sutton, is betting on a new agitator.

As technology makes it easier to research, buy and sell a home, the commissions paid to real estate agents should be coming down. They’re not – though that might be about to change

Bob Dymont doesn’t sound like a revolutionary. He’s too soft-spoken, too diplomatic, too avuncular. And yet, in real estate, he’s done nothing but overthrow the status quo for the past three decades.

The 66-year-old Vancouver resident played a general’s role in building Remax in the mid to late ’80s, which drastically reshaped the way realtors operate by changing the way they earn commissions. Less than 30 years after it was born, Remax was the top-selling realty firm in the world. 

Dymont then took on the role of CEO of Sutton Group, leading that outfit from upstart to the No. 2 spot in Canada by again changing the rules of engagement by tweaking the way realtors are paid.

Such is his reputation as a franchise builder that Dymont has never been short of offers from entrepreneurs who think they’re the next game changer and want him to help them build their business. Yet for the past 13 years, since his last assignment ended – taking the top job at Realty World, a 15,000-agent international firm that he turned around and sold off in parts – he’s turned all these offers down. Until now.

“Everyone else is trying to reinvent the wheel,” he says of the other entreaties he’s received from real estate entrepreneurs. “This is different; this is the future. Our timing is good.”

He’s referring to what he sees as the next seismic shift in residential real estate: the full-service discount realtor. On paper anyway, this model would give agents a lot less and customers a lot more. This time, though, Dymont isn’t betting on a firm that’s already proven its staying power, as Remax and Sutton had when he joined them. He’s betting on a 31-year-old Alberta kid who’s fresh out of the gate and who thinks he’s got the next revolution figured out: using technology to cut the costs of selling a home. This kid, who’s been very successful so far, wants to be a real estate mogul. Dymont thinks he’s going to make it, and that’s a big endorsement. 


2% Realty

The would-be mogul in question is Roy Almog, and his mission is to upend the way we buy and sell our homes. He’s not the first entrepreneur to latch on to that lofty and lucrative goal. But he is, so far, one of the more successful of the recent crop. In just over three years, Almog and his firm, 2% Realty, have made a deep mark on the realty industry in Alberta. Now he has his eyes set on B.C., the first step in his aggressive push to build a nationally franchised realty firm. And his biggest coup is lining up the support of a veteran like Dymont, who’s leading the expansion efforts.

The name says it all: 2% Realty sells real estate for a two per cent commission. The typical rate in B.C. is seven per cent on the first $100,000 and three per cent on the rest (that’s standard, but agents can charge whatever they please). The cost of selling an average detached home in Vancouver – based on the Real Estate Board of Greater Vancouver’s benchmark price in December 2010 of $800,000 – is $28,000 using regular commission rates. The cost of selling through 2%, which just opened its doors in Vancouver, is $16,000. 

There are other discount options in the B.C. market. ComFree, which stands for “commission free,” has had some success by charging a small fee to list on its website. Other firms have offered discounted full service (meaning an ad on MLS, the multiple listing service, and an agent to show the home and take care of offers). One is Vancouver’s One Percent Realty, which has done well locally (although it usually charges more than one per cent because it imposes a minimum commission of $6,900). And some agents will discount their rates on an ad hoc basis. But by and large, discounters are the exception despite their rapid proliferation.


The commission conundrum

Almog started his business in mid-2007 in Edmonton at the age of 27. He got the idea to launch 2% when he was buying houses, fixing them and flipping them back onto the market in his hometown of Edmonton. He couldn’t help thinking that he was paying a lot of his profit out in commissions, and a subsequent investigation led him to get a realtor’s licence and start his own firm. In his first year of operations, Almog single-handedly made 33 sales, well above the average for a full-time agent. Last year, having expanded to Calgary, the firm sold 203 homes. That’s a small number relative to the size of the combined Calgary-Edmonton market but a big number for a young firm with only two offices. Much more telling is that average days on the market for a 2% listing is 32, about half the industry average. 

Not bad for a firm that has yet to celebrate its fourth birthday. But the truth is that the business model simply wouldn’t work any other way because this revolution is about technology and volume. 

“Twenty years ago, there was no Internet. There were no BlackBerrys or iPhones. Agents had to use binders, pick a few listings they thought their clients would like, then drive them around. They earned their commissions,” Almog explains. “Today the typical client looks at MLS himself, drives by to look at the place, then calls the agent if he wants to go inside. Technology has made the job a lot easier, but the commission rates haven’t come down.” 

Not true, say his critics, who are typically other agents who charge higher rates. Almog and his ilk, they say, can’t provide the same level of service and charge so little. Even the real estate boards are at best coolly cordial when asked about discount firms, even if those firms are members.

“If consumers find value with their services, they’ll be successful,” says Jake Moldowan, an experienced Vancouver realtor and president of the Greater Vancouver Real Estate Board. But he’s skeptical: “You can go online and get a kit that lets you write your own will for $50. I just had mine redone [by a lawyer] for $5,000. Some lawyers will do it for $300. Could I have done it cheaper? Probably. Would I have had the same quality of service? Probably not.” Moldowan also bristles at the term “discounters”: “I don’t acknowledge that word because it assumes there’s a standardized fee, and there isn’t.”


Do real estate fees correlate to service?

It’s a familiar refrain from agents everywhere: fees are not set in stone but they do correlate to service. The more you pay, the more you get. “Time will show whether or not it’s a business model that can thrive,” says Chris Mooney, a real estate agent and president of the Realtor’s Association of Edmonton, where 2% has its longest track record. “There aren’t a whole lot of them out there that have stood the test of time.” Mooney acknowledges that technology has changed the game but insists that it has only made consumers more demanding of the level of service they want. 

The fee-equates-to-service argument is nonsense, says Tsur Somerville, a UBC professor who studies the real estate industry: “House prices have more than doubled over the past decade or so, and so have commissions more or less. Has the level of service doubled? It hasn’t.” Somerville says it’s this dramatic rise in house prices, and the advent of technology, that make room for the discount model. Selling real estate, he says, can be more of a low-margin, high-volume business, although he’s not sure that this pricing model will dominate. Why? Because, he says, if it had such an appeal to the consumer, it would have taken off much faster than it has.

Yet the numbers do seem to bear the discounters out. There are no official statistics tabulating the growth of the model, but anecdotal evidence from industry sources confirms that it’s a trend. And both 2% Realty and One Percent Realty have seen their listings grow from nothing to respectable numbers in a short period of time, although neither has a big share of the market as yet.


Real estate agent averages

The average realtor in Western Canada does about 10 deals a year, but since that number is skewed downward somewhat by part-time realtors, industry sources suggest an average for full-time agents in the mid-teens. Almog says his agents sell about 25 homes a year – about the same as One Percent Realty – and he figures that as the housing market slows down, more sellers will choose the discount route: “They can afford to lower their price a little and still get the same or more for their homes because the agent is taking less.” In other words, a house can be listed for less with no cost to the owner. 

And as for Somerville’s comment about the slow rate of adoption by consumers, Ian Bailey, the founder of One Percent Realty, counters that his firm spends significantly less on advertising than the big firms. It takes time to educate the public and attract more realtors, he says, but the trend is definitely upward. 

While it’s impossible to track the success of these new firms because real estate boards don’t keep stats on them, one thing is clear: other agents don’t like them. Bring it up to any realtor and the response tends to range between resentment and hostility. This animosity led to problems for Almog early on as some agents said they wouldn’t show his listings, either because they resented him or simply because they wouldn’t earn as much if their clients bought his listings (selling and buying agents split commissions 50-50). But it turns out to have been an idle threat; the majority of 2% sales are to clients using traditional agents. 

Almog says he has had little trouble getting sellers, but attracting buyers has been more of a challenge. That’s why he introduced a cash-back program in 2008, whereby anyone who buys using his firm gets a cheque for one per cent of the purchase price on closing. The scheme seems to be working: he’s given away more than $500,000 that in a full-fee deal would have gone to agents. 


No perks with a full-service agent

Dave Lawrence, a Calgary oil and gas executive who has bought and sold multiple homes in his life, the last time through 2%, sums up what other customers say: “If there was something over and above what Roy offers, I might use [full-service agents], but there isn’t. You’re not getting anything for that difference.”

That’s exactly the consumer appeal Dymont is counting on, and his long experience suggests he’s got a knack for spotting trends.

He’s been in the business since the ’60s. From 1984 to 1989, he ran franchising operations in Western Canada and the Pacific Northwest for Remax. Remax, like 2%, wanted to revolutionize real estate with one simple innovation: the desk fee. Instead of charging agents a fat proportion of their commissions – 40 or 50 per cent – Remax would charge a small monthly fee to agents in exchange for the use of the office, name, advertising and so on. The upshot of this strategy is that the agents, including many top producers, wanted to join. In his five-year stint at the firm, Dymont grew his region from zero to 130 offices.

He then joined Sutton Group as CEO and grew that firm from 1,300 to 5,800 people. Sutton was also a game changer, emphasizing à la carte services to agents, who were able to pick and choose what they wanted from the firm and pay accordingly.

In short, he’s an expert in franchising new realty models. So what does he see in 2%? For starters, he sees an “uprising” against commissions across the country. “I think a lot of homeowners are getting tired of paying high fees. Every time I go to social gatherings, I hear grumblings: My realtor listed my home and made $30,000 for three hours’ work. They don’t always understand the realtor’s point of view, of course, but that’s what they think.”

Dymont acknowledges that there will be challenges in ramping up. It wasn’t hard to get realtors to join Remax, he says; they would make more by moving. To get them to join 2% is tougher because, on paper, agents assume they’ll be making less. Dymont says they need to be educated so they understand that they can actually earn more. It helps that One Percent Realty, established in 1999 and having sold hundreds of homes since, has already proven that agents will move to a discount model. 

Almog says his eight Alberta agents earned, on average, $124,000 last year; that appears to be higher than the average, but real estate organizations don’t track that statistic. A 2006 survey by the Alberta Real Estate Association found that 61 per cent of realtors earned less than $75,000 annually. 

What will help convince agents to join is growing consumer demand for another way, says Dymont. “Agents will follow the customers, and the customers know agents do less these days. The clients already know which homes they want. The realtor does the paperwork, the legalities,” he says. “The role has greatly diminished. I got in the business in ’69. Everything was done manually. In the ’80s, my Remax office had the first fax machine. Agents lined up to use it. Today everything is done in minutes.”

As for the naysayers, Dymont says they’re “protecting their turf; they’re holding on with their fingernails.”