Too Many Realtors

Posted by: Peter Coy on December 29, 2006

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 <1%

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.

Reader Comments

Diane Kelly

January 1, 2007 1:54 AM

Hi,

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.

Diane Kelly
Professional Commercial Property Scout
http://www.propertyscoutcash.com

Lord

January 1, 2007 2:09 PM

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.

Mark Norman

January 2, 2007 12:24 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!

Marlow

January 3, 2007 1:49 AM

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?

Robert (property agent)

January 3, 2007 2:44 PM

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).

Maureen Francis

January 9, 2007 11:34 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.

FRANK LL0SA- Broker/Realtor, Northern Virginia

January 15, 2007 11:03 PM

Hey Peter,
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
Blog.FranklyRealty.com

Brandon W

January 19, 2007 9:05 AM

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".

Bill Ruppert

January 19, 2007 4:39 PM

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?

knuckle

January 31, 2007 11:11 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.

Nick Taylor

February 12, 2007 12:16 AM

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.

Nick Taylor
Blue Star International Brokerage & Research
Market Research, Commercial Property Scout, Commerial Loan Broker
www.globalimportexportagent.com/research.html

Jeremy Allen

February 23, 2007 5:29 PM

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!

TundrAgent

March 7, 2007 5:10 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.

Don Stark

March 16, 2007 12:00 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.

Dr. Johnny Jackpot

March 19, 2007 8:55 AM

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.

EDWARD HUNTER

August 20, 2007 11:11 PM

A PROFESSIONAL SUCH AS A COP, FIREMAN OR TEACHER DOING REAL ESTATE AS A SIDE VENTURE HAS FAR LESS REASON TO UNDERPRICE A HOME BY DOING A FRAUDULENT CMA THAN ANYBODY WHO NEEDS TO MOVE HOUSES TO PAY MONTHLY BILLS. REALTORS HAVE EARNED THE PLACE THEY HOLD IN THE MINDS OF CONSUMERS.
THE CMA GAME IS THE BIGGEST LEGAL SHELL AND NUT GAME AND NOBODY HAS CAUGHT ON YET AT WHAT A CMA REALLY IS.....CAREFULLY MANUFACTURED ARITHMETIC

Ernie Cabrera

September 7, 2007 2:54 AM

Have you heard this one?

A guy gets pulled over by a cop for speeding. Then the cop asked the guy to pull out his registration and his real estate license. The guy quickly asks, my real estate license? The cop said, yes, your real estate license. The guy says to the cop, don't you mean my driver's license? Then the cop replied, no, not everyone has one of those.

When I got into the business of real estate 18 years ago, this was the joke that I heard in a real estate career night. Things have not changed that much in regards to having too many real estate agents.

I am glad however that my real estate brokerage, REAL ESTATE AMERICA, has may associates working for it. The market has changed and this is a professional's market. Only the top professionals are going to make in this new market place.

I appreciate the comments on this blog! It has made me laugh!

Ernie Cabrera, CEO
REAL ESTATE AMERICA
www.rearealtors.com
ernie@rearealtors.com

nick stewart

September 18, 2007 7:44 PM

I'm not an agent but was considering the career. I noticed that nick taylor mentioned commercial property scout. Are you currently scouting properties? If so tell me the truth about that business.

Maggie M.

May 25, 2008 10:01 AM

I have been a Property Scout with the National Association for Commercial Real Estate Property Scouts (NACREPS) for about 18 months, several months ago, I submitted a apartment complex that has closed and is in the process of being renovated and released. I am in line to make 5% of the net profit -- which is estimated to be around $4M. I don't have a license, but they train you on exactly what their investors are looking for and all I had to do was find the property.

Also, I have another property that just went under contract -- of course no guarantee that it will close, but I only do this about 15 hours a week. I haven't seen any paydays, yet, but am certain its coming.

Maggie
www.NACREPS.org

Betty Mingo

November 11, 2008 2:41 PM

I am very interested in becoming a commerical property scout I just don't want to pay 97.00 for the program does anyone else know how to get started without having to pay money for a training manuel?

Money Maker

January 17, 2009 3:06 AM

Betty Mingo, you want to go into a business, and I mean "go into business" as a commercial real estate professional and don't even want to invest a lousy $97 to try to learn your desired trade???? You are the empitome of the lazy, fly by night, get rich quick wanna-be that brings shadow and disrespect to the profession. While you are at it, go ahead and hop on a plane and try to fly it without any type of instruction, much less the lousy manual. I wish you the same type of results in your commercial endeavors. Crash & burn baby!!!!

Of course, you could try to work off the cost of the manual the old fashion way...on your back or on your knees. However, if your commitment is the same there, it will probably take you quite a while to earn the measley 97 bucks!

Step up and invest the $97 for the freakin manual. I know it will take the entire month's wages from flipping burgers or cleaning out the fry bin but what the heck, eh?

Shelley

January 26, 2009 9:56 AM

Marlow says that 25K a year is better than waiting tables. Problem is that $25K does not go far when that person must pay their own taxes, self employment taxes, SSI, health insurance, business fees to include MLS and board memberships (sometimes more than $2K/yr), office fees/rent, etc. $25K to a self employed Realtor is probably closer to $12K of traditional 'employee' type income.

Joe Homeowner

April 25, 2009 12:28 PM

I think if commissions were lower, there would be less agents and the remaining agents would have more transactions. If agents are making less then $24,000 a year, that means they are doing less than 6 transactions per year. It doesn't take that much work to fill in the blanks of an offer sheet and wait for a response. They should be doing 6 transactions per month. Besides, there is no reason Homeowners should subsidize Realtor's income because there is too many.

Jared

October 8, 2009 2:03 PM

I believe the manual is free now. I had to pay $97. Let me be honest here. It was not as easy as I was originally led to believe. Maybe my own fault for being too excited. The learning curve took me about 3 months to feel like I knew what I was doing. They do encourage you to jump in and not wait until you feel you are ready. Maybe I should have done what they taught.

After a year, I finally have a solid deal and I have received almost $10,000 and I am written into a contract to receive an additional $10,000 when the deal is refinanced.

I love the training and this is fun, but again, it is more work than I originally thought. I forget the URL where you can read about being a propertyscout but the association is nacreps.org.

Jared Levy

P.S. I found it: http://www.creapprentice.com

blkbird

March 3, 2010 11:41 AM

BusinessWeek
should they be ashamed? while the notion of becoming a real estate scout was interesting, i found it hard to give out my Credit Card number to a company that doesn't seem to exist. i did research and found nothing of create substance; so you get a manual valued at 197 for free yet you give up your personal info and the website nacrep.org goes no where... is this fraud much or what? i don't get it? I did a search on NACREPS through BBB for Nevada ... nothing and again the website goes to an error;

Post a comment

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

BW Mall - Sponsored Links

Buy a link now!