Real Estate Agent Bubble

[Eagle Man]

[synthetik]

[Eagle Man]

[Alan]

With that many agents prices have to go up to support all of those incomes. If some of the agents start quitting then prices might drop. If you own a house you better use an agent to trade up now or else all of your equity might go down the tube.

[Eagle Man]

Alan, I don't think the market cares whether RE agents get paid or not. My sister has a RE agent friend who's getting out after 5 years. Says she can't make it.

[JD@Preview]

There *are* too many agents and it's not good for consumers. The majority of new agents don't last long enough to get through their first license renewal. In the meantime these new agents may do one or two transactions with a friend or family member who feels obligated to use them. They don't get enough practice in the art and science of managing a transaction to ever get good at it and they don't make enough money to pay for the self marketing neccesary to stay alive. They take on a job with a paycheck so they can do real estate and consequently are often unavailable when the agent on the other side of the transaction needs something done. They start falling down on their due diligence and fiduciary responsibilities in ways like "buying" listings when the comps clearly won't support the exorbitant price. The way agents are paid and the way the industry (brokers, NAR and the MLS) makes money compounds the problem. Agents pay half their side of the commission to their broker until a total contribution threshold, usually around $23,000/yr, is reached. Assuming an average $360,000 transaction @ 6% total commission it takes a little more than 4 transactions to make threshold and start getting the full 3%. The majority of agents don't make threshold...ever. From the "industry" standpoint lots of new agents barely making threshold is a *good* thing. Better to have 20 agents running a finite pool of say 100 transactions a year than 5 experienced agents doing 20 a year and making a decent living. The excess of rookies makes the broker nearly $500,000 while experienced agents only had to cough up $115,000. All are paying around $1200/yr in NAR dues, MLS fees and the cost of continuing education. Now, a good agent working full time should be able to manage 4 transactions a month which translates out to about $500,000 year gross income at the average $360,000 @6% total commission. I can't speak for anyone else but if I didn't have to spend a boatload of cash fighting 26,000 agents for 110,000 listings I could easily justify giving the kind of full service expertise I'm proud to provide now for a much lower commission. But wait! The agent you negotiate with isn't the one who has the authority to make that call and few full service brokerages allow their agents to write up a listing for less than 6%.

A few changes at the state level could make it better for the consumers and the folks in the industry that do the real work, agents. First, raise the requirements for a license. An 18 year without even a GED and only 60 clock hours of RE training shouldn't be allowed to be a fiduciary on the largest transaction most of us make. Your massage therapist had to take 2000 clock hours just to make $60 on your backrub. If the purpose of the DOL is to provide consumer protection let 'em do it by limiting how many sharks get in the tank. Second, considering the level of responsibility agents have they are the most undersupervised group profession around. While conventional business wisdom suggests a supervisor for every 15 employees it's common to see 70 to 100+ agents under one managing broker. The Real Estate Commission and the DOL should require more supervising brokers in larger offices. About NAR; since the profession is regulated by the state, I feel that the practice of brokerages requiring all agents to join and pay dues should be abolished. The "Board" is not terribly responsive to the needs of the people who pay the freight while the brokers (remember, the "industry") reap the benefits. I could go on but I'll save it for later.

[Eagle Man]

No wonder my sister's friend wants to get out of the biz. Looks her bosses and top agents are the only ones making it. The example between the RE agent and massage therapist was interesting......

[JD@Preview]

[EconE]

[JD@Preview]

[JD@Preview]

[Eagle Man]

[JD@Preview]