Agents Only Blog

In researching for that article I found some very interesting real estate industry statistics that paint a very interesting picture about what it means to be a real estate agent which I would like to share here (and this time interject my own personal viewpoints). I apologize in advance for not saving the web links to the sources (I didn’t intend to add this piece). However all my sources were found with some simple Google searching (and a lot of it comes from the National Association of REALTORS at www.nar.org).

What it is like to be an "Average" Real Estate Agent…

- The average full-time agent works 46 hours a week. 1 in 5 agents work 60 or more hours per week.

Part of the perception problem- even with agents within the industry- is that all an agent does is show homes. (A mine-numbingly simple task that can be argued is obsolete thanks to the internet.) Yes there are a lot of internet search tools available to today’s buyers, but if you don’t have a strong understanding of the real estate industry or the local market, it doesn’t mean you know how to interpret the data. A good, knowledgeable agent (and let me add that I fully understand many agents don’t fall into that category) will spend time on every transaction crunching statistics trying to interpret the data to make sure their buyer doesn’t get burned (this is a whole blog article on its own). Suffice it to say, this is hours of office work that a lot of new agents don’t realize exists.

Then there are the inspections- a good agent attends them with (or on behalf) of their clients. Plus there is the negation process after you receive the inspection report, working with the lender, inspector, appraiser, other agent and title company, as well as all the paperwork required by the state, broker or lender to get the deal to close. On the selling side, a good agent spends time helping a client stage their home, offering advice to make it show better, holding open houses, soliciting other agents for feedback (which is a fulltime job itself), providing feedback to the client and of course marketing.

I should also note that each transaction is its own beast. For every “easy” deal there is another client that has three contracts die before things work out, a difficult or emotional client that defies logic and consumes an agent’s time, or another agent whose lack of knowledge, arrogance, or apathy for their own client quadruples the amount of time it takes to make a contract close. All said I would estimate for every hour an agent spends with a client there is 4-5 hours of administrative work to manage the client/contract and another 4-5 hours of marketing to bring in the client.

More important, in residential real estate weekend and evening work is quite common since you have to work around the schedule of the buyers- so the fact that the agent may be at home at 2pm on a Wednesday doesn’t mean the agent isn’t working their fair share of hours.

- The average full-time agent has 9 years of experience but has been at their current brokerage for 2 years.

Getting paid 100% commission unfortunately means some months you feast and others you starve. At the same time federal regulations that define independent contractor status prohibit a broker from using a lot of the traditional perks an employer might use to retain a traditional employee- such as health insurance, benefits- even logical things like helping to market or grow the agent’s business. No matter how much you may like your broker, office, or coworkers, ultimately as an agent you are forced to take an “every man for themselves approach” in order to survive. This means the successful agent is resigned to “shop” brokers for better compensation deals- because a little more from each commission check can mean the difference between making it in real estate and failing.

- Hotjobs.com says the average agent earns approximately $31,000 per year. I’ve seen other sources that peg it at $33,000-35,000 per year.

Compared to the average hourly waged employee running a cash register at Wal-Mart or waiting on tables at Applebee’s, this is probably a pretty good income. However, compared to most people’s perception of what real estate agents make it’s significantly lower. A lot of this has to do with the fact that most people see the total commission being paid on a real estate transaction, but they don’t understand just how many people get a part of it beyond the initial agent- or the expense the agent might actually have to generate that commission. For example, one of the top listing agents in our office retains two full-time salaried employees to process administrative paperwork at a total cost of $100,000 per year- and that’s an expense she has to pay every month even if nothing sells. Combine this with the stats below.

- 10% of agents earn less than $17,600 per year.

How is this possible? I have seen statistics from various local associations of Realtors that show the average agent in their geography processes a low of 1.9 transactions per year (I believe that was Massachusetts) to a high of 12 transactions. Depending on where you live, that’s an average of one sale every six months to once a month. I can no longer find the Missouri statistics but I believe it was somewhere around 6-7 transactions per year (basically one sale- or paycheck- every 60 days).

- An Inman News study shows that 61% of all real estate commissions are earned by the top 25% of agents. The bottom 25% of agents only earn 3% of the total real estate commissions.

In other words, forget about the 6-7 transactions per year average. A few agents are doing 6-7 a month and the rest are going months between transactions- and paychecks.

One theory on why the industry works this way is that success breed’s more success. However my theory is that being a real estate agent is no different than any other business- to be successful you need a solid business and marketing plan for how you are going to attract new customers and a critical mass of start-up capital to pay for the initial marketing and expenses required to be successful- and most new agents have neither.

I have seen statistics that show the average first year income for a new agent is somewhere between $12,000-14,000 (on the low end) to $22,000 (on the high end). Realty Times did a survey of people in licensing school and found that more than half of the people got into real estate expecting to make over $40,000 in their first year. 23% assumed they would make over $60,000 in their first year. (See this article.) Clearly reality and perception is out of line.

Here are a few other first year agent statistics:

- Inman News did a study and found 10% of new agents quit in the first year and another 16% quit in the second year.

- The California Association of Realtors did a survey that showed 57% of new agents quit real estate within the first five years.

So the failure and burnout rate is high for real estate agents. Perhaps the unrealistic income expectation combined with the work hours has a lot to do with it. One statistic that has eluded me is the divorce rate for established agents- which I expect is also higher than the national average due to the excessive non-traditional work hours and inconsistent pay.

Although these statistics can be pretty gloomy, don’t look at them as a reason to stay out of real estate as a career so much as a need to plan and prepare prior to entering. Ask yourself questions like, “how will I survive if there is no income for six months or there is a zero month?” If you don’t know a lot about real estate as a business, put together a plan for training yourself on things like financing, construction and understanding client’s needs.

In our own case, Kimberly entered real estate sales in a back end fashion- with 10 years of industry experience in other roles (mortgage broker, rehabber, builder, property manager) that allowed her to be both a newbie and an expert at the same time. More important, she had a second income to support her during her first year at Prudential Alliance.

My interest and formal classroom training in real estate started over five years prior to getting licensed. More important, I moonlighted on my corporate sales job for over a year helping Kimberly market and grow her business prior to joining her- even traveling with two laptop computers so my employer’s IT department wouldn’t spot my work on their laptop. When I finally quit my job to join Kimberly, I had saved up several months pay to cover our expense- which we quickly burned through to pay our bills.

Overall, we both work over 60 hours a week. However because we enjoy what we are doing, the hours (on most days) doesn’t seen oppressive. For example, today was our first Sunday off together in months- and we spent the day driving around an area of town we don’t know very well looking at real estate trying to get to know the area better (go figure).