How long have you been a real estate broker? I’ve been practicing full time since 1997. Unlike many who entered the profession after 2008, I’ve seen great markets great times and great financial rewards. My income was fairly consistent prior to the global economic crisis. And while our local market has slowed, I can’t complain. I’m doing better than some of my counterparts, many of whom have left the business for more consistent sources of income. Are you in the same boat? Are you a real estate broker and broke?
HEADS OF HOUSEHOLDS NEED CONSISTENT INCOME
I take my hat off to those real estate professionals who are the heads of their households. It takes a very consistent producing agent or one that has another source of income to stay in the business.
I can only speak for our local market, but unless you’re a top-producing broker who has been practicing for many years and built up repeat clientele with a referral network, it’s extremely difficult to maintain a comfortable lifestyle based on real estate commissions alone.
One of the reasons sales are currently sluggish in the New York tri-state area (outside of Manhattan) is that potential buyers are waiting to see the outcome of the elections. They’re also waiting to see what the Federal government does with interest rates. They’re waiting until after the holidays. They’re waiting for Brexit to be finalized. They’re waiting for this. They’re waiting for that.
We’ve been in a buyer-driven market for several years. If you’re a broker, you’re livelihood is dependent on what purchasers do. While they may be able to procrastinate, agents cannot afford to wait. They need income. Those who have families and other dependents cannot live with financial uncertainty, at least not for very long.
The Bureau of Labor Statistics reports that “the median annual wage for real estate sales agents was $43,370 in May 2015. The lowest 10 percent earned less than $21,780, and the highest 10 percent earned more than $110,560.”
Consider that the average earner rents or has a mortgage, needs home or renter’s insurance, has car expenses, electricity, water, internet, food, health insurance, medical bills and needs clothing (for starters) $43K may go a long way in the mid-west but if you live in the Northeast, you need an alternate, passive or supplemental source of income.
ALTERNATE SOURCES OF INCOME
It’s not uncommon for real estate agents to own other businesses. In my office, alone, we have artists, photographers, authors and stay at home moms who work remotely. While they’re juggling passion and profit, realistically, in Westchester and Fairfield counties if you want to earn over $100K, real estate brokering has to be a full time profession. Under the current economic climate, however, earning six figures is not viable for the majority.
The housing market under $1million is very active, interest rates remain low and it’s great news for first time buyers. However, most of our inventory is priced considerably higher and we have a three-year supply. I’ve brokered real estate in this area for nearly twenty years. We are driven by the financial sector and I don’t see the higher-end segment of the market coming back soon.
Some have secured evening or weekend jobs to supplement their incomes hoping for an improvement soon. These are helpful but temporary solutions. “Filler jobs” are band-aids on a deeper problem. Proactive agents have turned to more viable businesses. The truly visionary ones know that the best ones are those that generate income 24/7/365 that are not affected by local downturns.
As if waiting for the global economy to improve is not bad enough, we’re also seeing many more people getting into real estate as a perceived easy means of earning income.
REAL ESTATE IS NOT A GET RICH QUICK SCHEME
Many individuals erroneously think that real estate brokering is easy. They get a license looking for fast money. The reality is that, today, it’s a more sophisticated profession than it was previously and one that is under much regulation.
Being a good broker requires developing trust with your clients. This does not happen overnight, it takes time. The best clients are those who return or refer your name. This happens only when you have proven yourself after you have invested time and nurtured the relationship.
In real estate, patience is the name of the game. Not only do you need persistence but also endurance. The average days on the market in our area is currently over 300 days. This requires planning finances accordingly. Not too many people can wait this long before they receive income.
A real estate professional today is required to have many hours of education both formally and outside the classroom. The number of hours has doubled since I first started. In addition, an agent has to take continuing education every two years. Classes are not free.
Membership dues are required to practice real estate. Every board and membership is different. Our local annual fees now exceed $1,200 not including continuing education, networking events, and other business related expenses.
Real estate brokering is not a get rich quick scheme. When I first started, our agent membership was not heavily reliant on information provided by the Multiple Listing Service (MLS). Listing prices were often established by “pulling a number out of a hat.” Although not as sophisticated as the NYSE, NASDAQ or CME, the MLS today serves as an exchange. Establishing list and sales prices is no longer a guessing game.
Staying on top of MLS information is essential, if you’re to succeed. All too often licensees take a listing and forget about it, hoping another agent will sell it. Sellers today expect to be kept informed. Providing value to your clients is how you earn your commission. A good agent provides on-going counseling and guidance to his or her clients. With the data and information you provide, clients can make educated decisions.
Besides being on call seven days a week, especially on weekends, good brokering requires excellent communication. Delivering an offer that is not what a homeowner expects requires diplomacy and keeping a deal together demands skillful negotiating.
Top brokers are strong negotiators and good at problem solving, which requires thinking out of the box. If a transaction does not close, the agent will not receive a commission despite many weeks and months of hard work.
You may have all that it takes to be a top earner but there are never any guarantees of making money as a real estate agent. This is not a get rich quick scheme and why so many leave the profession.
THE REAL ESTATE PROFESSION IS SATURATED
There is a surplus of licensed agents. For every person you know, they will probably know at least five real estate brokers. Competition is fierce making it more difficult each year to keep up your earnings with the cost of living.
At its highest point, membership at the National Association of Realtors (NAR) was 1.37 million in October of 2006. With this high number of competitors, it’s no surprise that membership has declined by nearly 30 percent. Real estate brokers are turning to alternative careers where the income potential is greater and the competition far less.
Many people get their license as a fallback position making the “slice of the pie” smaller every year for those who depend on this profession for their livelihood. We have seen an increase in Wall Street executives who have been downsized entering the field. This is good since they bring a stronger work ethic to the profession.
Even if you’re the best realtor in the community, the sad reality is that you may loose a piece of business to someone who has very little experience or who just got their license because they’re your potential client’s “best friend.” It happened to me. The owners sat on the listing without selling it for four years. It finally sold with another broker. In the meantime, the market had tumbled and they lost a fortune.
For a lot of people, their real estate holdings represent a large part, possibly the largest part, of their investments. I’m always amazed when a seller gives a listing to a friend who is new in the business. I wonder if they would turn to someone equally unqualified for heart surgery or legal help.
No one knows when the global economy will turn around and you don’t want to be a real estate broker who is broke. If you can see the writing on the wall, you’re probably already considering alternative professions or at least ways to transition into another business. Consider a possibility that allows you to take charge of your destiny.
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