People make their own success. That is true in all walks of life, and especially true for real estate agents. While one might think the recent unprecedented highs and lows in the real estate market have serious bearing on an agent’s income, the truth is that successful agents are successful in any and every market condition.
Today, tens of thousands of applicants are now eagerly lining up to pursue a license in real estate. They hope to follow in the Louis Vuitton-clad footsteps of Fredrik Eklund, Luis Ortiz or the other popular stars of TV’s Million Dollar Listing, and are drawn to an industry where a single commission can earn many times what some people make in a lifetime.
Becoming a real estate agent certainly is alluring. However, it is not for the faint of heart. Guiding clients through the process of buying and selling homes and other real estate properties is a volatile business. A completed transaction may depend on factors well outside an agent’s control, and clients are often under undue stress (think divorce or the birth of triplets!) and not on their best behavior.
Indeed, Investment Week magazine ranks the $1 trillion lost to investors during the 2008 financial crisis – sparked in part by the collapse of home values across much of the country – as the third worst economic contraction of all time. This ranked with the technology-driven “dotcom” bubble deflation of the late 1990s and the famous Great Depression of the 1920s and ’30s.
One might assume that an agent’s career is at the mercy of the same boom and bust mood swings that affect the housing market as a whole. During the recent downturn, thousands of agents walked away from the industry. Yet many real estate agents maintained thriving businesses and made handsome incomes. What defined the winners’ edge?
Today, as markets improve across the country, fueled by historically low interest rates, prospective agents are flocking to licensing schools, hoping to capitalize on the new real estate boom. After all, buyer confidence has surged, even in such hard-hit markets as Florida, California and Nevada.
According to the Associated Press, applications for real estate licenses in Florida alone have almost doubled, from 23,863 in 2010 to 40,901 in 2013, despite a 50 percent decline in home values during the recession just five years ago.
In California, the AP reports that the number of people taking real estate license exams has doubled since 2012, and in hard-hit Nevada, there was a 23 percent jump in the number of those now eager to get into real estate.
Overall, the National Association of Realtors (NAR) reports that in 2013 there were 42,000 more agents, brokers, salespeople, appraisers and other real estate professionals than the year before – the first increase in seven years.
One reason for the turn-around is the historically low entry bar. Most prospective agents are able to get a license in two months or less and with a modest $1,000 investment for tuition and licensing fees.
Ease of entry is no guarantee of success, however, as studies show most new agents quit the profession with few or no sales to their credit in their first year of service. Furthermore, despite the high profile of successful industry superstars, the NAR reports that the median income of brokers and sales agents was just $47,700 in 2013 and $43,500 in 2012.
The message here is that talent always rises to the top and that the 80/20 rule is alive and well in the real estate profession. That is, 80 percent of the business is captured by a mere 20 percent of the working agents.
In my many years in the real estate industry, I’ve seen the reasons why some agents succeed and others fail. Here are the five factors I think are the most important:
Mindset management: All of us are plagued by our worst fears and insecurities. This leads us to avoid unpleasant tasks, even if they are the very behaviors that will make us successful. When agents tell me that they hate calling friends, relatives or acquaintances to ask for business; that they fear the pain of rejection, I know their negative mindset will soon get them in trouble. These agents concentrate on not “bothering” people when the truth is that talented agents bring real value to potential clients and are making a positive contribution. Nothing to be afraid of there.
It’s a business, after all: Many, many agents simply fail to treat their work as a business. Being your own boss and working from home are some of the perks of working in real estate. Yet the informal setting and absence of more traditional business trappings do not eliminate the need for sound business practices: education, time management, budgeting and cash flow control, solid work ethic, to name just a few. The same solid work standards that equal success in other fields also govern success or failure in real estate.
Fiscal irresponsibility: Too many agents live from paycheck to paycheck. Too few reserve adequate funds for tax time or budget themselves to survive through the inevitable lean months when the market softens. My heart goes out to those agents who rack up huge credit card balances between sales, which they then hope to pay off after a closing. It is a vicious cycle that repeats itself again and again as agents are never able to get ahead of this very dangerous curve. And it’s all because agents don’t know the basics about creating and maintaining a budget and a profit and loss statement for their businesses.
Being a “secret agent” just won’t cut it: Too often an agent will come to me and complain that his neighbor just listed his home with a competitor. This agent will lament, “He knew I sold real estate! Why didn’t he call me?’ My question is always, “Are you sure about that? When was the last time you touched base with your neighbor and let him know how competent and capable you are?” Whether hampered by modesty or shyness, failure to communicate your capability and competence is a sure fire road to failure.
Leads, leads, leads: The final and most critical self-imposed obstacle to success is the lack of commitment to consistent lead generation. This results in an inconsistent flow of business creating a corresponding inconsistent income stream. Failure to generate leads is the perfect recipe for euphoric highs and gut-wrenching lows like some endless roller coaster thrill ride. No surprise that many agents are plagued by a nagging sense of desperation and depression. Lead generation is a “must-do” activity, every single day. You see, it is easy to put off a networking event or a phone call to a past client when we are busy showing property and writing offers. The problems occur when all the closings are completed and the pipeline for new business has been emptied. The time it might take to refill that pipeline may be just long enough to push an already financially strapped agent over the edge. So generating leads is a daily task that the smartest agents perform consistently for a couple of hours every single day. Business is there when we remember to ask for it.
Being a professional real estate agent is rewarding in so many ways. Great agents take enormous pleasure in helping people through what can be often one of the most stressful transitions of a lifetime. And the income potential is truly unlimited. So if you are considering a move to our industry, just remember that to become a top producer, one must become a top performer. There is no free ride in this, or any business, and the ticket to success is clearly defined.
Lynn Cohen is CEO and team leader at Keller Williams Chestnut Hill
Market Center.
