So, how many agents are leaving the industry due to lack of
work? Have you ever stoped and asked yourself that question? Most likely not
but, I did this week because a friend of mine who owns their own real estate
brokerage told me that he is expecting that by the end of this year, his office
is going to shrink......so much so, that he may actually close his doors.
You see, many, if not all brokerages are built around
reoccurring revenue streams brought in by the agents. Obviously, I am not going
to go through every single office business plan I know of but, ultimately they
all revolve around either one of two...or both of these ideas.
Idea # 1: High
monthly fee and little to no commission split. These offices charge agents a
high monthly fee....like $500.00 a month or so and, yes...that is high in my
area. Now, these offices don't really care if the agents on their roster do any
business at all because, the broker is paying bills and making money off the
monthly fee. Normally, in these offices, the broker isn't making any money on
commissions anyways so, he is working for just that monthly fee.
Idea # 2: Low to
no monthly fee and high or graduates commission splits. These offices make the
bulk of their money on the performance of the individual agent. These offices
will typically charge little to no commission splits however, they typically have
a skeleton staff and expect the agent to be able to handle most all issues with
little to no broker involvement.
Now, as you can
expect, plenty of pros and cons with either major model however, what happens
to these models when the number of agents in the industry or in local markets
begin to dry up?
Well, the
competition for agents becomes more fierce and these 100% or low monthly fee
offices begin attracting a lot of agents. Much like we have now in my market.
The problem is these office typically attract the type of agents that most
people should steer clear of. Now, granted, this isn't true in every market and
this is strictly my opinion however, my experience is that before a agent truly
gives up on their business they go into the Realtor Death Spiral. Yes, this is
a phrase I just thought up.
So, what is the
Realtor Death Spiral? Ok...so, here it is. It's when you have a Realtor who has
been struggling the past few quarters and is now having to make a decision. Do
I stay in the business or do I go back to do what I know how to do? You see,
most Realtors, 99% of us, didn't grow up thinking...oh, I want to be a Realtor.
We grew up thinking, I want to be a fireman, a police officer, a marine or in
my case, a secret service agent...yes, that is true. My point is, we all came
from another industry and we either fell into real estate because we had a
friend who was selling their home or it was a part time "job" for
vacation money or...whatever reason you can think of other than, I want real
estate to be my career. With all that
said, it means that many of us....almost all of us thought to ourselves, well,
if I can't make it big and live like Donald Trump, then I will go back to
teaching, being a stay at home mom or steel worker.
Now, let's look
at the graph above...yes, I pasted that in here for a reason. The graph is the
latest information I could find from the National Association of Realtors on
the number of Realtors by year. Look closely at the nose dive in the past 4
years. You see, the graph clearly shows that when real estate was good.....or
easy, people were becoming Realtors left and right. In fact, if you look at the
graph just a little closer, see how we doubled the amount of Realtors from2000
to 2006. That's right people, in 6 years, we doubled the number of people in
our industry. Now, consider that when I tell you that back in 2007, NAR release
a statistic that said something to the effect that 93% of all Realtors, DID NOT
CLOSE MORE THAN 3 DEALS A YEAR! In fact, I read at one time that the average
income of a Realtor was like $26,000.00....that's not even a million dollar in
sales in my area.
Well, I will
leave it up to you to come to your own assumptions and conclusions however, I
am of the mindset that our industry does need to do some "house cleaning"
if you will. In fact, I venture to say that as the housing bubble was blowing
up so was the rank and file Realtors and now, as the bubble is busting....those
same agents are looking at themselves in the mirror and saying, "Damn,
this is much harder, much more expensive, much more involved than I thought or
ever experienced it really was". Yes, we are going to start seeing a mass
exodus of agents from our industry, in fact, many of us in the industry have
noticed this for the past 2-3 years. I must admit, I am glad to see it.
Personally, I am sick and tired of dealing with agents who have been in the
business for 3,4,5 years, sold 3-5 homes a year, has a full time or part time
job in another industry and then complains that they want to do REO and no one
will help them get into the business or that they attended some conference but,
they had no ROI.
Our industry
needs to purge the part time agent. These agents don't do much for our
industry. Yeah, maybe they have a place and time but, it's not now. Now, we
need to get back to professional standards, common sense and the Realtors who
are here, participate, contribute and improve our opus.
Now, don't get me
wrong, people got to pay bills, people got to do what they got to do in a
country with an unemployment rate of 9.1% but, let's make sure we are all
looking at this with an ounce of perspective. Let's make sure when we see
brokerage office closing, or agents retiring their license that we stop and
realize, fortunes are made in times of recession and those who can survive
deserve to be here and reap the rewards of their commitment.
Comments
Judith, you are 100% correct. There is no doubt that the buyers that you are selling to now will become customers for life.Wish you much success, If you ever move to CT come and work with me!
I have been in sales all my life,only in Real Estate for the last 5 years, I try to be the best agent I can be both to my buyer/seller and other agent (if any) that are involved in a sale. Thank God I have my retirement and SS to fall back on..oh, and good old BPO money!...... I met an agent that had been in the business for 50 years,(he refers all his business now and is an investor)....I admitted to him that I wouldn't discuss with the other agents at the class that I had done sales as low as $20,000 and up, he made me feel good by asking how long I had been in the business and told me if I took a survey in the room that a lot of agents hadn't even had 1 sale this year, no matter what the $ amount! They were mostly from the "order taker"era,he told me to hang in there and keep doing what I'm doing and grow and learn! I work at this all day,every day and night, I try to keep my spirits up by going for "units", ($ amounts count too, but I just try to keep positive and don't look down my nose at amounts,....although I will admit that you tend to work harder on the lower priced ones it seems) I have the attitude that the low priced first time homebuyers will hopefully someday have a need to buy another home and sell what they have?? That investors will like dealing with me because I work hard for them and keep in touch with them and their lawyers all along the way while waiting for settlement and when the market turns and they're ready to sell some of their inventory that they'll remember me.. I see agents come in and play games on the computer,read magazines,pace and wait for the phone to ring and then get upset because I have business and they don't???? I don't have time to worry about it...thank goodness! It will all pay off someday. With more agents leaving ( and I don't wish anybody any harm), the busier I'm getting....but it kind of works out because there are less buyers.....Good luck to everyone and hang in there.
This rant is aimed at the occupy wall street protestors, but just change the principals to realtors working long hours and finding success and those not willing to do what it takes. In that context, to me it is one of the funniest, and truest things I have read.
http://dailycaller.com/2011/10/28/traders-talk-back-to-occupy-chicago/
I work for one of the mega brokers in Atlanta, with 26 offices and 2200+ agents (at last count I heard). My office is in a rural area on the out-skirts of the metro area. In 2008 we had 140 agents assigned to my office and 3 pre-license classes running with full classes. Today we have about 35 agents, no classes and of those 35, less then 10 are full time. A few moved to the low cost non-Realtor companies but most have quit completely.
But even with these bad numbers, our sales have grown and so far this year we are the highest producing company in our market and numbers are still growing. Now if the banks and HUD will start releasing inventory again, we should be off to a great start for next year! For those of us still in the business!
Thanks for the visual Jessie. It looks to me that a level of less than 800,000 was pretty consistant until sub-prime fueled the market. But here's a thought, this chart is REALTORS, I wonder how many licensees there are. The dirty little secret in real estate is most large franchise offices have a "straw" broker that holds the non-REALTOR licenses. Those licensed agents can refer business to REALTOR office agents, but don't pay dues, E&O & MLS fees. When the market improves, they can become REALTORS again and jump back in.
In Maryland 40% of the agents have only done 1 transaction, that is an average, and now instead of the 80/20 rule we are living in a 90/10 rule, when only 10% of the agents are making 90% of the business.
We can see it as glass half empty, but the reality is that real estate historically has one of the highest turnover rates than most careers, maybe because like you said most of us were "dual" careers when we started in this business, and to be successful in real estate you have to be like 300 Spartans, and we have to sell homes to make a living or quit for good.
The problem is that many brokers don't really take the time to train their agents properly, just teaching an agent to write a contract, the liability issues, and to use MLS and digital lockboxes, that doesn't make an agent.
Agents need to understand that they are not the broker's employees, they are in business for themselves, and they should be accountable and responsible for their business, they should worry about their business more than anyone else.
But unfortunately most agents don't have a business plan, budget, etc. They hang around the office waiting for the phone to ring and in some companies in my area, they are the receptionist, while waiting for the leads to come.
Jessie,
this is one of the most sensible blogs I have ever read. Part timers and agents unwilling or unable to learn and change will never survive the next 5 years.