Feb. 12, 2008 - The Lebow Report

The Lebow Report: Why begrudge the commission?

I am writing this in a national Canadian newspaper for real estate people but actually it is a rant to the public and especially to the cynical and unenlightened media that continually bashes real estate agents. I leave it to you, my real estate readers, if you find the content to be of merit, then post my article on your blogs or forward it to your customers.
 
Allow me to put my tirade into a really simple perspective. If a stock or other investment broker made you, say, $200,000, would you begrudge them a $10,000 commission for their efforts? I know this about my personal experience with stock brokers – it sometimes appears that their fees can be greater than my profits. One day I really will try to figure out all the charges and fees in my mutual fund.
 
Now, what would you pay if that $200,000 was fully tax free, and fully capital gain exempt? 
 
Heck, even to a tightwad, $10,000 in commission would be nothing in return for $190,000 net.
Let me restate it this way: an investment broker puts you into a deal, you make $200,000 totally tax free, no strings – what would you pay that wonderful, brilliant broker for this magnificent return? Damn right – that $10,000 would be a bargain and you would run to all of your friends to let them know that you have met the most wonderful investment counselor in the world. The guy’s a saint!
 
So  According to the media, you should be able to buy or sell for a few hundred dollars and bypass a brokerage all together. No negotiation, no financing skills needed, just go in, buy or sell and the process is so simple and lacking in sophistication and dangers that anyone can do it. Isn’t that what we read in the newspapers?
 
Okay, let’s get real. I live in an affluent neighbourhood in Toronto, which is just the way it is within the central city core. My neighbours, who were sold their homes by hard working real estate salespeople 10 years ago, paid about $300,000 for their modest bungalows. Now, these same bungalows are selling for around $650,000 just for their land value. Let’s get a handle on this: my neighbours bought an investment for $300,000, but they only put down from 10 per cent to 25 per cent, lived in it, enjoyed it, celebrated family life, made love, planted, thrived and made friends and then they resold for an absolute  profit of $350,000, which was totally tax free. So please explain to me, why would anyone begrudge an agency for taking a mere five per cent off the top? What am I missing?
 
I no longer sell houses. I do not have staff that sells houses so I have no vested interest in making a case that serves my own interests. I am a commercial Realtor but when I have bought and sold houses, I have used top residential Realtors and I have never fought with them about what they charged me because they have made me money.
 
Few people have bought and sold as many houses as I have – at least 600 (not a misprint) in my career as an investor, and at all times I used agents to buy and sell for me. Yes, I have been a broker for most of my career, but when it came to buying or selling, I used the services of residential experts and I paid them well. It was logical, I was making a profit, so why nickel and dime the people who made me money? And my investments were not tax free!
 
Of all of the investments that Canadians can make, name one that will give greater pleasure than home ownership and one that is tax free? Can you live surrounded by your stock certificates, your GICs, or your art? Do your gold bars keep a roof over your head and can you leverage those investments by putting down as little as five per cent or 10 per cent and financing the balance on a long-term basis as the investment keeps increasing?
 
What, prices don’t always go up? Gee, when my mutual funds have tanked what do the experts tell me to do? Hold on, wait, pray and hope that in years to come the market will correct itself.
 
Here is one for you: ever live in an apartment? After 10 years when you handed in the keys, did the landlord thank you and give you back 75 per cent of your rental money? Worst I have ever lost on a house was 25 per cent in the darkest of periods but that house gave me shelter and pleasure. The apartment gave me cockroaches, noisy neighbours and management that couldn’t have cared one bit about me.
 
In the long run, those who write about the high prices of real estate commissions are either ignorant or jealous. They have either never owned real estate, or make so little that they begrudge anyone who makes more than they do. They write about greedy real estate people while they sit at their computers, wearing their Che Guevara tee shirt and complaining to the world about corporate greed and capitalism.
 
Sorry, I am just baffled about the concept of anyone begrudging a hardworking Realtor who continues to make Canadians rich. There is but one reality – the largest wealth owned by the largest group of Canadians is in real estate. No other investment is as widely held, none gives the benefits of real estate ownership and few return the same results bottom line. Real estate commissions are minimal in relationship to the profits made by the owners. Given the profits made by homeowners across Canada since the 1950s and again, with my emphasis on it being tax-free money, real estate commissions are probably the greatest bargain today based on what is charged for any other investment.
 
A real estate broker is a bargain – period!
 
Barry Lebow is a commercial Realtor who specializes in appraisal, expert court testimony and real estate education. One of REM’s long-time columnists, he recently launched the new Accredited Senior Agent professional designation program in Canada for residential salespeople to learn how to serve the mature and senior markets. (416)-9806, barry@lebow.ca or www.thesenioragent.com.

Feb. 13, 2008 - RE: The Lebow Report