About It...
August 23, 2006
I have talked about It, RCG has articles about It, Jim Duncan has blogged about It and Inman has articles warning about It. What is It? The real estate AGENT bubble. Inman has another article posted this morning in their "members only" area:
Many issues emerge: lack of proper training, not understanding business in general (this is a business and business experience is a plus if not mandatory to become successful), intense competition may lead to unethical behavior, buyers and sellers suffer because of agent incompetence, unknowing new agents lose their life savings because they had no idea it takes such a long time and expense to build a sustainable business.Too many real estate newbies
Perspective: Excessive supply of real estate salespeople is bad news
Monday, August 21, 2006
By Marcie Geffner
Jane Austin. Algebra II. Hypnotherapy. Jazz. Those are some of the subjects of the newest books in the "for Dummies" series published by John Wiley & Sons.
There's also another new title: Success as a Real Estate Agent for Dummies, being released this summer.
...
The economics of real estate brokerage create incentives for brokers to recruit, recruit and recruit, regardless of the reality that most of the recruits won't survive their first year much less succeed in real estate as a long-term career.
This is one of the many problems this industry faces today. It is entirely too easy to get a license and be able to say "now I R 1" and be turned loose on the consumer. I for one advocate significant tightening of the criteria to become licensed. Two weeks in school (teaches how to pass the exams), $269 and then passing the exam (locally, only about 25% pass the first time) is simply not enough.
No wonder so many lead generation companies have sprung up. If you can't generate business organically (fancy word for yourself), pay someone else to do it for you. Ardell at RCG has a good article about "good enough" (how does she keep up her pace of publishing opinion and good advice?).
Anyway, the industry is going to shake out. There is a lot of noise about change everywhere. The MLS, commissions, entry criteria, DOJ, limited service, consumer choice and more. When the noise gets loud enough, something is going to happen to quiet it (hopefully good). If you don't like the current system, make noise!
Comment on About It.... Follow this article is off. More articles like this one filed in: Real Estate
Subscribe to eMail Notifications
Enter your email address in the appropriate box below (email never disclosed)Comments
good point: lots of new breed agents some are noobs some are pros..
Just wanted to make mention for the Loudoun County Market. According to the stats we love to pour over, the number of listed homes in Loudoun has dropped 6% in almost the last 30 days. That is a great trend, although I'm sure its due to the summer selling season being over. I also wonder how many of these units are being removed by agents refusing to continue a listing because the seller wants an amount beyond what the market is buying.
I think 10-15 years from now RE Agents will have gone the way of travel agents and the dodo bird. By then all municipalities will have standardized on electronic filing of all of the paperwork required to transfer title to a property. Electronic mortgages will be readily available with lower costs and more competition than today's mortgage broker. There will still be a place for agents letting poeple into houses but fees will likely be fixed amounts at far lower rates than today. Regional MLS services will be overcome by a national database that does not require an agent, (possibly by google or zillow) available for a flat fee. Buysiderealty.com and others are on the cutting edge of this trend of reducing commisions.
To date NAR has been able to lobby some states and localities into legislating away competition in the form of discount brokerages and buyer/seller commision rebates. I expect the political tide will turn through court cases and public opinion will shift as RE prices fall and comissions start coming out of the pockets of sellers rather than from funny money capital gains.
To answer the question, yes there are far too many RE agents. I suspect 50% of RE agents in the hottest bubble markets will either retire or find another line of work over the next 5 years.
Yes, I agree. Way too many n00bs are working in the Real Estate industry. This current slow down will weed them out of the system. Because when their Lexus payment comes due and they can't get a house sold and/or their buyers are waiting and watching, they'll have to start looking for a new line of work to pay the bills.
My biggest issue with Real Estate Firms is they work on Commission. Why does a person have to pay 6% to sell a $1,000,000 house and a different person pay the same 6% to sell a $400,000 house? The same expense by the firm is being incurred for both houses to market them. Newspaper Ads for the $1,000,000 house don't cost more than a $400,000 house. And if the firm is putting in the same effect to sell both homes, why should the more expensive home be paying a higher dollar figure to the real estate firm? $24,000 in commission on the $400,000 house and $60,000 in commission on the $1,000,000 house.
To me, the real estate firms get a win-fall profit if more wealther home owners call them. The whole structure of the NAR just seems like a Monopoly. They have the MLS/MRIS "market" which lists every property a NAR agent is selling. All other NAR agents who represent buyers can check the listing and steer their clients to a home they like. Nothing wrong with that. The monopoly issue is that if want to sell your home and don't use a NAR agent who is charing 4-6% commission, you are prevented from getting your home listed in their database. leaving you as a seller to post ads in newspapers and such and home a Buyer sees it and wants your home. But there is even a catch with that.. Because the majority of Buyers are represented by NAR agents (because agents are free to buyer clients, so why not?), those NAR agents will not represent a buyer nor take them to a known Forsale listing if the Seller isn't paying a 3% commission to the Buyer's Agent. So anybody who is a Seller that wants to keep 100% of their profit from a home sale, will be shut out of 99% of the real estate market. A nearly perfect monopoly that honestly needs to be broken up by Anti-Trust regulators.
But in the defense of Business, I completely see where the Realtor Assoc. is coming from. Its a collection of private companies sharing pricate information. If you as a seller want to be in the private club, you gotta pay the commission fees. If not, its your choice, and you can try to market and sell your home all by yourself. And unless you happen to have an awesome 1-of-a-kind mansions that cost millions of dollars which only a Hollywood star might buy, your luck of selling the average home at the average price with using an agent is nil.... Unless of couse, we get back to a red hot sellers market. Then your chances go up a few percent.
