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December 29, 2006
Too Many Realtors
Whether the housing market is stabilizing or not, it seems pretty clear that there are still too many people in the U.S. trying to make a living selling houses.
The housing boom sucked in all kinds of people who used to work in other fields. Trouble is, very few have left. National Association of Realtors spokesman Walter Moloney says the NAR's membership is 1.35 million, which he says is at or very close to a record. By comparison, the Bureau of Labor Statistics says there are only 1.06 million people employed in motor vehicle and parts manufacturing. At the Realtors' annual meeting in New Orleans, there were predictions that the number of Realtors might decline about 8% in 2007. That comes to over 10,000 people.
One way to see that there are too many Realtors is to look at the breakdown of pay. While the top quarter or so is making good money, there's a huge army of Realtors at the bottom who would make more money with a full-time job at McDonald's. Nearly a third earned under $25,000 in 2004, according to a National Association of Realtors study. Here's the complete breakdown of the 2004 survey:
Less than $10,000: 18%
$10,000 to $25,000: 13%
$25,000 to $35,000: 9%
$35,000 to $50,000: 11%
$50,000 to $75,000: 13%
$75,000 to $100,000: 10%
$100,000 to $150,000: 12%
$150,000 to $200,000: 6%
$200,000 to $250,000: 3%
$250,000 to $500,000: 4%
$500,000 to $1 million: 1%
Over $1 million
By the way, a lot of the lowest-paid Realtors are the newbies who don't have references and repeat clients. The median income for people who had been in the field for two years or less in 2004 was $13,000.
Real Estate Culture
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You may be interested to know the Orange County Register of Organge County of California recently published an article saying 1 out 55 adults in California is a Real Estate Agent.
Sad--but very true.
I don't understand why people would want to work so hard for so little money they make, especially in residential where the clients can be so demanding, fickle and unappreciative.
That's why I am a believer in being a property scout. You make ten times more for a third the time and effort.
Professional Commercial Property Scout
Posted by: Diane Kelly at January 1, 2007 01:54 AM
They may earn more at McDonalds but it would be considerably more work without any prospects for growth so it is not surprising real estate is more attractive. That is the problem with most jobs created since the recession. They either take considerable background like healthcare or they are deadend ones like restaurants. No wonder participation rates have dropped.
Posted by: Lord at January 1, 2007 02:09 PM
I am a realtor with almost 4 years of history. According to your statistics my earnings in 2006 would puts me into the top 1/3. I came from technology (I owned three of my own companies).
There maybe three reasons why there are so many realtors (hanging on).
#1 - There were so many good years that although this past year was not great many agents are probably hoping for a return to the "good old days".
#2 - Many real estate companies still make it sound so easy to earn "BIG BUCKS".
#3 - Many agents are part time and really don't care how much they make because it is not their main source of income. Any money is better than no money.
During this holiday season most agents from my office sat home. Those agents that basically came in on a daily basis are the ones that are in the top 5%. This industry is changing and changing rapidly. Personally, I beileve with the changes that are coming into place and those changes that will be happening in the coming months and beyond that many of the "old guard" will be leaving.
If you are not willing to look with fresh eyes your time as a realtor is (really) limited. I also believe that too many agents are just "listing agents". They are not experiencing the some what dramatic shift that is being made by how potential buyers are coming to the marketplace. If you don't understand how buyers are starting their home buying search you will not be able to position your listings correctly. Buyers (and everyone else) are TIME-STARVED and INFORMATION INTENSIVE.
The days when an agent could sit back and earn money is over. Even if we re-enter a sellers market competition will require much more effort.
If you are not proficient in digital photpgraphy, own a web site, blog and video podcast, utilizing state of the art virtual tours it is time to visit your local career counselor!
Posted by: Mark Norman at January 2, 2007 12:24 PM
Even if someone is in the bottom third, making $25K a year, that's still better than waiting tables or working in retail for someone else. You're your own boss, able to make your own hours, with a good degree of autonomy and potential for future gains. Why would you expect even those low-achievers to leave?
Posted by: Marlow at January 3, 2007 01:49 AM
I work with a lot of property agents. Many of them make very little (as per your survey) but are still content to be agents because:
- They don't put many hours into the job, so while the annual pay is low, the pay per hour is more reasonable.
- Many of them are doing this as in-between-jobs employment or as supplemental work. As such, it is incremental income rather than a job they are dependent on.
- The work is more pleasant than many of the alternatives (e.g. working in a fast food joint).
- If there is a market up-turn they are well positioned for some easy money. Meanwhile, they are just marking time.
- Many are new to the work and just trying it out.
Those who are really serious about the work either become successful, or they quit because it is too little reward for the effort. I think many of the people at the low end are either just starting are are not serious (see above list).
Posted by: Robert (property agent) at January 3, 2007 02:44 PM
I expected the number of Realtors in our board to go down this year when renewal time came around. I don't think that happened. My office actually is growing in spite of Michigan's economy.
But it's not only the new agents with low incomes. It is anyone who isn't totally committed to working, especially in a tough market. And the tech requirements that Mark Norman commented on above are definitely no longer optional.
Posted by: Maureen Francis at January 9, 2007 11:34 PM
What this breakdown of Realtor's salary needs is more information on Full time vs Part Time agents.
The real reason that these numbers are so low is because it is so easy to get into Real Estate, that many people do it as a side gig. Maybe they take 2 weeks of classes and pay $500 to be a REALTOR, but their goal is just to do a deal or two a year on the side. With a goal of adding an extra $5k or $10k to their normal $40k job. Like a 20% pay raise.
Anyhow, just thought I'd help explain that the numbers are skewed by the weekend warriors and not really sucky full time agents.
FRANK LL0SA- Broker Virginia
Posted by: FRANK LL0SA- Broker/Realtor, Northern Virginia at January 15, 2007 11:03 PM
I wonder if those earnings are net earnings, or gross. I used to work for a company that ran real estate marketing sites and sold leads to agents. Most of our agents were newbies (3 yrs or less) and most spent about $3,000 a year with us. If your income is $13,000, then your net - right away - is now $10,000. That's before any other marketing. Being a real estate agent is like being an independent businessperson. Certainly, there are successful agents that are good at their marketing and sales and make money. But many lose money at the bottom line because the marketing costs are more than their income. In that regard, many real estate agents are doing no better than if they joined a Multi-Level Marketing (pyramid) scheme "business".
Posted by: Brandon W at January 19, 2007 09:05 AM
Those numbers indicate 1 in 4 make over $100k. Not bad given the ease of entry. Sure, it takes a couple of years and lots of sweat to get there, but what other profession offers that potential with so little formal education, training, up front expense?
Posted by: Bill Ruppert at January 19, 2007 04:39 PM
It would be more interesting to know the incomes of RE agents as compared to other incomes in the area.
A RE agent in NYC making 50k would be hurting, compared to a RE agent in Buffalo.
I realize this would be more detailed, but $25k or $30K in some parts of the country is good money.
Where $75k in other part is near poverty.
Posted by: knuckle at January 31, 2007 11:11 PM
I definately agree.
There are way too many RE agents out here. Every time I go to a networking event with a mixed crowd of business owners and employees 35% of the event will be agents.
Im surprised more people dont do commercial where the serious money is.
Blue Star International Brokerage & Research
Market Research, Commercial Property Scout, Commerial Loan Broker
Posted by: Nick Taylor at February 12, 2007 12:16 AM
I've been in this profession for only 6 months and its all in how hard your willing to work! All I've done is factory work my whole life but I don't regret it because I'm able to "RELATE" with my perspective clients. I think thats the key to being succesful at this. HOUSES CAN SELL THEMSELVES I just want to be the "GO GET IT DONE GUY" to sell it!
Posted by: Jeremy Allen at February 23, 2007 05:29 PM
It's true, there are way Too Many Realtors.
The problems are starting to correct themselves, but the agent washout will continue.
Also, there are more 'seller assisted' services available than in the past, providing home owners with more options, information, and service to allow them to say "I Sold My Own Home" and pocket the extra dollars they would have had to pay out at closing.
Posted by: TundrAgent at March 7, 2007 05:10 PM
I'm one of those responsible for there being too many Reatlors. I was the first broker to buy a franchise (1974) and helped C-21 sell franchises nationally in their race to keep Realty World out of the market. When C-21 sold out, the new holding company brought in Ivy League MBA's who determined that training agents was not profitable (they moved on to greener pastures)and that the most profit agent was the newby! These new agents came in with 3-4 transactions (friends, relatives, co-workers) and the newby was comfortable with a lower split, netting the broker more. As a result the survivial rate of Realtors is very poor. I think a national study would show less than 20% survive the first year.
The problem is commissions are too high, they are high to support the franchise override. With high tech and experience an agent can make a very good living with low commissions and high volume. The problem is with so much competition, it is difficult to acheive the high volume. I personally need 65-70 closings to make the $250k I need to justify being self employed and net the income I think I deserve. It takes a cliental of almost 500 to develop that volume.
Posted by: Don Stark at March 16, 2007 12:00 PM
It's too easy to get into real estate sales. All agents attempt to pass themselves off as a 'professional' yet few know anything about building codes, legal matters or even how many square feet are in an acre. They are ignorant on taxes, figuring financing, reading maps, etc. To get a license and knock down above $100k + per year these people should prove 5 years in the trades, have a BS in business and a college degree in real estate law.
Posted by: Dr. Johnny Jackpot at March 19, 2007 08:55 AM