I recently spoke to the wife of a friend who had been planning a career change into residential real estate but was now having second thoughts. Sound familiar?
“Is this a bad time to give up my job and take the plunge?” she asked.
“Good question!” I said, enthusiastically.
She has reason to be concerned. There has been a lot written about the slowing of the residential real estate market and many firms are reducing overhead in response.
Keller Williams had several rounds of layoffs over the last year, RE/MAX cut 17% of its workforce in the second half of 2022. Anywhere recently announced an 11% reduction of its workforce, and Compass has also had several well-publicized layoffs.
Office consolidation has already begun, further spooking potential new agents. What should we tell them?
This is what I said: “There is nothing about the conditions of the current real estate market that will have a negative influence on your long-term success. While demand for real estate rises and falls with the economy, the need to sell remains consistent since it is based on events in people’s lives, not monetary policy. Divorce, death, job loss, illness or injury, and downsizing make up the chief reasons behind a home sale. Since it is predictable life events that lead to listings, earning a good living flows through people and not property.”
Based on my experience in all types of markets I believe that downturns offer the best opportunity for new agents to establish themselves against the competition.
The real impediment to long term success is that there are too many agents competing for too few closings. And that never changes.
Why do we keep fueling the myth that real estate agents are millionaires? If we really want people to succeed, we must be honest with them. There may be no ceiling to their income, but neither is there any floor. Yet most recruitment ads suggest six figure incomes as high as $250,000. Television shows paint an unrealistic picture of the life of a typical real estate practitioner. The vast majority of real estate licensees fail to earn a decent living.
In my recruitment interviews, I like to introduce a harsh and bitter truth. The National Association of Realtors (NAR) reported that in 2021 realtors with two years or less experience had a median gross income of $8,800. That means that half earned less.
Should we even bother to recruit new agents? What is the alternative, trying to coax top producers away from other firms? To what? Lower fees? Better leads? Newer technology? Nicer office? Better training?
Leading to what? The median income for all members was $54,330 up from $43,330 but, only those with 16 years or more experience had a median gross income of $85,000 – up from $75,000 in 2020, can be thought of as earning a living. Why should it take 16 years just to make a living?
Obviously low earnings are among the reasons for high turnover. Why don’t real estate agents make more money? They do the wrong things, in the wrong way for the wrong reasons. And mostly they imitate what they see other agents doing. Failing.
The other reason is that they just don’t like the job. For that, I don’t blame them. Asking strangers for business and all that goes along with that is often unpleasant. There is a better way.
The industry and agents in general view real estate as selling houses. In other words, they are more focused on finding buyers than they are on contracting sellers. Or, as Sinclair Lewis described fictional real estate broker George F. Babbitt, “He was nimble in the calling of selling houses for more than people could afford to pay.”
How does that workout in reality? In the NAR Member Survey referenced above, fifty-seven percent of respondents cited limited inventory as the main impediment to their business, followed by 16% citing housing affordability and 12% citing difficulty finding the right property.
Agents with portfolios of saleable listings do not face those obstacles. In most markets, listings always sell, eventually. Listings attract more listings, better qualified buyers, and build stability for both agent and broker.
Listings are not market driven and they flow into the marketplace at about the same rate, year after year. In fact, their numbers tend to increase slightly as the economy sags. One reason many brokers do not emphasize pursuing listings is that they believe that the process is more nuanced and requires more training and experience than new agents possess, and they see buyers as quicker commissions.
But they are not comparable. The buyer focused agent is always starting over. The agent who builds a business focused on listing referrals is building a barrier to market forces.
Over the course of my career, I have rescued failing offices and launched new ones. I’ve had skin in the game. I was a pioneering RE/MAX Broker/Owner, I opened the first Keller Williams Market Center in California and I understand the challenges of recruiting to something new, different, or speculative.
The question was always, “What are you going to do for me that your competitors won’t?”
My answer, “I know the secret to long-term success and in thirteen weeks, I can teach it to you. Is that something you might be interested in hearing more about?”
My message to new agents, is and always has been the same: the market doesn’t matter. Obtaining listing referrals isn’t about real estate, interest rates or economies, it is about people and our image in their minds. In that regard, there has never been a better time for a new agent to enter the business, providing they master the art of generating listing referrals.
George W. Mantor is president of The Associates Financial Group, based in Vista, California, and the author of “The Awful Truth About Careers in Real Estate and What to Do About It: A Guide to Building a Rewarding Real Estate Business.”