Earn back buyer's real estate agent commission - Become an Agent!
This thread focuses on becoming a real estate agent, which I am doing. EDIT: Less than 4 mos later I have my licence. It is about but how to earn the 2.5% commission the seller pays buyer's agent when you buy a home, rather than being able to sell your own home which you can already do with a flat rate MLS listing (see my guide Here to learn how to do that), Before I even start, kindly dispense with the "This is not worth it!", "Why would someone do this?", etc comments. Just move on as it adds nothing to the discussion. It may not be worth it for you but your value matrix should not be imposed on others. It certainly is worth it for me and many others to put in the effort to save this kind of money. If anything, even if you are not interested in actually doing this, just understanding how the licensing process even works by reading this first post may be worthwhile.
This post is long because I gathered all the info from various sources, including phone calls to the various organizations, and also am dispelling alot of misinformation out there. Btw, If you think this post is too long and cannot take the 10 minutes to read it I would strongly suggest you not consider taking a course that is 215 hours + study time + travel time + 6 x 3-hr exams to be initially registered, not to mention another 30 hrs of study and 1 exam after that. The post is long because that is the only way to provide all of the detail I have gathered from various sources and provide it all in one place. This is for Ontario only. Just to clarify I am talking about MLS listings, which comprise 90% of all homes listed, not private sales or alternative methods that do not involve MLS. There is a buyer's agent commission specified in every one of those MLS listings, which is typically 2.5% (sometimes 2% but rarely).
All MLS listings have a buyer's agent commission so that agents want to show your home to their clients. Less than 2.0-2.5% and you'll find your home is shunned. Unethical but it happens. I have my license mainly to earn the commission on the properties I buy for myself, not the public.
In Ontario, the Ontario Real Estate Association ('OREA') provides the education required to become registered/licenced as real estate agent. The degree of difficulty you will find with the OREA courses depends on your background. I find them very easy but then I have 4 degrees. There are parts where one has to do a bit of memorization of the various terms. The Real Estate Council of Ontario ('RECO') provides the registration to become a real estate agent. TREB (or whatever real estate board is local to you), OREA and the Canadian Real Estate Association ('CREA') provide services to real estate agents and brokerage firms, such as MLS. More about that discussed below and it is not necessary to join them or pay their fees to maintain your registration.
NOTE: Buying or selling your principal residence as a real estate agent does not increase the chances of you losing your principal residence exemption on that home. Flipping multiple homes in succession is the critical factor in that, along with some other factors that don't relate to you being an agent, and if you do so you risk the chance of losing the exemption no matter who your agent is. It takes a lot more than simply being a real estate agent buy or selling your own principal residence for you to be flagged as a house flipper by the CRA. If you don't believe me, consult the CRA and/or a tax lawyer.
Note: A breakdown of all of the costs is shown in my post #342 in an easy-to-read handy-dandy spreadsheet format that I prepared.
Go to the OREA website (www.orea.com) to apply. You must have a high school diploma, equivalent or take a simple equivalency test to apply. There is no minimum age to be able to apply but if you are under 18 you must get Mummy or Daddy to give OREA written approval for you to take the course. That requires a phone call to OREA to set up. (If you want to become a real estate agent right at 18 you should start the course no earlier than 2-1/2 years before you turn 18 as that is the maximum time you have to complete the first part of it, and no later than probably 4-6 months before you turn 18, as that's the fastest it seems anyone has done the part of the course that allows you to register.
The following are the 3 steps you must perform:
(1) The Pre-Registration Segment is the 18-month period by which you must complete 6 courses, 1 of which is 35 hours, 1 is 60 hours and 4 are 40 hrs each of classroom study but 3 can be done via correspondence or e-learning online (on your Internet browser) and 3 are done in a classroom setting. However, there is no requirement to actually show up for the class. You can still just study from the textbook. However I would suggest you show up at least for the first session until the break as some instructors take all attendees' email addresses and will send the course notes. As such, there is no need for anyone to take any time off work to complete the course. Just take the evening sessions for the classroom course so that you can give your email address to the instructor so they can email you the class notes and leave at the first break. There is an exam after each of the 1st and 2nd, then one for the 3rd & 4th together, then one after the 5th and 6th.
Fees: $2,850 for 6 Courses (35 hrs/$525, 60 hrs/$545, 3 x 40 hrs/$425, 40 hrs/$505)
* TIPS: Pay for the courses as you go as there is no discount for paying for all up front. Buy the 'Passit' study guide ($25-$28) on OREA's website as you enrol in each course. Well worth it as they provide numerous multiple choice drills, memorization drills and help you to focus on weak areas. Practice exams q's are also provided. The OREA 'Exam Tutor' CD ($25) has practice exams for all of courses and even the brokers course and is also well worth it. For those who work daytimes and don't want to do online e-learning or correspondence there are evening classroom options. For all class options see https://www.orea.com/OREA-Real-Estat...CourseCalendar. Daytimes classes are typically 8:30am - 4:30pm, evenings are 6:30pm-9:25pm but take more days to do. Only 2 particular courses have to be taken in a classroom format. You book your exam date for that course when you enrol in it. You cannot enrol or book the exam date for the next course until you start it. Exam dates changes cost $50 fee once booked. High demand means exam dates can be way off in the future. If you want an earlier exam date then check out of town locations London, Kitchener, etc. They have less demand. Getting exam dates is the main reason the time to take the course stretches out. Course textbooks can be bought separately from OREA before you start the course for about $105 each. You can also buy texts used online but if you do then buy the physical books. Many are reselling the pdfs you get with the course anyway over and over. That's a scam. You may only want to do this if you have a long time before your exam date and want to 'pre-study' for the next one. No discount though when you start the next course for the texts you already bought. Exams are multiple choice (could they have made it any easier?) and you have the option of paper or on an iPad. iPad is no extra charge and the advantage is results are returned in 24 hours vs 7 days for paper, so you can enrol in the next course sooner (if you pass). All Pre-Registation courses are mandatory and there is 1 elective course in the articling period.
(2) The RECO Approval Segment is the 12 month period during which you have to find a brokerage to associate yourself with and the time limit that you have to apply for Initial Salesperson Registration at reco.com. You must be 18 by the time you apply. Note that you can find the brokerage firm during the first segment and apply to them the day OREA confirms you have completed it. Then you indicate your brokerage firm on the RECO form which you can view here if you want to see what it entails: http://www.reco.on.ca/wp-content/upload ... y-2014.pdf. Once registered, you can start selling real estate & make those fat commissions.
* TIP: A Canadian Criminal Record Check is required for the RECO application. You get it from your local police department in person or online, which costs $20 in Toronto but possibly more in other jurisdictions. Because of the high volume of requests this can take up to 8+ weeks. So, if you are trying to get registered as an agent as fast as possible then you should request your record check well in advance. Just remember that the record check cannot be dated more than 6 months in advance of your RECO application so don't apply too early. Here is the RECO link that provides info about how to go about it: http://www.reco.on.ca/real-estate-profe ... er/2957-2/
Fees: $1,170 (Criminal Record Check $20 + RECO $350 Registration Fee for 24 + RECO Errors & Omissions Insurance - 2 x $400 for 24 months
Total so far $4,020 - You can now do real estate deals and there is no requirement to have a mentor, be part of a team or do a single transaction. You can choose to join TREB/CREA/OREA at this point which will cost you another $860 (see below) so the total then would be $4,880.
(3) The Articling Segment which lasts 24 months, but is unlike any other articling I have heard of. During this time you do 1 more 40-hr course in the 24 months and then renew your license as an agent after 24 months and every 24 months thereafter. One of the courses is designated to be done in the classroom. However, there is no requirement to actually show up for the class. You can still just study from the textbook. However I would suggest you show up at least for the first session until the break as some instructors take your email address and will send you the course notes. Other than that I don't know why they call it articling as there are no other requirements.
* NOTE: There is a lot of confusion about the following: The Initial Salesperson Registration that you get after completing these 4 courses is exactly the same as when you 'Renew Salesperson Registration' after the 24-month articling period during which you need to complete the second set of 3 courses. When you renew all you are doing is renewing your licence. It is not a different licence or one that give you different capabilities. It is not more 'full' than the licence you received when you initially registered as a salesperson. You either have a licence or not. Period. *
Fees: $505 for 1 40 hr elective course
Total so far - $4,525 if you don't join TREB/OREA/CREA and $5,385 if you do
If you join TREB/CREA/OREA you do their free orientation and MLS course. These organizations are called 'organized real estate' and by joining them you are a part of organized real estate. Not sure why they call it organized, but perhaps it's because they provided services that are not strictly required to transact in real estate in Ontario and so they have organized something!
Fees: $860 - $460 Registration for TREB + $400 CREA/OREA Registration (you must pay both)
Then you pay TREB/CREA/OREA annual fees.
Fees: $2,195 for the 24-month articling period (2 x $860/yr TREB + $475/yr CREA/OREA)
Total so far - $6,720 and you have been able to transact real estate since 24 months earlier with full access to MLS
IMPORTANT TO UNDERSTAND: As you can see, doing the course is not an insignificant time commitment and neither is the cost. It is almost 300 hours of study, at least one week of classroom study (more if evenings), 6 exams you have to pass and 7 courses you have to take and over $7,000 to finish it entirely. If you just want to get the initial registration and start the articling period so you can do a transaction and then quit it is 215 hrs and at least $4,525 and more if you join TREB/OREA/CREA or not. OREA's statistics show that only a minority of people who start the course actually finish it, some because they lose interest, some because it's too much of a time commitment and others because they don't pass. The payback if you do finish can be high though if all you want to do is to buy your own homes. Also, although the course is not that hard, if you are going to attempt to handle transactions other than your own remember that although it is not difficult work, it just can be time consuming to represent other buyers and sellers in multiple transactions if you want to do a good job. It can also take a lot of interruption of both your workday if you work full time and your free time too. Other buyers and sellers that you represent will expect you to do just as good a job as someone doing it full-time and you should want to do that too. I am not trying to discourage anyone but just trying to be realistic in pointing out that it is very different doing your own buy deal and making being a real estate agent a sideline by representing others. This is clearly not for everyone and I just want to point that out. BTW, this does not in any way diminish my opinion that agents get paid way to much for what they do and that selling commission should not be tied to selling price but rather to the difference between listing and selling (if higher) price. This is currently disallowed by legislation and is the subject of another one of my threads.
Now you have completed all of the requirements and you need to renew your initial registration and pay more fees:
FEES: $1,932 per year - RECO Registration $175 ($350/2 yrs) + E & O Insurance $400/yr + RECO Continuing Education $22/yr ($44/2yrs, 24 hours, ie 1 hr/mos average!) + $860 TREB + $475 OREA/CREA
That's it. After this you can keep paying all the fees or omit the TREB/OREA/CREA fees if you want to be less active or inactive and that makes the fees only $597. You'll still have to do the Continuing Education courses though. You will then you have to register with a brokerage that is not a TREB member (or has one office that is not out of all their offices) and pay their fees which can be as low as $99. $700/yr is not a lot to keep your licence active.
See my post #265 in this thread, which details how to pay only the RECO fees, 'park' keep your license and also transact deals as an agent. It also outlines the differences between having TREB/OREA/CREA membership and not having it.
For the money I am simply going to join TREB/OREA/CREA as I want easy access to MLS all the time from home or office. It's only another $1,335/yr which is deductible from income.
* Note: You do not have to transact a single real estate deal ever to maintain your license, just pay the annual fees to RECO *
Brokerage cut of your commissions: 0% to 50, sometimes constant, sometimes it's on a declining basis, decreasing as you generate more commissions, reset each year. Some agencies only charge 10% on your commission and a flat rate of about $200 on every commission thereafter, some only charge a flat rate on each. It's all over the map.
Brokerage desk fee: Many also charge a 'desk fee'/mos for their services, anywhere from $35-$1,500+/month. They might charge a combination of both. I have found some that charge as low as $99/year to be registered with them and then $35/month but only on those months you have a listing. You also pay this fee in months you are representing a buyer because the brokerage has to get involved as all requests for lockbox key codes as the authorization always goes through the respective seller and buyer brokerage firms first. In case you don't know, the lockbox is a box that hangs on the door handle with the house key inside. It can only be accessed if you know the code. That allows buyer's agents to open the door and show the house without having to get the spare key from the seller's brokerage office or having the seller's agent having to attend, as was the case before the real estate industry started using lockboxes. (Another reason why being an agent is less work today).
Other: Business cards, some minor office supplies, a computer, smartphone, some decent clothes and a half-decent car and to pay for gas. Most of that you’d have anyway, not to mention they are all write-offs against your income. There's no fee to list on MLS as a TREB member. As a non-TREB member you list on MLS by using a 'referral agreement' to a brokerage firm that is a member.
Remember, this is on the buy side. On the sell side, if you also do that, your 'marketing' fees for an MLS listing will be the cost of brochures, pics, adverts, custom house website, etc. but that’s a pittance compared to the commission, not to mention they are all deductible expenses against commission income. The price of single family home in Toronto is now $1.15M. Buying (or selling) one house would put at least 90%+ of the $28,750 commission in your pocket with the rest to the brokerage firm. That leaves you with about $20,000 pre-tax on the first buy after the deduction of course and registration fees and more if the higher the transaction value.
Note re cashback on commission: Some buyer's agents now provide a cashback rebate on the 2.5% commission they earn but they are rare and it is not as if they are going to give you more than half of it, if even that. That cashback may be taxable but I would contact the CRA to determine if cash back on the purchase of a principal residence is taxable as their answer is definitive. Your agent might send you a T4 for the cash back but that's not what matters. It's what the CRA says about it.
Note to those thinking they can take the course, not earn commission as an agent and keep claiming a loss due to expenses year-after-year (legit ones related to being an agent of course) against their personal income. You might get away with this for a year or two but then the CRA will start denying your expenses and might even re-assess your previous returns which will result in you paying back tax along with interest. Worst case scenario is you also get audited. This is all no different than starting some other sole proprietorship or partnership and then just continually showing losses due to expenses but never any income. There is no free ride.