1.1 "Don't Quit Your Day Job"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"
Reality In Realty for Career Seekers 2001
DON'T QUIT YOUR DAY JOB© 2001, Ray Wilson
So.... you want money, self-respect, and public prestige?
The money can be there. You can bring self-respect there with you. You can develop personal prestige within your local community, if you earn it through genuine service -- but prestige does not come with the job or with a real estate license. I was fortunate enough that my first real estate instructor (an attorney) removed any unrealistic prestige expectations with this observation:
"Real estate agents just do not fare well in the prestige scales of national surveys, scoring just above attorneys and just below mafia hitmen!"
Real estate agents should indeed recognize their indebtedness to the legal profession. For good or bad, attorney jokes keep the agents out of first place in the competition for national ridicule. Every business sector has those in it purely for "the business." Real estate is no exception, but both its social impact and the typical price tag of its central product are indeed very different than most any other business. The self-servers in this business sector are very high profile; film and TV writers cannot resist using the commission-chasing real estate agent as the on-screen personification of human greed (See Pat and Jennifer Rioux's IRED piece, "Real To Reel").
Ironically, the words "agent" and "attorney" both mean service in the place of others! Both professions have those who actually do that, who persevere in consumer service despite both instinctive and institutional calls to put themselves first. There are far more of the good ones in both places than reflected in comic Stephen Wright's observation that "99 percent of lawyers give the rest a bad name".
Still, people should understand the social forces in a profession's subculture and institutions which actually impose mindsets, values, and behaviors the rest of the world finds appalling. Self-service in real estate is not always motivated by greed, or even bad intention, but sometimes by a simple instinct for survival spurred on by the presence of predators in the water. Well-intended people can still be shallow enough to accept a business "ethic" in which sacrifice for others is justified only on the basis of self-interest return or, at best, allowed only as a feel-good luxury. The sheer dollar value of virtually every real estate transaction makes it never a matter of a "small" sacrifice. It is difficult enough to pass up a four or five figure commission because it wasn't the best deal for your client, but try telling that to the colleague or boss who would have shared in the commission you rejected on principle!
It is easier in some ways if one isn't saddled with a social conscience -- but most people have at least enough of one to be uncomfortable about unfairness to either clients, customers, coworkers, or even competitors. If you get stuck in an organization where the interests of these three aren't truly together -- such as one that makes agency promises to both buyers and sellers (see IRED series, "Reality In Realty") -- then be prepared to have trouble sleeping nights until you succeed in desensitizing that annoying conscience. Usually such a firm will "help" you with that...
The evidence is that many people go into real estate only to be "turned off" by it. U.S. Department of Labor statistics on the real estate industry indicate that a good many people endure substantial effort and expense to obtain real estate licenses, only to soon toss those licenses on a shelf. The same statistics show that those who do stay, make fairly decent money -- especially as part-time income while keeping their day jobs. The part-time aspect has a lot to do with the fact that recessions rapidly turn off the income faucet -- but even in 1998 during a booming economy, there were an enormous amount of inactive licensees:
Real estate agents and brokers held about 347,000 jobs in 1998. Many worked part time, combining their real estate activities with other careers. More than two-thirds of real estate agents and brokers were self-employed. U.S. Department of Labor (DOL) Occupational Outlook Handbook.
Given that the dues-paying membership of the National Association of Realtors® (NAR) is over 720,000, we might wonder if the Department of Labor doesn't rent its tabulating machines from the Florida Election Bureau. The trademarked term "Realtor"® refers only to NAR members, and not to all real estate market operatives. There may actually be about two million license-holders in the United States, most of whom are not active.
Take heart; if you personally are considering a real estate career, all those inactive licenses are not a sign that there is no room for you. Individual opportunity has far less to do with those numbers than with the likelihood that many people jump into it for the wrong reasons and with the wrong tools. The purpose of this article is to provide you with a realistic perspective about your personal opportunity for a real estate career.
As I said, those who do last also report respectable income -- at least when the overall economy is strong. The DOL National Compensation Survey reports median annual earnings for 1998 above $28,000 -- not bad when you consider that many are part timers. Mean hourly earnings are $35 which, when translated to a fulltime 40 hour week, is equivalent to $70,000 per year. The top ten percent earned above $83,000. Only 10% of those reporting real estate operative income earned less than $13,800 in 1998, and that surely included many part timers and first year rookies.
So, the income potential is high and very real. If you've got the right stuff, you can do very well financially, do much good for many people, and overcome the institutional baggage by personally establishing yourself as an exception to the stereotype. You need to know if you have the "right stuff" in the first place. Many don't, as indicated in this good news / bad news observation in the Occupational Outlook Handbook:
Real estate sales positions should continue to be relatively easy to obtain due to the large number of people who leave this occupation each year.
Either a good number of people learn they do not have the "right stuff" to make the income earned by others, or they don't like what they have to do to achieve it. Part of the clue is in the Handbook's use of the phrase, "sales positions." The fact is that many people are simply not cut out to be sales people! Many of these non-sales types invest time, effort, and expense to obtain real estate license because they simply underestimate the intensity, aggressiveness, and competitiveness of the sales culture that is the real estate industry. They know people generally are motivated to become buyers or sellers by their life circumstances, and not by sales pitches, and that makes them think that properties sell themselves. They see the job as a matter of chauffeuring people, explaining procedures, and writing up orders.
What will come as a surprise to many readers here is that these novices are essentially right about property selling itself! But they are wrong about the job....
Ninety-nine (+) percent of the real estate industry jobs are definitely in sales firms where licensees must think and act as salespersons to survive, let alone succeed. The work of the typical successful real estate operative is best described as one continuous sales pitch! It is a matter of outright pitching to owners for the right to sell their house in the first place, i.e., to "get the listing!" Even more, the sales pitch to the owner is a promise to salespitch the home to buyers! But that is all too often a disingenuous promise; for the ugly trade secret is that career success comes not from making a sale happen, but in having control of the property at the time the sale does happen. Far more industry salespeople sell to sellers, not to buyers -- like designing fishing lures to lure fishermen instead of fish. A long-established industry slogan is "If you list, you last!"
In the second article in this three-part series, I will explain to sellers how traditional firms structure commissions, their own organizations and procedures, and the market itself to actually work against this promise to actively SELL their property.
True salesmanship is needed to get the home sold at the best price in the shortest time. Nevertheless, there is one great irony in all these people leaving real estate because they weren't comfortable in sales jobs. All the jobs in real estate should not be sales jobs, and a few of them (very few) are not! In fact, fully HALF the consumers do not need sales agents. They need buyers' agents. Buyers' agents are not the same as sellers' agents. For one thing, they don't sell. Outside real estate, not a business firm in the world big enough to be organized into departments would ever put its sales agents and purchasing agents in the same department. The managers know the two functions are far different, and so are the two mindsets needed. But 99% of the real estate agency managers -- the broker/owners -- do not know that. Those who do hear the obvious call for buyer agents from increasingly aware consumers, simply give the title "buyer agent" to some members of their sales firm (betraying the firm's promise to its sellers).
The next two articles in this three-part series will show sellers and then buyers how true exclusive agency actually works to each of their mutual and respective benefits. They will both see that they are badly served by the reduced or limited agency of mixed firms and overcharged when made to pay full agency commissions.
Summing up the above two paragraphs: ninety-nine percent of the real estate industry is organized to perform less than half the job that only fifty percent of the consumers need and, incredibly, it is not the fifty percent with the money! That fifty percent is served by only one-percent of the firms, and not served at all unless one of those true exclusive buyer agencies happens to be in their market area. That means that many of those departing the real estate industry simply missed massive opportunity to become buyer agents! So did and do buyer agent firms miss opportunity when they fail to comb the lists of the profession's drop-outs for new buyer agents.
Much of the solution for the industry's problems, and especially for those new to or contemplating real estate careers, lies with real estate educators. There is just more to the business than often portrayed by those who make their living peddling real estate license courses. Note that while my instructor told us the dark truth about the prestige factor, it was during the first class and after we had laid our money down.
Even that was an "extra", since license courses are about getting licenses, and seldom about the social reality of working in the real estate industry. The function of a license is to ensure compliance with law -- so the course is chiefly about law. People are certainly aware that there are market skills to develop, techniques for obtaining listings, trade secrets to effective negotiation, strategies for keeping organized and maintaining a competitive edge. They think that's all stuff that can come later, that they'll invest time and money in marketing courses after they know they have the license.
Some final word is needed here about the nature of the "sales mentality" as it functions in the real estate market, and about why it necessitates the thing we call "agency." Once again, it is the dollar size of the transaction that makes real estate different than other market-centered industries. Some limited exaggeration in sales (eg. "This is the best fertilizer you'll ever find anywhere.") is usually acceptable and understood as part of the market competition and negotiation process. That notion is called CAVEAT EMPTOR ("Let the buyer beware"), and it even has some legitimate function in a free market. People learn through their own mistakes to be better shoppers and negotiators, and the cost is theoretically worth it in the long run -- but NOT at the dollar levels and long-term consequences of real estate transactions!
There is a point where the excessive application of caveat emptor becomes simply fraud, one of the reasons we have laws and courts. It is also the reason we have a system holding people to the promises and representations made by sales people and other people relied upon in market processes -- the thing we call "agency." Agency is not a "real estate" concept, but a fundamental social dynamic which is apparent to the common sense, vital to the common good, and necessarily enforced by common law. It simply applies to real estate as no less of an outside and immutable force than does the law of gravity. Accordingly, the behavior of some state legislators serving real estate lobbyists (instead of voters) with amendments to the law of agency is no less bizarre than amending the law of gravity! The real gravity will be felt in the inevitable landslide of court decisions, political consequences, and financial disasters upon the conspirators.