About Calgary Real Estate Commissions

Who pays and how much? I decided to write this article because the friendly lady at the post office yesterday thinks all real estate agents are rich and make $14,000 on every deal.

In Calgary, all real estate fees are negotiable. There is no set limit either high or low. Some Realtors will work for nothing and some have a lot higher standards.

Let's say a person lists a home for sale with a listing agent and agrees to pay 7% on the first $100,000 of the selling price and 3% on the balance. And let’s say the home sells for $350,000. The fees deducted from the sales proceeds of $350,000 would be $7,000.00 plus $7,500 plus 5% GST for a total of $15,225.00 leaving the seller with $334,775.00 So the nice lady at the post office wasn’t too far off the mark with her estimate of $14,000.

The truth is that most deals involve a buyer's Realtor and a Sellers Realtor. And the two Realtors as a rule of thumb would split the commission 50/50. So each Realtor would end up with $7,612.50 minus the 5% GST they collected on behalf of the Government Of Canada, each agent is down to $7,250.00 30% of that should probably be set aside for Income Taxes, so now those Calgary Realtors each have about $5,075.00.

Out of that comes fees to the Realtors Brokerage, Calgary Real Estate Board, Real Estate Council of Alberta, Alberta Real Estate Association, and office expenses, advertising and promotions, professional development costs, vehicle expenses, insurance, and the always popular unforeseen expenses.

Little by little that huge commission everyone thinks Realtors make on every deal gets whittled away to; not much left.

The 80/20 Rule applies to Realtors. 80% of the Realtors split up 20% of the business. Most Realtors don’t make much money if any and most don’t last in the business very long because it is a tough way to make a living. The 20% of the Realtors doing 80% of the business usually have massive expenses and large teams that all get a piece of the commission pie. The Realtors that really do the best, are the agents that own rental properties. There are no company pensions in the Real Estate Business, Realtors have to create their own and the smart ones do it with Rental Properties.

Back to the commissions. I know you really don’t care about our expenses you only care about the gross amount you have deducted from the sales proceeds. There are lots of options to avoid paying what some call typical commissions in Calgary and all have their pros and cons.

Some people become so focused on not paying commissions that they end up losing a lot more money in other ways. At the end of the day if you are buying a home, get a Realtor you know will be looking out for you 100% of the time. And the same thing if you are selling. Buyer Agents work for buyers and Sellers Agents work for sellers.

The Simple Guide to Selling Your Home in 3 Steps

Successfully selling a home involves more than just planting a "For Sale" sign on the lawn. Like selling any valuable asset, the key is in the presentation, pricing, and promotion. Let's unpack this process into three straightforward steps, making your home sale as smooth as possible.

1. Perfect Your Home's Presentation

Think of your home as a product on display. Just as you would spruce up a car before selling it — cleaning it and perhaps even replacing old tires or a cracked windshield — your home too deserves this attention. This doesn't necessarily mean extensive renovations; sometimes, a fresh coat of paint or a well-manicured lawn can greatly enhance curb appeal. Remember, first impressions count, and a beautifully presented home can captivate potential buyers from the get-go.

2. Price It Right

Setting an appropriate and competitive price for your home is essential. To do this, research is crucial. Browse online listings, local property newspapers, and other resources to gauge the going rate for homes similar to yours. While it's natural to aim for the highest possible profit, it's vital to be realistic. An overpriced home might linger on the market, making buyers suspicious, while underpricing might mean a quicker sale but at a potential loss. Knowledge is power; equip yourself with a thorough understanding of your local market, and if possible, consult with a Realtor who can offer expert advice.

3. Promote Your Property

Now that your home looks its best and is priced competitively, it's time to get the word out. Effective marketing can significantly increase your chances of a swift and profitable sale. In today's digital age, online platforms are a dominant force in property promotion. Yet, traditional methods like newspaper listings, supermarket bulletin boards, and word-of-mouth can still be potent. A multi-pronged approach ensures that you reach the broadest audience. Engaging a Realtor can also tap you into their extensive networks and marketing strategies.

In conclusion, selling your home needn't be a daunting task. By focusing on these three core steps, you can streamline the process. Remember, a well-presented, fairly priced home with excellent promotion can make the process of selling not just effective, but, dare we say it, even a tad boring. And in the world of home sales, 'boring' can often mean 'smooth sailing'.

The Truth About CMHC (Canada Mortgage & Housing Corporation)

CMHC is an insurance company. It offers insurance to banks and other home mortgage lenders. The insurance company (CMHC) will pay the banks and other lenders if you don’t pay your mortgage. CMHC does not lend money.

Then the insurance company (CMHC) takes the house and sells it. If there is a shortfall between what the insurance company (CMHC) gets from the sale and what they paid the banks, then the insurance company (CMHC) will come after you.

If you take what’s called a High Ratio Mortgage then you pay the premium to the insurance company (CMHC) for the privilege of insuring the bank against any losses.

To summarize you pay the cost of the insurance to the insurance company (CMHC) and you receive none of the insurance benefits.

The Banks are too lazy to make smart mortgage lending decisions, so instead they have you pay the (CMHC) insurance for them.

CMHC the insurance company is what’s called a Crown Corporation. That means it’s owned by the government and backed by taxpayer money.

So here we have a taxpayer-backed insurance company that has guaranteed around 600 billion dollars in mortgages to the banks.

The recent rule changes and the other changes in the last few years are not because homeowners have abused the CMHC insurance system. It’s because the banks have abused the CMHC insurance system. There are thousands of mortgage loans guaranteed to banks that have no right to be insured in the first place. When the banks couldn’t collect CMHC insurance premiums from the borrowers the banks paid the CMHC insurance premiums themselves. Much easier than actually doing due diligence on the borrowers.

This in effect passed off the liabilities from the banks to the taxpayers and has allowed the banks to leverage up more and more and more.

The Banks make obscene amounts of money from mortgages without the liabilities. But the government would have you believe that we the home-owning taxpayers are out of control, so they need to change the insurance company (CMHC) rules to protect us from ourselves.

When you start to peel back the layers you begin to see this whole issue as a giant shell game being played by the banks and the government on the taxpayers of Canada.

First-time homebuyers tap your RRSP to help with your home purchase

Your thinking about buying your first home... Wish you had saved up a good down payment. Maybe you have, but don't know it. To help first-time buyers get into home ownership, the federal Home Buyers' Program lets you access tax-free money for use towards the purchase of your first home. 

As a first-time homebuyer, you are allowed to withdraw money tax-free from your RRSP, provided you adhere to the repayment plan. You can withdraw up to $25,000 from your plan. If your spouse qualifies as a first-time homebuyer, then he or she will also be able to withdraw $25,000. Between the two of you, you could possibly have a total down payment of $50,000. 

There are conditions, you must enter into a written agreement to buy before you can withdraw money. And, you must meet the repayment terms. Repayment begins the second year following the year of withdrawal. You have up to fifteen years to repay, and each annual repayment must be at least one-fifteenth of the total withdrawal, otherwise, you have to include each repayment amount as income for that year.

A detailed booklet is available on the Canada Revenue Agency website. 

Debunking the Myth: Why Calling the Listing Realtor Might Not Get You the Best Deal

When it comes to real estate, there's a common misconception that directly calling the listing realtor can fetch you a better deal. It sounds logical on the surface: eliminate the middleman, perhaps save on commissions, and directly negotiate. However, this strategy often fails to consider the intricate dynamics of real estate transactions and the primary role of a listing realtor.

The Loyalty of the Listing Realtor

The core responsibility of the listing realtor is to the seller. They're contracted to ensure the seller's best interests are always prioritized. Hence, expecting the same realtor to pivot and act in the best interest of the buyer is unrealistic. It's a clear conflict of interest. It's akin to expecting the same lawyer to represent both the prosecution and the defence in a courtroom. The dynamics don't align.

The Need for a Buyer's Realtor

Buyers benefit immensely from having a realtor dedicated solely to their interests. This agent can provide insights, point out potential issues with properties, and harness their experience to negotiate favourable terms. They're in the game for the buyer, advocating and working to ensure the buyer gets value for their money.

Seeing Beyond the Commission

It's a mistake to focus only on commission savings. Real estate transactions are multifaceted, involving more than just the exchange of money. There's the actual property value against the asking price, potential hidden faults, and other nuances that can be leveraged to negotiate the price. An experienced realtor provides value by navigating these complexities, often saving the buyer more than any commission they might hope to save.

The Perils of DIY in Real Estate

Some buyers might feel they have the acumen to navigate the real estate waters solo, assuming they'll outsmart the system. However, this is often a misguided belief. Just as we rely on professionals for haircuts, dental procedures, or medical diagnoses, the expertise of a realtor is invaluable. They bring market knowledge, negotiation skills, and a network of resources that the average buyer simply doesn't have access to.

Conclusion

In the world of real estate, professional guidance is not just an advantage—it's a necessity. To truly safeguard your interests and ensure you're making a sound investment, it's always best to have a dedicated professional on your side.