Lew Sichelman
Can you answer these two questions?
A landlord refuses to show or rent an apartment to someone who is not either Christian or Jewish. What type of discrimination is this: disability, familial status, racial or religious?
Oliver is working to provide a buyer and lender with a formal opinion of the value of the property the buyer is purchasing. What is Oliver’s role: a certified or licensed appraiser, a home inspector, a real estate licensee or a tax assessor?
If you guessed correctly (answers below), then congratulations: You are on your way to becoming a licensed real estate agent who can work with buyers and sellers on what will likely be the largest transactions of their lives.
According to a new report from the Consumer Federation of America, the ease with which people can become licensed in the realty field is shocking. In many states, it takes relatively little time, and very little money, for an aspiring agent to take the courses required to pass the real estate exam.
Whereas most financial services professionals – such as consumer credit counselors, loan officers, stockbrokers, financial planners, property appraisers and tax assessors – must have earned a bachelor’s degree to gain a license, many real estate agents do not, according to the CFA report. In 26 states – including the three largest, California, New York and Texas – you likely don’t even need to graduate from high school.
Of course, some states demand more course hours than others. Texas requires 180 hours of study; Oregon, 150, according to CFA’s estimates. But other states require only 40 hours.
In comparison, electricians in Texas must work 4,000 hours and pass an exam to be able to work independently. Plumbers must work 4,000 hours; cosmetologists must take 1,000 hours of instruction and take a written test.
Many States’ Exams Insufficient
There’s no telling what these tradespeople pay for their schooling before hanging out their shingles. But the cost for would-be real estate agents is often pretty low: $1,225 for the 12 weeks of study required in South Dakota, and $1,115 for the 12 weeks needed in Colorado. In Michigan, it costs just $338 to take two weeks’ worth of classes; it’s $400 for 10 weeks of study in Rhode Island.
Rookie agents have to take tests, too. But the CFA report’s author, Stephen Brobeck, found the exams pretty lacking, and said that others agree.
“There is widespread agreement that [the] required courses and exams do not adequately prepare licensees to sell real estate,” he said.
Brobeck himself recently took real estate courses in the District of Columbia. But even though he earned his license, he said he doesn’t feel any more competent to facilitate a sale by himself than he did before he started the process.
There are other licensing requirements, too. For example, all states require additional coursework on an annual or biannual basis to keep agents’ licenses current.
But in most places, newbies don’t need errors-and-omission insurance, which protects against claims by clients of inadequate or negligent service. And while rookies need a sponsor to get started, most brokers walking the Earth welcome practically any and all fresh blood, even if the new person nets just one deal. After all, brokers share in every agent’s commission.
Commission Structure Draws Many
Ah, commissions. One reason people go into real estate may be the ease of entry, but the prospect of bagging a big payday no doubt draws many more to the business.
Sure, there are some altruistic reasons to become an agent, like the good feeling of helping someone reach the American Dream. But the draw of the dollar is extremely strong. And why not? As the CFA report points out, “The prospect of selling expensive residential properties is especially attractive.”
Take an agent who works both sides of the fence on the sale of a $1 million house: They’ll receive the total commission of, say, 6 percent because they represented both the buyer and the seller. They would earn $60,000 – to be split with their broker, of course, but $30,000 still ain’t bad.
Is it any wonder, then, that the business is riddled with agents? There are about 1.5 million Realtors, according to some estimates – all competing to sell just 5 million to 6 million houses a year.
The latest CFA report supplements another from this summer, which documented the cost of this overabundance of agents. In that report, Brobeck said newly minted agents “usually charge the same commission rates as experienced, full-time agents, yet in general offer worse service and deprive experienced agents of needed clients.”
Brobeck isn’t against licensing and hiring new agents. Indeed, the average age of agents is skewing older, and the field, like any other, needs to be replenished with younger people. But he would like to see entry standards tightened up.
Among other things, the report recommends that state licensing authorities work with professional testing firms to strengthen their exams, adding more relevant and challenging questions.
Which takes us back to the questions at the top: If you answered “religious discrimination” to the first and “an appraiser” to the second, go to the head of the class.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
