Imagine working for a company that for every two employees it hires, one of two washes out within two years. Now imagine this same company is not some new kind of start-up enterprise, but rather an organization with a 100 year business history. Wouldn't you think that the Board of Directors would want to "head in a new direction?"
Sadly, the real estate industry as a whole has been plagued with 50% turnover rates of "independent contractors" (self-directed employees without bennies in other companies) for decades.
Why is that?
There are a number of reasons, but the industry bears most of the blame, I think. While it is true that many new agents in the industry are enthralled by the "huge commissions" they think they will earn and get rich on very quickly, they soon realize that there is no gold at the end of the rainbow unless they work VERY HARD. Brokers who hire these agents love to promote the sizable commissions and the "unlimited income" opportunity, often making only fleeting references to "working hard" and "asking friends, relatives and neighbors" who want to buy or sell a home.
What they don't prepare agents for is the math. For example, the math of the costs it takes to be your own marketing guru. Brokers today often supply forms and general paperwork, but most of the marketing expenses today are borne by the agents themselves, and each agent in every company is trying to duplicate the same efforts. This is extraordinarily capital intensive and frankly quite wasteful, because each individual agent is really a company unto themselves.
Nor, are they prepared for the sheer volume of numbers it takes to make a decent living when all expenses: marketing, auto, health, retirement and full social security, medicare etc. comes out of the individual rather than having an employer to contribute. If it was such "easy money," then EVERYBODY would be doing it. Quite frankly, it appears nearly everybody TRIES it at one time or another. Ask your friends, neighbors and relatives who they know that is "in real estate." EVERYBODY knows somebody with a real estate license. In Massachusetts, where I practice, for the most part, there are an estimated 70,000 active real estate licenses. In 2006 it was estimated that there were 6,437,193 people in Massachusetts. Estimating a 3.2 person household, and dividing that result by 70,000 means that there is one real estate agent per 29 households. How many actually make their living that way is quite another thing. The average real estate agent GROSSES about $34,000 annually according to recent statistics, and is likely declining because of the slow real estate markets in most of the country. Take all the expenses from this income and you will find that the result is not much more than the minimum wage, but with a lot more inherent risk because of the liability risk involved in selling property as an agent for others. Remember, there are about as many licensed attorneys as there are real estate licensees, and you get a clearer picture.
This whole mess creates mediocrity. That is the enemy of excellence in the industry. Our firm is attempting to change that by offering different solutions for our sellers. That's what our REALOptions(TM) offerings are about. We offer clients the opportunity to hire us by commission, by fee or by the hour. We are frank with you about rates of sale, pricing and marketing risk quotients built into traditional commission structures.
Agents, sellers and buyers need to know these things if they are to make intelligent choices in the real estate services arena.
Where does all this mediocrity lead? Here's an example: someone that I know who lives in another area recently l called to tell me his property had been shown 35 times, and he had no offers. "What's wrong," he asked? Instead of answering the question directly, because I knew he was in the sales business in an entirely different field, I asked him: "how many sales calls does it take for you to make a sale?" He said probably five to seven sales calls before someone would buy from him, or at least begin negotiations. I then asked him how much turnover he had in his company among salespeople. He said maybe one a year out of a sales team of 10 people. "That's about a 10% turnover ratio," I said. "Did you know that in some markets the turnover ratio of real estate agents is as much as 80%," I said? "No, I didn't know that." My guess is that is the problem. There are too many "rookie" or inexperienced agents trying to market your home without getting to know the buyer prospect well enough to know whether or not your home will fill the bill. Unfortunately, this is too prevalent in the industry.
Chris Michaud
chris@acceptancegroup.com
http://www.acceptancegroup.com
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