Your Realtor is not a Financial Advisor

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Despite the downward trend, real estate is still insane in Canada. To be honest, I haven’t been paying much attention to the headlines as of late, but it seems like everyone is a real estate expert these days. Talk to any homeowner, and they’ll tell you about how much their homes have gone up in value while realtors are more than happy to talk about how real estate is a can’t miss investment.

Wait a minute, are realtors all of a sudden financial advisors? How can they possibly say real estate is a can’t miss investment? Well, there are no laws saying they can’t make such statements, so they’re not doing anything illegal. But that doesn’t mean you should think they can accurately predict the future or treat them like a certified financial planner.

Full disclosure, I used a realtor when I bought my home, and I like him a lot. I trust him for all of my real estate needs, but I would never turn to him (or any realtor) if I needed advice about investments, here’s why.

Realtors are paid to sell

In most cases, when a home sells, 5% of the sale price is paid out to the realtors. 2.5% goes to seller’s agent, and 2.5% goes to the buyer’s agent. The higher the selling price, the higher the commision that is paid to the realtors on either side. If the realtor represents both the buyer and seller, then they get the full 5%. You can see how this is a conflict of interest.

Now if you’re the buyer, it obviously benefits the agent if you spend more when buying a home. I’m not suggesting that realtors purposely encourage you to spend more, but they do have a natural incentive. Some realtors will tell you that spending more is just a few dollars per month. Seriously, have you seen those home buying shows on HGTV? The first question they ask is “how much can you afford a month?” and almost always, they still go over budget. Yes, it’s just a few more dollars or a “cup of coffee a day,” but you’ll end up paying thousands of dollars more when you factor in the interest.

They can’t predict the future

Some realtors look at how the markets have been doing over the years and suggest that the real estate will never go down or this investment will be worth much more in the future. This may or may not be true, but it’s impossible to make that guarantee. Certified financial planners aren’t allowed to make such claims because they’re regulated, but realtors can. That doesn’t make any sense, does it?

Realtors can accurately (usually) assess the current market conditions and give you their recommendations on what specific homes are worth and what they may sell for, but they can’t predict the future. No one can. Unless you’re buying an investment property, you should think of your home as a place to live. Don’t focus on future value, think about what you can afford now.

They don’t know your financial situation

Generally speaking, there are only two things your realtor will know about your financial situation: How much you are approved for your mortgage and how much you can “afford” on a monthly basis. A good realtor will, of course, tell you to set aside some money for closing costs and furniture, but they likely won’t know what your overall financial situation is.

Realtors aren’t thinking about your other debts, the cost of raising kids, how you’ll pay for your vacations, or if you’ll have enough saved for retirement. They’re focused on helping you buy or sell your home (which is their job). When working with a realtor, you need to know what you can realistically afford and to stick to your budget. It’s not fair to expect your realtor to know how your home purchasing decision will affect your overall financial situation. That’s your job!

Final thoughts

It may sound like I’m hating on realtors, but I think they can provide excellent insights in their field which is real estate. You can trust your realtor when you’re buying and selling a home, but don’t go to them if you’re planning your financial future.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Nicholas on March 19, 2018 at 2:06 PM

    I bought my home 3 years ago, when the housing market were bit hotter than current state.
    I do remember going into bidding wars several times. My real estate agent kept giving me $5 latte a day speech. In a nutshell, If you don’t go out for a latte a day, you can bump up your offer by saving monthly costs of buying a latte. I couldn’t hate my agent for repeating that, but it is their tactic force closure or up-sell. The agent was doing their job…

    Like the article indicates; they are pressure to sell (hence the latte speech) and they can’t predict future (if my agent did, my agent should of known I don’t care for lattes! PLUS I don’t care how good the latte is, but I’m not paying interests on lattes! even if the fancy latte is made with Kopi Luwak aka cat poop coffee beans!!)

  2. Pamela George on March 19, 2018 at 8:06 PM

    I am a Financial Literacy and Credit Counsellor and I couldn’t agree more with this article. On point!

    • Barry Choi on March 19, 2018 at 8:17 PM


      Seriously, I like my realtor, but I’d never go to him for financial advice.

  3. John Smith on March 21, 2018 at 10:51 PM

    ps—when an agent rep’s both the buyer & seller, it is almost NEVER 5%… They work out a deal on the initial sale paperwork (assume they are listing agent because they have to be) and if the doubel end thr deal, its usually 3-3.5%.. NOT the full 5. In fact, not many ppl sell for the full 5 these days.. its more like 4.

  4. Eric Lange on April 19, 2018 at 8:51 PM

    for what its worth when we were selling our house in 2016 before the market in GTA exploded, we had an offer of $1.7 on the table, we wanted $1,745,000 and would not come down in the price, the seller wasnt going up either, the buyer agent insisted due to her planned vacation in one day, that this deal had to be done that night, or her client would be waiting until she got back and then look at another group of properties.. I then made the suggestion, the the 5% would net the two realtors some $87,500 to split, why not take a hit on the commission, agree to a 4% split commission,
    that would save us some $20,000 and apply that to the offer sheet get her client to offer $1,725,000 and the agents would have to split the 4%..
    the buyer agent went crazy, how dare i suggest she take a hit on the commission!!,,, that was crazy and would never agree to a pay cut.. She said the following,,, i will go back to the buyer, i will convince him this is such a great house and property and lets agree to pay the $1,745,00 and be done with it. no discount on the realtor commission ..
    next day she gave us the $1,745,000 offer with only house inspection as the conditional, she cost her client over $20,000 in extra cost, that he could have saved. I made sure after the closing, i went back to the house and shared the story with the buyer, to ensure he understood his agent cost him over $20,000 more than he could have saved on the deal.. He told me that he never realized his agent was not looking out for HIS best interest but instead looking out for her commission, By the way my agent was fine with doing that deal, and in fact ended up giving us back half a percent on the commission so it only cost us 4.5% in total,, she had our backs..

  5. […] ★ Your Realtor is not a Financial Advisor […]

  6. Adam @ Minafi on June 15, 2018 at 10:04 AM

    Realtors on the seller side seem more aligned with their clients interests, but as you pointed out it’s still not great. It’s more important that it sells at all than if it sells for fair value or above the existing mortgage.

    One thing we did for selling our house was find someone who was really experienced in selling houses in our neighborhood. He’s sold a bunch in the blocks around ours, and by doing that had driven prices up, allowing us to benefit. Our house sold high and fast, and I imagine he’ll be able to use that in the next house he sells in the neighborhood.

    • Barry Choi on June 15, 2018 at 1:48 PM

      Hey Adam,

      Great point about realtors knowing areas. 8 years ago when my wife and I first started looking at homes, we had to give directions to our realtor for areas where we were looking. She had no clue and it completely turned us off the buying process.

  7. Rohan on June 17, 2018 at 3:45 PM

    I agree realtors incentives are not aligned with sellers. The first offer they get is their best, irrelevant of the price. If they get the seller another 10k, the realtors only gets an extra $500. So spending more time on getting you 10k is not worth their time.

    With many other services going online and peer to peer, it surprises me that real-estate is the one industry that does not want to budge. I personally sold my house privately and saved nearly 20k on agent fees. And I feel confident that I couldn’t sell my house for 20k more than what I did.

  8. […] $ Your Realtor is not a Financial Advisor […]

  9. […] Speaking from experience, looking at properties over budget may only leave you feeling discouraged that you can’t afford a nicer home in a better area. If it’s a financial no-no, do yourself a favor and keep it moving. Regardless of what anyone says, remember, you are on the hook for paying your mortgage, no one else. This goes without saying but your realtor is not a financial advisor. […]

  10. HomeHow on November 9, 2019 at 1:15 PM

    A realtor and a financial advisor are two different people who are not able to give recommendations on the other’s work. This is the reason you should keep them separate.

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