Why 90% of Realtors Fail

surprise.png 

My first day in the business I attended a Mike Ferry seminar that my brokerage had organized. I took a lot of notes (which I still have). Mike was up on stage telling stories about the 90/10 rule and about agents failing and how he believed successful agents became the top in their field (mostly it involved cold-calling). The next day (my first day actually working) his theory was confirmed when I went into the office and my broker showed me a desk with a phone and a Coles Directory (basically a telephone book listing names and numbers by street instead of by last name). He told me I’d be sharing the desk with about two or three other new agents and he showed me how to use the directory and where the copy room and break rooms were and that was basically my initial training. Later I would attend a two week training course the office had, but at the beginning it was all about that phone. So I got on the phone and began making calls.

The calls went something like this…

Hi, my name is Greg Tracy and I’m with Coldwell Banker Real Estate. May I speak to the owner of the home? I’m calling to ask if you have thought about selling your house now or in the near future? If you were to move where would that be?And when would you be making that move?Do you know anyone who may be thinking of selling at this time?Thanks, have a nice day.

Here’s a checklist to making money in real estate;

Take one month going through schooling – About $450 Pay Licensing and Association fees – About $1000

Buy business cards/yard signs/open house signs – About $400

Find home to sell

Market home – discuss marketing with seller and choose from following;

marketing.png

(Of course these costs are one reason so many agents simply put homes in the MLS and hope they sell)

Go through escrow period (inspections, appraisal, title, loan)

Close deal

Closing gift – Up to $100’s

Finding a home to sell is the hard part because who wants to list with a brand-new agent who has no experience? And if you do find a home to list, what if you spend the money marketing it and then it doesn’t sell?

What if you are really good (or lucky) and find five homes to list and spend $500 to market each of them all and two of them sell?

Average price home in Salt Lake is around $260,000. If an agent lists a home at 6% and gives 3% to the other agent their commission would be $7800. Now pay the broker $2300 (30%- not bad for new agent) and subtract the $500 marketing and the agent gets $5000. Not bad, except how long did it take to sell that home and get that check? Average time on market is about two months right now, plus the average 30 day escrow and you’ve spent three months waiting for that $5000 check.

The average agent in Utah sells 3-4 homes per year- that’s $15,000-$20,000 per year. This is all agents- new agents sell less.

poverty.png

Factor in the stress of a feast-or-famine income schedule, the emotional stress involved (way above average) and the process of prospecting for business (not very fun) and you begin to see the pressure a new agent feels. Many spend $2000 getting into the business and make less than $10,000 or even $5000 their first year.

And thousands of people get their real estate license every year and sell one or two homes and then leave the business. So those sellers may have listed with an agent who had little money to market their home and little experience to do the job and may have a bad experience. And that experience is how they now see Realtors.

There are over 8000 Realtors in the Salt Lake Board of Realtors, but only a couple hundred do most of the business. Most of the 10% of agents who do stay in the business are part-time, either because they have a full-time job or they have spouse who brings home the money and just do a deal or two each year. Or they think they are full time but don’t do much business anyway.

Starting out in real estate is a tough gig and I try to talk friends out of it. I’ve seen a lot of people get into the business feeling pretty confident only to leave a year later with their savings account drained and their confidence shattered.

Those who succeed can do pretty well, making a great living and enjoying a wonderful career, but the odds are 90-10 that it doesn’t happen.

Advertisements

21 thoughts on “Why 90% of Realtors Fail

  1. Pingback: The Feed Bag - Squidward Version

  2. Jeff-

    Cold calling was a neccesary part of my prospecting when I first got into the business but I had no idea that’s what being a Realtor was. And most people don’t realize the actual work that goes into being an agent. Many think it’s just driving around looking at homes.

    When you first get into the business you don’t have past clients to give you referrals and you don’t have experience to share at your listing presentations- it’s much tougher than most people imagine.

  3. Great post, Greg. Good insight into how to get started in the business. I’ve had friends who tried and bailed after a few months. I worked with one of my friends who was starting out to try and buy a place and unfortunately, he wasn’t really knowledgeable enough to provide the direction we needed as first time home buyers.

    Here’s a question, though: Do you think that finding an experienced agent and trying to join his/her team is a good approach to take for new agents?

  4. Right to the first comments. It was hell – but I changed to the loan market and while you have some of the same stresses, if you work for a larger bank, there are at least some in-house referrals.

    But I hated….absolutely hated the “looky-loos” who spent your time and gas money looking around and then doing nothing, or seeing an open house and buying iit that day from another agent.

    Yuk…….and awful profession

  5. Pingback: Tuesday links 07-24-2007 : Real Central VA

  6. Greg – love your new look – especially the red hair!

    Thank god we only have one licensee for every 52 citizens out here in Calif. If it was any worse, some of us might starve to death.

    See you in San Francisco?

  7. Pingback: BlueRoof.com Blog Real Estate Licensing Makes a Mockery of the Industry «

  8. Getting the word out about this to everyone….I was one of the agents stuck in a contract with Mike Ferry…just to have them constantly hassle and threaten me. Well, read this about Mike Ferry this evening..seems that he was just what I always suspected..this was from bloodhound blog:
    Rhymes With Ferry
    By: Russell Shaw, NoHassleListing.com, Post Archive, RSS Feed
    Posted: Wednesday, March 19th, 2008, 9:29 pm MST
    Category: General, Marketing, Realty Reality

    A couple of things. First, the largest real estate company in Arizona (based on number of agents) is now Homesmart. Homesmart was already pretty damn big but on Tuesday it was finalized – they bought Dan Schwartz Realty. Dan Schwartz Realty was, itself, was already one of the top 3 companies in the state for number of agents. So was Homesmart. It is my understanding that – at least for now – both companies will continue to operate with their current names.

    A Little Bird Told Me

    And now for the “big” news. I’ve just received a report that Mike Ferry’s coaching business is falling off. Big time. I have long considered him a predator, so I am happy to hear this. His company has had a pattern of high pressuring agents (who attend his free seminars) to sign up for coaching. Coaching is pretty much all he really sells – his events being a giant sales pitch for getting coached by his organization. For those who don’t follow the Mike Ferry coaching advice or who find it unworkable they are in for an additional shock, besides not having all that additional income they were sure to get. If they attempt to cancel their relationship they discover – as they have signed a contract – their account will be turned over to a collection agency.

    It now happens that the state of California (EDD) recently ruled that all the coaches (I think he has averaged about 60 coaches at any given time since 1999) he has been paying as independent contractors are legally employees. Mike appealed and lost. Prediction: a big fine will soon be levied by California and I’m guessing the IRS will soon do the same. Also, from the very same little bird: a lawsuit from ex-coaches will soon be filed and made public to recover any money not recovered via the taxing agencies. My prediction: he will be out of money before any of them can collect anything.

    Mike, once you see this you can have one of your attorneys send me a nice threatening letter. Here is my contact information.

  9. Wow, Greg, am I glad I didn’t read this post a year ago. I’ve been in the business 14 months and I’ve closed 7 houses. I have 4 under contract and 3 more listed. According to your post, I’m home free!

    My career started a little differently than yours. My company is the largest in Charleston, SC, and holds 1/3 the market share. It was the only thing I had going for me, since I had just moved to this area and knew NINE (9) people. Our approach for new agents is to “warm” call. We call homes near our company successes. When a house sells, we call the neighborhood to let them know about it.

    My first listing came through an open house I held my very first weekend in the business. I didn’t even have my MLS membership yet. After that I started a farm and got a listing there. Then I started calling expireds and withdrawns. Next I picked one up from floor duty. Now I’m getting referrals and things seem to be taking off.

    You’re right in saying it’s not easy, but with discipline and consistency (not to mention a sizable savings) it does happen. Sounds like you’ve made it also. Phew! Let’s count our blessings. Thanks for the post.

  10. Wow I am very glad to be reading this. Our agents do little to no cold calling. It sounds like its a change we can make that will greatly increase their success. Thanks for all the comments.

  11. Hi Greg,

    Great info! I just started out a few months back as a realtor in Singapore and I found your post very interesting. Just wanted to let you know that your input’s appreciated as far afield as here!

  12. I tried insurance TWICE. That was a mistake, that was a mistake. You’d think I would have learned the first time… what I did learn is that the people selling me on these occupations are really good salesmen – !

  13. Awesome post. I’ve had several friends try out real estate and it’s definitely 9-1 odds you lose. I’m going to send this post out to others.

    (regarding a post by Stephanie)
    If you’re lucky enough to start out at a big firm with tons of clients and prospective clients in line that’s great. I think that definitely helps your chances significantly. Keep it up! best wishes.

  14. I gather the reason for this post is to say the business is difficult. I couldn’t agree more however its not that hard either if done on a system and you have sales ability. My best advice is to hit the pavement running, do all the little things other agents will not. Another idea is to figure out if you have a niche. Is your buddy a home builder? Is your rich friends dad an investor? Think about who you know and go after the business. In this market I would recommend getting on a very strong team that is supplying solid buyer leads and make them prove they have the leads. Call everyone you know to let them know you are in the business and tell them to let everyone know that you are in the business and that you need business asap.
    visit my blog and say hello at http://www.arlingtontexashomes.wordpress.com this is a new addition but I will be blogging regularly, again do the little things

  15. if you live in brampton and you going for door knocking you can see 1 realtor after 3 houses, .people selling house $999 like a grocessory shop
    what you can do here any advice

  16. Pingback: The Secrets New Real Estate Agents Need to Know | CityBlast

  17. The successful new sales associates will refer to the plan they’ve developed, with the assistance of their manager, and implement that plan with gusto. They’ll work a solid day, spending their time on activities that have consistently proved to be successful with others. They’ll set their sights on their goals, and they’ll achieve their goals if they heed the advice of those who’ve gone before them. No one ever said getting started in a real estate sales career was easy. There are many pitfalls to avoid, but careful planning before taking the first step can help the new associate avoid most if not all of them. New associates should give their real estate career the same consideration they’d give any important decision–where to buy a house, whom to marry, which car to buy, etc.–and the odds are that when license renewal time comes around, they’ll not only still be in the business but also have more than enough money to pay the renewal fee. And they’ll be well on the way to a rich and rewarding career.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s