The explosive growth in the number of real estate agents in Ontario has left too many people dabbling in the profession, reducing the quality of service and risking the industry's future relevance, according to Re/Max Integra president Walter Schneider.
Mr. Schneider, whose franchise company oversees all Re/Max operations in Ontario and Atlantic Canada, said thousands of new real estate agents have become licensed in the Greater Toronto Area over the past decade as markets have boomed, but many are doing too little business to accrue the experience required to guide clients through complex transactions.
"People come in, they think it's an easy game and they will just pick up a $20,000 commission, thank you very much," Mr. Schneider said in a recent interview. "I like to say, 'You don't try real estate, real estate tries you,' in terms of being a practitioner in this business."
The Toronto Real Estate Board has seen its membership more than double from 20,500 licensed agents in 2004 to 45,000 as of October this year, adding about 24,500 agents. The GTA has seen 6,000 new real estate agents enter the market since the end of 2014 alone.
Mr. Schneider said he doesn't want Canada to go through the kind of jarring industry upheaval seen in the U.S. market, where the number of licensed agents belonging to the National Association of Realtors fell by 26 per cent between 2006-12 after the country faced a sharp housing-market correction. As of last month, the number still had not recovered to its 2006 peak.
"They weren't qualified, they just didn't serve their customers properly," he said. "They were essentially order takers, not professional sales executives."
The real estate industry is facing a long-term challenge to stay relevant as online technology reshapes the sector, making it easier for buyers to do more on their own. The industry's solution, Mr. Schneider believes, is for agents to become even more professional, with more qualifications and training, so they can become indispensable service providers.
For Re/Max Integra, part of the answer is to require its 10,500 agents in Ontario and Atlantic Canada to make real estate their primary, full-time profession and not a job they do on the side.
His firm's agents do an average of 16.7 transactions a year, he said, while 75 per cent of agents working in the GTA do fewer than three deals a year.
"Unfortunately, there are people in the business today who are there to sell one or two houses a year to pay for their vacation in the Dominican Republic," he said.
"Our agenda is to have full-time professionals. We don't want you to just buy a house through us – we want you to come back. We want you to refer us to other people and be happy with our service."
Mr. Schneider is confident there's a strong future for real estate agents, even as technology has drastically altered other professions, such as travel agents. Technology is a tool, he said, but will not be a disruptor.
People will still work with agents, and agents will face new pressures to prove their value. Mr. Schneider is a fan of online customer ratings, saying agents should be ranked so everyone knows who is doing a good job, and who is not.
"There's a whole lot more to a transaction than 30 or 40 years ago … The agent today just has to be a lot more qualified, more educated."
His confidence in the profession's future is such that he and partner Frank Polzler, who is chairman of Re/Max Integra, have expanded the Re/Max brand worldwide and continue to grow their network.
Their company, based in Mississauga, is a master franchisor, selling Re/Max franchises in jurisdictions where it has purchased the Re/Max brand rights from the Denver-based parent company, Re/Max Holdings Inc.
The franchisees pay annual fees to Re/Max Integra, which in turn pays a portion of its revenue to the U.S. parent.
The Integra group controls 30 per cent of the total Re/Max network worldwide, holding the rights for Eastern Canada, nine U.S. states, and all of Europe, plus Israel and Turkey. Its 37,600 agents are expected to complete over 468,000 transactions in 2017, with their commissions expected to top $3.3-billion.
The firm also expects to sell 430 new franchises this year – 350 of them in Europe – bringing the total number of franchises in the Re/Max Integra group to more than 2,800, Mr. Schneider said.
New franchisees are typically smaller local players who are attracted by the benefits of joining a large network, giving them access to technology, training, advertising, marketing, and bulk deals from vendors for everything from photocopiers to lawn signs.
Mr. Schneider, Mr. Polzler and a third partner launched Re/Max Integra in 1980 after hearing about the Re/Max brand at a real estate industry conference in Detroit. At the time, Re/Max had just one office in Canada – based in Calgary – and about 200 offices in the United States.
After acquiring the rights to Eastern Canada, the trio launched into rapid expansion mode, selling franchises to help consolidate a splintered industry. Mr. Schneider said he took home just $15,000 in pay in 1980 as they struggled to launch the company with $20,000 in capital.
In 1985, the third partner sold his stake to Mr. Schneider and Mr. Polzler. The remaining duo realized Canada was too small a market to count on for rapid growth levels, and began to acquire rights to nine U.S. states over the next decade.
As U.S. opportunities began to slow, the next frontier for growth was Europe, which had no Re/Max offices when the partners bought the European rights in 1994. They spanned the continent to introduce the Re/Max brand to the highly fragmented market.
Along with traditional franchise benefits, the pair also brought North American-style technology to their partners in Europe. When they launched in Europe, Mr. Schneider says there were no MLS-style listings the public could view, and no databases of comparable sales data to help agents decide on listing prices for houses.
"We have 20,000 agents in Europe now, which is a great number, but I see our business still at the early thresholds of growing. … I think we're at the tip of the iceberg."
Mr. Schneider calculates that he has spent about eight years of his life – roughly 3,500 nights – in hotel rooms, and has travelled 2 1/2 million miles on airplanes as he and Mr. Polzler developed Re/Max into a leading brand.
They no longer share hotel rooms, as they did in the early days to cut costs when they travel, and Mr. Schneider long ago stopped sleeping in his car before sales meetings. But they are still hustling to build the company.
Mr. Schneider is looking at new locations to attract clients where they are already shopping – such as locations in grocery stores. He is also working on strategic partnerships with vendors to give clients access to discounts on services they may need after buying a new home.
"The sweetest memories come from the toughest times, and I regret not one ounce of the hardships we've gone through to build this organization," he said. "It made it richer, and it lets me appreciate every day where we are."