The Awful Truth About Careers In Real Estate By George W. Mantor Under most circumstances, I am one of the most upbeat, positive, and encouraging people you'll ever meet. But I'm also straightforward and direct, which sometimes compels me to be the bearer of bad news.
For 27 years I have been attracting people to the real estate business. That's been the easy part. Getting them to do what they need to do to succeed has been quite another matter.
According to the one million-plus-member National Association of Realtors, 86% of new real estate licensees exit the business within a year. And only 7% go on to their first license renewal.
Obviously, the high turnover rate has negative consequences for consumers as well as for practitioners. Limited experience and inadequate training contribute to frustration and anxiety for consumers. This in turn has lead to negative stereotypes, and a general sense, as evidenced by the growth of discount brokerages, that we get paid more than we are worth.
In most states it is relatively easy to obtain a real estate license. In some states, such has California, anyone with a four year degree can obtain a broker's license without having any experience in the field. You can't teach what you don't know.
The low barrier to entry, combined with the misguided perception of high pay for anyone with a license, draws people who simply do not posses either the business acumen or the necessary people skills to have long-term success in real estate and mortgage lending.
From the outside, it looks so easy. How hard can it be to unlock a door and fill out a couple of forms? If that were all there were to it, you still wouldn't have much of a chance, because just in raw numbers, the odds are stacked against you. According to the California Department of Real Estate, there are approximately 24,000 licenses issued within San Diego County.
Yet, according to SANDICOR, the countywide multiple listing service, in all of 2004, there were a mere 46,745 resale closings to divvy up between them. In order to pay the expenses associated with a real estate business and earn an income sufficient to qualify for the median priced home at $580,000, a licensee would need to earn a minimum of $160,000.
I'll spare you the lengthy explanation of how brokerage fees are dispersed, but a typical arrangement would net an agent about $8,000. Just to earn a middle class income a licensee needs to achieve twenty closings per year. The national average is only five closings per year and in San Diego it's closer to three.
Do the math if you want to but consider that a small percentage of licensees are doing volumes of two or three hundred closings annually leaving even less for the rest to fight over. And fight they do, with other agents mostly, but also with transaction coordinators, loan officers, escrow officers, inspectors, and sadly, even their clients. It's the same level of desperation that develops when there are twenty hungry mouths to feed and only food enough for two.
There used to be a certain sense of unity among practitioners from competing brokerages. But that was before large international marketing companies replaced local independent brokers with their corporate brands, their colors and their “high-school” like ethnocentricity.
Now, powerful totems such as rocks and balloons attract a steady stream of hopefuls to real estate license school intent on getting their share of the easy money. Nobody tells them that we already have ten times the number of licensees that even record volumes can support. Or that it takes years to learn and master the competencies of a highly technical and legal business.
With the vast majority of new licensees exiting the business quickly, there is a constant need to keep replenishing the supply and the cycle continues to repeat itself until the market slows and greater abilities are needed.
The real estate industry is largely a run-away bulldozer with no one at the controls. It unleashes an army of inexperienced, untrained newbies on an unsuspecting public who can't figure out why it should be so difficult and confusing to buy or sell a home.
The new licensees can't figure out why, after doing everything their company told them to, and working seventy hour weeks, and maxing their credit cards, they still aren't earning a living.
Which all leads me to the following observation: if you come to the real estate business and you do what everyone else is doing, you'll get the results they.re getting. Here's my advice:
Approach it like a business, not a sales job. Write a simple business plan and follow it every day. Never waiver from the schedule. When in doubt, always do what you planned to do. Never forget that the goal is to build a referral business focused on building and maintaining an ongoing portfolio of property listings.
You are paid for your knowledge and your time. Commit to life-long learning. Education is a process, not an event. Budget at least two hours everyday for training and education. Those 24,000 licensees have more experience than you do and there is so much more to learn than you ever imagined.
Learn financing. Forget that baloney about the three most important things about real estate being location. They are in fact, leverage, utility, and tax-free profits. Leverage is the most important of all. If you want to increase your income and have a better relationship with your clients, you must master financing.
Understand the importance of personal growth and development. See the business as an arena in which to use your experience to build a better you. We are all works-in-progress. As you are the heart of your business, as you improve, so will the quality of the people and opportunities you attract.
Keep your passion alive by sharing the joy of building your own business with those around you. Be nice to every one because you don't know who they know or could refer you to.
George W. Mantor is The Real Estate Professor and the host of “Keepin' It Real, real talk about the real thing, real estate” on AM 1000 KCEO Radio, www.kceoradio.com, Tuesdays at 7:00am. Visit our website at www.myafg.com
For 27 years I have been attracting people to the real estate business. That's been the easy part. Getting them to do what they need to do to succeed has been quite another matter.
According to the one million-plus-member National Association of Realtors, 86% of new real estate licensees exit the business within a year. And only 7% go on to their first license renewal.
Obviously, the high turnover rate has negative consequences for consumers as well as for practitioners. Limited experience and inadequate training contribute to frustration and anxiety for consumers. This in turn has lead to negative stereotypes, and a general sense, as evidenced by the growth of discount brokerages, that we get paid more than we are worth.
In most states it is relatively easy to obtain a real estate license. In some states, such has California, anyone with a four year degree can obtain a broker's license without having any experience in the field. You can't teach what you don't know.
The low barrier to entry, combined with the misguided perception of high pay for anyone with a license, draws people who simply do not posses either the business acumen or the necessary people skills to have long-term success in real estate and mortgage lending.
From the outside, it looks so easy. How hard can it be to unlock a door and fill out a couple of forms? If that were all there were to it, you still wouldn't have much of a chance, because just in raw numbers, the odds are stacked against you. According to the California Department of Real Estate, there are approximately 24,000 licenses issued within San Diego County.
Yet, according to SANDICOR, the countywide multiple listing service, in all of 2004, there were a mere 46,745 resale closings to divvy up between them. In order to pay the expenses associated with a real estate business and earn an income sufficient to qualify for the median priced home at $580,000, a licensee would need to earn a minimum of $160,000.
I'll spare you the lengthy explanation of how brokerage fees are dispersed, but a typical arrangement would net an agent about $8,000. Just to earn a middle class income a licensee needs to achieve twenty closings per year. The national average is only five closings per year and in San Diego it's closer to three.
Do the math if you want to but consider that a small percentage of licensees are doing volumes of two or three hundred closings annually leaving even less for the rest to fight over. And fight they do, with other agents mostly, but also with transaction coordinators, loan officers, escrow officers, inspectors, and sadly, even their clients. It's the same level of desperation that develops when there are twenty hungry mouths to feed and only food enough for two.
There used to be a certain sense of unity among practitioners from competing brokerages. But that was before large international marketing companies replaced local independent brokers with their corporate brands, their colors and their “high-school” like ethnocentricity.
Now, powerful totems such as rocks and balloons attract a steady stream of hopefuls to real estate license school intent on getting their share of the easy money. Nobody tells them that we already have ten times the number of licensees that even record volumes can support. Or that it takes years to learn and master the competencies of a highly technical and legal business.
With the vast majority of new licensees exiting the business quickly, there is a constant need to keep replenishing the supply and the cycle continues to repeat itself until the market slows and greater abilities are needed.
The real estate industry is largely a run-away bulldozer with no one at the controls. It unleashes an army of inexperienced, untrained newbies on an unsuspecting public who can't figure out why it should be so difficult and confusing to buy or sell a home.
The new licensees can't figure out why, after doing everything their company told them to, and working seventy hour weeks, and maxing their credit cards, they still aren't earning a living.
Which all leads me to the following observation: if you come to the real estate business and you do what everyone else is doing, you'll get the results they.re getting. Here's my advice:
Approach it like a business, not a sales job. Write a simple business plan and follow it every day. Never waiver from the schedule. When in doubt, always do what you planned to do. Never forget that the goal is to build a referral business focused on building and maintaining an ongoing portfolio of property listings.
You are paid for your knowledge and your time. Commit to life-long learning. Education is a process, not an event. Budget at least two hours everyday for training and education. Those 24,000 licensees have more experience than you do and there is so much more to learn than you ever imagined.
Learn financing. Forget that baloney about the three most important things about real estate being location. They are in fact, leverage, utility, and tax-free profits. Leverage is the most important of all. If you want to increase your income and have a better relationship with your clients, you must master financing.
Understand the importance of personal growth and development. See the business as an arena in which to use your experience to build a better you. We are all works-in-progress. As you are the heart of your business, as you improve, so will the quality of the people and opportunities you attract.
Keep your passion alive by sharing the joy of building your own business with those around you. Be nice to every one because you don't know who they know or could refer you to.
George W. Mantor is The Real Estate Professor and the host of “Keepin' It Real, real talk about the real thing, real estate” on AM 1000 KCEO Radio, www.kceoradio.com, Tuesdays at 7:00am. Visit our website at www.myafg.com