Everybody has to start somewhere. But do you want the real estate agent who lists your house to be a part-timer who has to work another job to make ends meet?
That’s pretty much how the latest report from the Consumer Federation of America describes the bulk of the roughly 1.5 million licensees who work with consumers on what is likely the largest financial transaction of their lives.
The report found that half of all agents sell just one house a year – if they sell any at all.
“Shocking” is the way Stephen Brobeck, a CFA senior fellow and the report’s author, described that finding. “And that’s not just new agents; that’s the people whose pictures are on their firm’s websites.”
Yet, most brokerages tend to hire anyone who can fog a mirror, turning them loose with hardly any training other than what they learned to pass their licensing tests. And as a result, the business is overrun with too many agents chasing too few deals.
The high ratio of agents to sales – 1.5 million agents for 5 million to 6 million sales annually – “virtually guarantees that most agents cannot support themselves only from sales commissions,” the report maintains.
‘Marginal Workers Ubiquitous’
“The residential real estate industry is truly a part-time industry, with most agents working sporadically and holding another job, often full-time,” Brobeck says. “There is no other financial services industry or profession where part-time, marginal workers are so ubiquitous.”
Worse, brokers contribute to the overabundance of agents by continually advertising for new blood – largely, according to the report, because new hires “bring with them new clients, often friends and family members.”
There are other reasons, too. For one thing, the turnover rate among agents is high because many realize they can’t make the living they thought they could selling houses. For another, many agents pay “outrageous” fees to their brokers, according to one agent quoted in the report, to cover overhead expenses. But the report says new hires are not adequately trained or supervised.
“Through lax hiring and training, many companies sponsor agents that have too little knowledge and experience to adequately serve consumers,” Brobeck says.
This is not to denigrate all agents. Many do marvelous work, and next week I’ll profile what they do – often for only the hope of a payday down the line when (and if) a sale closes. Sometimes they put in numerous hours, only to have the deal fall through.
Who Offers What Training?
For now, though, let’s dig deeper into the CFA’s new report, which is the third focused on the glut of agents. It found that nearly all of the national and large realty agencies offer training in “the practicalities of selling property,” but the courses are typically online and not required.
Mentoring programs are infrequent, the study reports. Sometimes, more senior agents are given the responsibility of looking over the shoulders of new agents, but they often have too many newbies under their wings to adequately oversee them.
The study examined the sale records of 2,000 randomly selected agents working for four major companies in four markets – Orlando, Tucson, Minneapolis and central Pennsylvania. Nearly half sold only one house in the previous 12 months, or none at all; almost three-quarters of them sold five houses or fewer.
It is perhaps less surprising, then, that the 2021 household income of agents responding to a National Association of Realtors survey was “significantly” larger than that generated from their real estate work. Active agents, a limited group working for major firms, reported a median income of $38,000 from real estate, but a median household income of $110,000.
Where the extra money comes from is anyone’s guess. Most likely, either someone else in the house earns the lion’s share of the income, the agent’s income is supplemented from social security or a pension, or they work another job, whether part- or full-time.
NAR’s Low Bar
Circling back to the lack of training, the report says a new agent is rarely sufficiently prepared to sell your house or help you buy one. Some states require additional classroom work to keep a license active. But “a large majority” of rookie agents are not required, either by their states or their companies, to do more than pass their initial exams.
The glut of agents practically “ensures that many will not receive adequate personal training or mentorship,” the report says. “Yet, many large firms keep recruiting.”
So, what can be done to stop this vicious cycle? Brobeck says states should follow the lead of states like Colorado, Illinois and Montana, which not only require closer supervision of newbies but also define what that oversight should look like.
He also calls on NAR to raise the bar on the Realtor brand. Many consumers confuse the term Realtor with agent. A Realtor is only a member of NAR, and agents are not required to join the group. To help clarify that distinction, he suggests that NAR allow only those agents who sell five or more houses in a year to call themselves Realtors.
In the meantime, both buyers and sellers should take heed. They should choose their agents wisely, paying particular attention to the number of recent sales – key word being “recent” – and the evaluations of previous clients. That information is posted on both Zillow and Realtor.com, the two top listing sites. Be wary, Brobeck advises, of agents who don’t provide that important information.
You can still hire your uncle or the lady who lives across the street, if you like, or go with someone who’s been highly recommended. But at the very least, says Brobeck, use those two websites to supplement the info your prospective agent provides.
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.
