By Tony Palermo

Calgary-area salesperson Kirby Cox says he is determined to make sure Alberta Realtors know that their commissions are not protected and are at risk.

The former Royal LePage Foothills top-producing agent says he is out over $275,000 after long-time broker Ted Zaharko ran into financial problems and announced in December that he was closing all six of his offices.

Several sources who wish to remain anonymous told REM that, in hindsight, there were some signs months in advance that Zaharko was in financial difficulty, but Cox’s records show the commissions he’s owed are from a five-week period between November and December 2015.

In other words, it can all go to hell in a matter of weeks, leaving agents little time to react to minimize their losses.



Kirby Cox
Kirby Cox

To add insult to injury, Cox says none of the big industry associations – CREA, the Real Estate Council of Alberta (RECA), nor the Alberta Real Estate Association (AREA) offered any advice or assistance.

“I didn’t get any guidance, communication or calls from any of them,” says Cox, adding that these associations were all quick to take in their dues over the years but were nowhere to be seen, at least proactively, when the brokerage closed.

Cox says although he feels the sting of losing over $275,000, he has other businesses and investments and will be fine. But it’s not his substantial loss that is the primary force driving him right now.

“Look, I will recover from this, but a lot of people were really hurt when they lost their commission income,” says Cox. “We need to create awareness. Agents need to know that their commissions are not protected – that brokers really know the Alberta Real Estate Act and what they can get away with.”

Cam Sterns
Cam Sterns

Realtor Cam Sterns says he’s out about $50,000 between commissions owed and taxes he was paying Zaharko to keep aside on his behalf. When combined with the downturn of Alberta’s economy, he says losing that much money is “crippling.”

Worse, he says, was that he was told by a director at Foothills that his commissions and tax money were “safe and secure” and being held “in trust.”

“Every quarter I paid Ted Zaharko $200 for withholding about 15 per cent of my gross income to keep aside for taxes,” says Sterns. “I was led to believe that my money was safe and protected.”

In an email, Zaharko admitted to Sterns that “we did obviously use commission dollars to keep going” but that “we didn’t take it and pay ourselves a nice large dividend”.

Sterns delivers an angry response when asked to reflect on this email exchange.

“I wasn’t floating his business with my money,” says Sterns. “You know, I’m still trying to recover and lick the wounds.”

Shortly after moving to another Royal LePage brokerage, Sterns filed an official complaint with RECA. They responded in a letter which, he says, indicated that they had no authority to investigate the matter because it was considered a commission dispute and, therefore, wasn’t regulated by RECA.

Self-regulating in the interests of consumers

RECA communications manager Natalie Scollard says while she is not privy to complaint details, generally speaking, if RECA was to receive a complaint that is strictly related to a commission dispute between a registrant and their brokerage, it would be a civil matter outside of RECA’s jurisdiction.

“RECA was set up to regulate the real estate industry in the consumer’s interest,” says Scollard. “An employment relationship between agents and the brokerage is not our purview.”

Scollard says it proactively conducts Trust Assurance and Practice Reviews of brokerages every three to five years, and in the case of new brokerages, within the first year, to make sure they’re in compliance with the Alberta Real Estate Act and its rules. She says these reviews are in addition to other financial reporting requirements such as fiscal year end reports, which are also reviewed by RECA trust assurance and practice review officers.

Specific events such as bankruptcy proceedings, judgements and criminal convictions against an industry member or brokerage can also trigger auditors to examine the brokerage’s records. In the case of Royal LePage Foothills, Scollard says RECA never received such notification, noting that these mandatory notifications are triggered by factual events.

“RECA only heard things about Royal LePage Foothills second-hand, mostly from industry members calling us to get information about what was going on because they heard rumours,” says Scollard. “The information and advice we provided to those individuals was consistent, but we were not in any position to communicate broadly to the industry about what may or may not have been going on at a given brokerage.”

That being said, when the calls from industry members started coming in about Royal LePage Foothills, Scollard says RECA trust assurance and practice review officers went in and examined the integrity of the consumer trust accounts. They did not find any issues.

Calgary Police Service spokesperson Tanja McMorris confirmed that as of June 28, they have not received any complaints to investigate either Foothills or Ted Zaharko.

Scollard says that while auditors will examine a brokerage’s general accounts as well, it does so only with an eye to helping brokers comply with the requirements of the act and its rules, and not to identify things like the timing of payments around agent commissions and employee salaries.

“We had auditors in there every step of the way,” says Scollard. “But again, our focus is on the consumer protection side of things. Commissions earned on a transaction belong to the brokerage and not the individual agent. Agree or not, brokerage agreements are between the brokerage and the consumer.”

As the industry regulator of Alberta’s real estate professionals, RECA, which itself is self-regulated, is the only industry body that has the authority to go into a brokerage and examine its records. In a brochure, RECA says of itself, “RECA is committed to the public interest, by promoting the integrity of the industry and protecting consumers.”

When asked if there appears to be a gap in legislation since, it could be argued, protecting agent commissions and ensuring salespeople are being paid is important to promoting the integrity of the industry, Scollard said no.

“It’s right there in legislation that RECA is for consumer protection,” says Scollard. “There are local and provincial boards (to represent) the members.”

When reminded that RECA is the regulator and remains the only industry authority that can go in to a brokerage to review their records, Scollard says that as much as she is saying there isn’t a gap in legislation, she’s also not saying it will never change.

“RECA wasn’t set up for this but let’s see what’s best for the industry,” she says. “No one wants people to not get paid and the At-Risk Commissions Working Group is a positive step forward.”

At-Risk Commissions Working Group

Only months after Royal LePage Foothills closed its offices, an even larger brokerage, Discover Real Estate, which had offices in Calgary, Edmonton, Red Deer and Strathmore, told its nearly 400 agents that they would have to find work with another brokerage. Several agents who are owed commissions have reportedly started legal proceedings in an attempt to recover their money.

Alberta’s industry leaders took note and came together to form the At-Risk Commissions Working Group to address how to better protect Realtors’ commissions. The group, which has been releasing monthly updates since May, is made up of AREA, RECA, the Real Estate Insurance Exchange (REIX), the Calgary Real Estate Board (CREB) and the Realtors Association of Edmonton.

“We’ve had a significant portion of our membership that has been affected by a broker not paying out the commissions owed to their agents,” says CREB president Cliff Stevenson in an email statement. “This has been a very difficult experience for many of our members, so we are very pleased to have some CREB members and staff as a part of a group trying to find a solution to protect agent commissions in the province of Alberta. This is a significant priority for this industry in this province and time is of the essence.”

The working group is currently researching various options to help protect agents’ commissions, including insurance and bond products, commission trust accounts as a regulatory requirement and employment contract terms between brokers and associates. It has also engaged a third-party survey provider to solicit input from Alberta Realtors on the issue of at-risk commissions and the survey is expected to be emailed sometime in August.

Ian Burns
Ian Burns

AREA CEO Ian Burns believes there are “challenges” with the existing legislation and says AREA is advocating hard for changes to better protect their members.

“Agents’ livelihoods depend on their commissions and they shouldn’t be jeopardized in this manner,” says Burns. “I think (the At-Risk Commissions Working Group members) are all in agreement though that we’re working together to find a solution because we all believe something is required.”

Burns, who has an insurance background, says an insurance product is a longer-term solution, but is challenging to create. As he says, balancing coverage that meets the needs of all members against the costs of the program isn’t easy. The best information that can be provided to actuaries is examples of past cases, like Foothills and Discovery, to help model a plan. Still, he is optimistic a solution can be found.

Although it’s not a complete solution, Burns would also like to see mandated commission trust accounts. Not only would a trust account act as a deterrent for brokers to use an agent’s commission money for other expenses, but for those who do, he believes it would likely affect their ability to continue working in the profession.

CREA spokesperson Linda Kristal declined REM’s request for an interview, citing that this remains a provincial issue.

Soper: ‘Huge gap’ in legislation
Phil Soper
Phil Soper

Royal LePage CEO Phil Soper believes there is a “huge gap” in any legislation that allows Zaharko, or any other broker with outstanding significant business issues, to continue practicing.

“That the regulator continues to licence someone with a significant business failure, that affected many people, without anything like a probationary period or a business case showing why they should be allowed to continue to offer services in the real estate marketplace, to me, is a huge failure,” says Soper.

Still, licensing aside, Soper says he doesn’t believe it is the role of the regulator to manage the actual business-to-business relationships between agents and their broker.

“Where there could be a solution on that front is for the industry itself to require, in becoming a member of a real estate board, a greater requirement for disclosure and transparency of the brokerage,” says Soper.

He says there is a lot of misunderstanding about how business works when you have a commercial contract between two parties, such as between an agent and a broker, and what happens when one party doesn’t live up to their end of the contract. As he says, in business, when one party doesn’t honour the arrangement, the option is to stop working with them and take the matter up in civil court. And agents, he says, need to remember they are independent businesses, no different than any other business contractor.

In other professional services though, contractors aren’t generally forced to work with only one client (in the case of agents, a brokerage) and are free to diversify their client-base to minimize the risk associated with having their income come from only one source. But Soper doesn’t see this as a limitation.

“Agents can have multiple sales going through the brokerage,” he says. “As soon as one commission doesn’t go through, the agent can move on.”

Using a different analogy, he says to consider an independent I.T. contractor who works for a large client. As their only client, the I.T. contractor would be in the same position if that client folded or didn’t hold up their end of the payment agreement.

“Again, the remedy would be to stop working with that client, move on and take the matter up in civil court,” he says.

Soper said it was on a Thursday when his team got a hotline call about problems at Foothills. By Monday, a team was on the ground asking what was going on. Then, when it became clear the agents would have to move to another brokerage, Soper says the Royal LePage head office provided assistance to these agents, through their new Royal LePage brokerages, to help them get back on their feet.

“Most of the agents will be made whole by the better arrangements they have with their new Royal LePage brokerage by the end of two years,” says Soper.

Most, but not all. Soper says that for the top producing agent at Foothills, even if he didn’t have to pay any fees to Royal LePage, it would take 150 years to pay back what they are owed.

“There’s no money left to pay that agent back since 99 per cent of the money went to him and not Royal LePage anyways,” says Soper.

Reflecting on the situation, Soper says that while the financial issues at Foothills obviously involved mismanagement, his impression is that Zaharko didn’t realize how serious a financial problem he had and that it “crept up on him very quickly.” Soper says everyone needs to realize that the whole situation unfolded over a matter of weeks – he says it’s a few weeks’ commissions and Royal LePage fees that are outstanding – and that this wasn’t a long, drawn out process.

“Remember, Zaharko didn’t declare bankruptcy or go out of business,” says Soper. “Royal LePage pulled out of our arrangement with him and he co-operated because he felt really bad about the situation. To his credit, he really did put his agents first to make sure they got what was there. I really don’t think Ted knew the extent of his problems.”

Soper says to help protect agents and consumers, Royal LePage offers free broker business advisory services, consisting of financial and operational consulting professionals, to help brokerages with their business. He says the problem though is that Royal LePage corporate can’t mandate that a broker use these services, even if problems become apparent.

These consulting services, says Soper, were offered to Zaharko but were refused.

“He could have had an end-to-end review of his operation with recommendations, and we might have been able to help,” says Soper. “It’s the old saying, you can lead a horse to water, but you can’t make it drink.”

Foothills aside, Soper throws out a caution to the real estate industry, saying that everyone needs to look at the Foothills and Discovery incidents, which both happened in Alberta, and examine why they happened in such a short time apart from each other.

“A brokerage has to be highly managed – you can get into trouble quickly since most of the fees are going back to the agent,” says Soper. “I can see this happening again in the future. There’s a movement to less and less revenue being retained at the brokerage level, and that’s a problem.”

And, it’s a problem Ted Zaharko agrees with as well.

Floating a brokerage

How does a long-time broker with decades of experience – a man well-known in Alberta’s real estate circles, one who held a number of advisory and senior positions with various real estate boards and associations over the years, a broker who grew his office to become the largest Royal LePage office in Western Canada – find himself at 70-years-old with nothing left?

Several former Foothills agents declined to speak to REM on the record, or at all, with some describing Zaharko as, up until this incident, “like a father” or “a valuable mentor” to them.

“I spent (a number of) years at that company and loved every second of it,” said another. “Ted was a mentor to me and I had a huge amount of respect for him.”

So, what happened?

“How can I make any excuses?” says Zaharko. “Listen, it’s a terrible thing for everyone but the buck stops here. I ran that ship into the ground.”

Zaharko says he thinks protecting agents’ commissions is a good thing, but he doesn’t believe mandating a commission trust account is the answer. He says given how little brokerages in western Canada keep from their agents, the reality is agent commissions are used to float the brokerage and are managed and paid out just like any other of the brokerage’s business expenses.

“Brokerages aren’t making enough from Realtors in Western Canada compared to other parts of the country,” says Zaharko. “It’s a real problem. If at the end of the day, regardless of fees, commissions are protected by law, how will that impact the good operator?”

In other words, right or wrong, it’s less money the broker/operator has to help manage their cash flow, and it’s worse for brokers in Western Canada where only a very small percentage of an agent’s annual gross goes back into the brokerage compared to (the business models in) other parts of the country.

Zaharko says this has been a devastating experience. “The Realtors didn’t deserve that at all,” says Zaharko, adding that this has taken more than just a financial toll on both him and his family.

Zaharko acknowledges he hasn’t declared bankruptcy but is pretty much at that point since nothing he has tried to do to make things right for those he owes money to have materialized.

In addressing those who question whether he should still be allowed to practice real estate when he has serious outstanding business commitments with his brokerage, Zaharko is quick to dismiss the concern.

“Well, no one has to worry about it,” says Zaharko. “I can’t keep my licence if I declare bankruptcy and I’m pretty much at that point.”


Further resources

The following blog posts from the Real Estate Council of Alberta (RECA) provide information and guidance if Realtors find themselves in a situation where their brokerage is shutting down:

Realtors who are interested in learning about how commission protection insurance works in Ontario should read a May 30 REM article on the subject.

11 COMMENTS

  1. Kirby, Thanks for raising the flag on this concern. This issue has to be put in the spot light until agent commissions are protected. Keep waving that flag. I appreciate it.

    RECA – Great CYA “As the industry regulator of Alberta’s real estate professionals, RECA, which itself is self-regulated, is the only industry body that has the authority to go into a brokerage and examine its records. In a brochure, RECA says of itself, “RECA is committed to the public interest, by promoting the integrity of the industry and protecting consumers.”

    When asked if there appears to be a gap in legislation since, it could be argued, protecting agent commissions and ensuring salespeople are being paid is important to promoting the integrity of the industry, Scollard said no.

    “It’s right there in legislation that RECA is for consumer protection,” says Scollard. “There are local and provincial boards (to represent) the members.”

    Cam – A lesson I learned from a CRA (Canada Revenue Agency) audit. Take a portion of every commission made & put it in a separate bank account for them or pay them that portion when you receive your commission payment. It’s secure in government hands and should you over pay them upon filing you’ll receive a credit.. of course if you under pay, you’ll have to come up with what you now owe CRA.
    It’s like the saying with the police “we always get are man” CRA always gets their $ revenue!

  2. Beyond the subject matter of this article, I find that the written presentation leaves much to be desired, in terms of questions not asked. Consequently, I’m left to wonder how much REM’s readership are intended to take away, and is this the product of different approaches to writing? Some American authors have published a book that outlines the various elements to journalism ( I believe there are ten) with two of the key elements being: the pursuit of truth and a curious mind. A freelance writer who includes just these two elements with integrity, should be able to write something fairly decent.

    As it relates to Royal LePage Foothills, the big question is: was the brokerage (6 stores) actually mismanaged, or was it a victim of lower brokerage splits combined with the economic slowdown in Alberta? The other question is: how prevalent is the practice of floating a brokerage on the REALTORs commissions? None of these key questions were answered by this article — not even as it would relate to what Phil Soper might know of the typical practices of Royal LePage franchisees!

    The following is from REMs original article regarding Ted Zaharko and his offices:

    “Ted Zaharko is closing his Calgary-based Royal LePage Foothills brokerage, which had six offices and 163 sales reps….”

    I find that the number of sales representatives verses the total number of offices to be peculiar, because hypothetically if the agents were distributed evenly there would be less than 30 agents per office. Commercial offices tend to be smaller but not residential. Given the importance of recruitment, the question should have been asked: 1/ were these offices short of the required number of salespeople to pay for the square footage involved and 2/ if so, was it because the Royal LePage brand wasn’t attracting the required bodies? This aforesaid question would be a simple business reality, yet Phil Soper was spared answering these questions, as they weren’t asked!

    Phil Soper seems to flip-flop in terms of assigning blame, within just one paragraph, as per the following comments:

    “Reflecting on the situation, Soper says that while the financial issues at Foothills obviously involved mismanagement, his impression is that Zaharko didn’t realize how serious a financial problem he had and that it “crept up on him very quickly.” Soper says everyone needs to realize that the whole situation unfolded over a matter of weeks – he says it’s a few weeks’ commissions and Royal LePage fees that are outstanding – and that this wasn’t a long, drawn out process.”

    As the CEO of Royal LePage, Soper should know that mismanagement doesn’t manifest itself all within just a few weeks. He was talking out of both sides of his mouth with the above quoted comments. Consider what Royal LePage corporate had to say on this subject when REM first broke the story:

    “Royal LePage says in a statement that the economy “may have played a role in increasing stress over the past year on Royal LePage Foothills, but this situation is attributable to unique financial challenges for the owner of one brokerage firm.” It adds that the company’s brokerages across Alberta are “weathering the impacts of very low oil prices very well.”

    With the above, Royal LePage corporate seems to be acknowledging that the subject brokerage was under stress for “the past year” which seems to contradict Mr. Soper’s following statement:
    “Soper says everyone needs to realize that the whole situation unfolded over a matter of weeks – he says…”

    Other questions for Phil Soper would be:
    1/ who placed the “hotline call” to Royal LePage?
    2/ what does Phil Soper mean by the following:
    ““Most of the agents will be made whole by the better arrangements they have with their new Royal LePage brokerage by the end of two years,” says Soper.”? Is the reader supposed to assume that another Royal LePage franchise brokerage offered enhanced commission splits to the REALTOR’s of Royal LePage foothills, at the bequest of Phil Soper — as it wouldn’t be Phil Soper’s call?
    3/ what are some of the criteria for someone to obtain a Royal LePage franchise? Would they not, at least, have to submit a business plan, or in Liu of, subscribe to one provided by Royal LePage corporate?
    4/ what did Royal LePage corporate know about Royal LePage Foothills, when they made the following comment: “unique financial challenges for the owner of one brokerage firm.”?

    The one question that Phil Soper did answer, was how far he is prepared to go to protect the Royal LePage brand. Ted Zaharko on the other hand seems to take full responsibility for the failure of his offices and consequently has laid his personal brand bare. Perhaps the one last question that could be asked: did Royal LePage Foothills lease any space from Brookfield (Royal LePages parent company)?

    Perhaps the pursuit of the truth begins with a curious mind, but whatever the case may be, this subject story shouldn’t end with the written effort here.

  3. If I have a deal closing in two weeks, I should be paid within a few days after or a week. If money is coming in it should immediately be paid out. I had no idea commissions weren’t held in trust accounts – secure. It is flat out theft to steal the money. There are arrangements between Brokers and Realtors. Brokerages know the amount they can keep. The rest is the Realtors – smoke and mirrors statements that it is the brokerage’s aside.

    Who pays RECA – where specifically does the money come from? Who pays everyone everywhere? If it all comes from Realtors’ dues, Realtors are paying to be abused or disregarded. Where does all of the money go? It is almost laughable the whole state of much now – or should be cryable. eg o e became that so many were fined for not using registered size for condos and now Realtors are going to have to pay measurement companies, even though perhaps tax size could be used whatever it turns out to be. RECA are what? accountants, are they not, many? Why are they overseeing much real estate while much accounting is barely being noted?

    This article might give some in trouble ideas about keeping commission, those on the edge – many.

    The public wonder who they can trust in the real estate industry. Apparently Realtors have no one watching their backs – all while they are paying to . . . what? For what?? What insanity. It is criminal behaviour to steal commissions buyers think are going to Realtors. Many flim flam men are running brokerages, and the industry, then – with the industry complicit, doing nothing to protect Realtors all just looking out for themselves. Too many brokerages shouldn’t be franchised or in business. There seems to be little concern that many brokerages are on the edge financially – with franchises just wanting more and more money those at the top throughout often in the US at the top. It seems, should have to cough up the money – those taking in money while not caring about those losing everything. What a sickening state of affairs.

    • Ahria

      In Ontario the pattern typically is: co/op brokerage invoices the listing brokerage. Listing brokerage invoices the seller’s lawyer, for full amount of commission owed, and is required to pay the co/broke office within X number of days.

      We are not permitted to put clauses in the APS offer document addressing who pays what and how. There are special forms that address that topic and accompany each offer.

      I sold a property listing back in the days prior to buyer agency contracts, mid 90’s. The word on the street was that the listing brokerage might be in difficulty. I was a young new company.

      I really stuck my neck out. I put in the offer that the seller’s lawyer would be invoiced directly by my company. Specified the amounts and complete details, just like a typical invoice would be.

      The listing agent read the offer to his sellers as I sat there. Made no comment whatsoever regarding what I had done, except to say he had never seen that done before. They signed and he put up his sold sign. He reported the sale to the MLS system.

      Another broker owner had addressed the exact topic at a general board meeting only a few weeks prior; I surely did test the water. Weeks went by and I never heard a word from the listing brokerage. Of course I did not invoice the listing brokerage. Assumed there was no problem since seller signed the offer. My buyers prepared to move.

      Back at the office with knowing everyone had their copies, I generated an actual invoice to the seller’s lawyer, direct, and included an extra working copy of the offer, with the clause highlighted coloured in bright magic marker, instead of invoice to the listing brokerage. Due and payable at closing.

      I knew the seller’s lawyer well and had many transactions through his office. No problem there. They READ the offer, as they always do. No questions asked. They like my paperwork. It is always clean with i’s dotted and t’s crossed. No funny stuff. Not ever.

      So closing day came. Law office called and said come pick up your cheque. I did. Took it straight to the bank. Done like dinner.

      A few days later I got a call from the listing broker owner. The discussion was heated. WHO did I think I was? He seemed to be scratching his head, wondering how this happened. It might have been a different situation, had anyone read their sales paperwork.

      He said I made a huge problem for his office. Wait a minute: your listing agent read it, didn’t delete the commission clause, and his seller signed it.

      GOLLY!!! No one at the listing office had read their agent’s deal file; just filed it. Invoiced the lawyer for the full amount including my portion, but lawyer only wrote the listing brokerage a closing cheque for their portion in his payout cheque.

      I messed up the whole Acctg desk at that brokerage! My oh my! But I got paid! Many months later the brokerage closed. Maybe the listing agent knew something but didn’t say. And I certainly didn’t ask him. I didn’t know him. A rather gruff fellow. I didn’t have to sell him on the concept and my buyers always bring good respectable offers. Sellers were pleased to have it sold.

      Perhaps it would be a useful system of billing lawyers direct? A little bit of protection goes a long way. I don’t know if I would have got paid, but I wasn’t taking that chance.

      In all the years I only had one other iffy situation that nearly got out of hand. Several weeks after closing, our invoice to the listing office in nearby domicile had been ignored even after a few phone calls. They said they had not been paid yet by their seller’s law office since closing, weeks had gone by.

      My next call:

      I placed a call to their seller’s law office to confirm the transaction had closed and the large franchise co had been paid, as they said the law office had not paid yet. Not true. Lawyer called listing brokerage and I got a call to pick up my cheque that day!

      Followed by a call from the broker – asking who did I think I was – calling their seller’s law office. Oh, well. Such is life. Needless to say, then avoided showing their listings. Soon the whole system changed and no longer allowed to address commissions in APS. Buyer agency can pay direct.

      It could all be so simple. Ruie A. had a good idea at that board meeting so many years ago. The keep it simple solution often works best. Leave pride and vanity out of it.

      But brokerages don’t like it because they cannot fluff their Balance Sheets to show their banks their borrowing power, using full commissions in the workings. And banks are often dumb like sticks. They have no clue mostly as to how a real estate office works. Thus enabling the referred to comment: floating the office.

      Carolyne L 🍁

      • There was a comment about the size of offices being only 26 agents. Long before my thirty-five years in the industry someone put great effort into researching production stats vis a vis office number of agents. The bottom line quantified and qualified, proven successful.

        At one time, pre-franchise days, RLP had it down to a science. All offices had allocated space for 26 sales reps. Not 22. Not 29. And it worked. It followed a proven pattern. I never did find out who prepared the original research but it was mountains of work and brilliant at the time.

        The purpose being at the time to keep the pattern throughout Canada. Offices with 26 reps, proved productive overall. I certainly don’t know who analyzed such things long before my foray into the field. But for many years, it worked successfully.

        The leases, leaseholds, internal office support staff numbers – it all worked like a fine tuned engine. I don’t know when “the system” stopped working. I left the firm in 1991, after many years as their top area producer. But certainly till then it was a success-driven system for all intents and purposes. A good, strong corporate model. Identity with a purpose, spelled that success.

        I always thought that the breakdown of the 26-rep pattern had something to do with the physical costs of keeping lights on at multiple leased (agent-empty) locations, combined with when independent contractor contract status arrived on scene, many agents refused to attend previously held mandatory office meetings, and pretty much vacated their use of provided desk and equipments, deciding to work from home. At the time there was no “rent a desk” system.

        I studied such research before going off on my own. Offices of 10 reps could be proved to work, but not offices of fourteen reps. Offices sized at 26 reps proved most productive. Offices of 35 reps mostly didn’t survive. It’s a numbers game.

        The only other workable for a top producer was to work alone, if not interested in recruiting, babysitting, managing AND selling as a whole. Someone predicted back then that the only survivors, future be known, would be sole operators and mega size operations.

        And then came the mega-offices; a whole different algorithm. Programmed in many cases to self-destruct, big possibility to implode, yet some made it work.

        In the end it’s a matter of economies of scale. Attached to the mathematical necessaries is location-domicile research. How many homes of various descriptions, sizes and prices are likely to be involved in resale, and following what sort of annual patterns, based on history, and efforts to prognosticate. And what age groups are involved.

        Imagine a bedroom community to a mega city, a town of 60,000 population (all age groups inclusive), growing each year, with four same company brand offices strategically located at specific landmark intersects. Each with a different manager, different phone number, specific marketing ID.

        Each office is equipped and designed to accommodate 26 agents. No more no less. Marked for success.

        Suddenly those office systems vanished and the mega-core offices became the thing of the day. Will history repeat itself?

        Now the industry has hired outside experts and is often run, managed, by experts who brought their learned business acumen from outside the real estate industry, not from within it. The results still remain to be seen.

        When Boards hire EO’s, for example, who were administrators in a different country running a school bus corporation, or were institutional bankers, and others with strong skillsets in other industries, what is to be expected as to how CREA, and such function as interactors with membership, many of whom have been in the industry for decades, enjoined by smart dedicated people with no real estate background.

        Running a real estate business is first and foremost as Tom Peters often said about manufacturing industries, a “stick to the knitting” procedure. Find a hole and fill it. You simply cannot be all things to all people. Yet we are forbidden to use the term “specialist.”

        And always a consumer-centric happiness procedure, as is dominant in the Nordstrom retail model. When agents had to drop their percentages in order to be competitive to get a listing, yet still found themselves incurring large expenses that continue to increase, well there we have the economies of scale out of whack again. No different than the retail suffering world, where so many dropped prices in order to compete, ends up in closed locations, and pitiful out of work stats.

        And the same pattern/theory applies to the brokerage world, itself. In order to attract the most productive agents, having to offer all the commission to the agents, what is left to run the business? Proof is in this current REM story.

        Respectfully
        Carolyne L 🍁

        • Carolyne,

          In regards to the following: ” I don’t know when “the system” stopped working. I left the firm in 1991, after many years as their top area producer.”

          I believe those systems were doomed for failure every time the “top area producer” left! The algorithm was irreparably harmed, as there could only be one “top area producer” and they couldn’t go above 26! Unless of course, someone else’s “top area producer”, who was comparable, could be recruited, but that wouldn’t be the kind of variable that could be incorporated into a pertinent algorithm.

  4. Mr. Zaharko’s notion that “the reality is agent commissions are used to float the brokerage and are managed and paid out just like any other of the brokerage’s business expenses.” is absurd and certainly not indicative of how the vast majority of brokers operate their businesses. This could only occur if commissions are withheld by the brokerage and not paid out to associates immediately upon receipt. If associates are not receiving cheques in a timely manner, the writing is probably on the wall and it is time to be looking for a new brokerage. The establishment of a legal requirement for a commission trust account would offer protection of commission to associates and ensure that the brokerage’s general account contained only funds belonging to the brokerage. I fail to see why any brokerage would be against this type of legislation.

  5. Commission protection is a serious issue and needs a robust solution, quickly. I narrowly missed being collateral damage in a brokerage shut down years ago. The red flags were there and I jumped ship months before it went down. I don’t feel that agents are getting the respect and support we need from our organizations on this issue. It is now August 30 and I have YET to the get the survey referenced above. More knuckle-dragging ensues. My commission income is absolutely critical to my family and even one missed cheque would spell hardship. This downturn in business has really got me worried as to how my current brokerage is managing. The only thing I can do is require large deposits on deals knowing it will be “secure” in a trust account and “hoping” I will get paid out. What a way to live! Ted Z and his ilk get NO sympathy from me. It is theft, plain and simple and I hope his former agents start a class action against him.

    • I would say agents that were part Royal Lepage Foothills need to make complaints to the Calgary Police Service as comments from Tanja McMorris indicate that the police service is willing to hear their concerns & would investigate once complaints are received. “Calgary Police Service spokesperson Tanja McMorris confirmed that as of June 28, they have not received any complaints to investigate either Foothills or Ted Zaharko.”

  6. Using one’s commission to “float the business,”is not a good business practice. If Cam is actually paying you quarterly to hold your tax money that should NOT be touched. I’m still not clear how Ted went broke in such a short time. What happened? Back taxes? I feel bad for all those that have lost their commission. Let’s face it, the majority of real estate associates out there do not do the amount of deals Kirby Cox does. Most live commission cheque to commission cheque to feed their family. After everyone get’s their hands into your commission CREB, RECA, and your brokerage, you’re not walking away with much. The fee’s seem to go up more and more every year and yet our rates remain the same to remain competitive with these top producers and mere listings. I hope all, including the top producers are made whole again. I know my brokerage holds my money in trust and that made me feel a bit more comfortable until I read this. We have to find a way to protect our hard earned money. Stay have out there my fellow Realtor(r).

  7. A company loots the bank account, closes the doors and stiffs everybody it owes money to.
    Didn’t I see this on Soprano’s once?

    Going of business is one thing – stiffing working people for thier pay cheques is another thing!

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