Real Estate Licensing Makes a Mockery of the Industry

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Would you like a life of luxury? Driving around in your new BMW looking at expensive homes and having all the free time and money you could ever want? Just get a real estate license and you’ll be living the high-life making way too much for doing way too little.

That’s the promise and dream of many who get into the real estate industry.

And that’s what many are told by attending “career nights” that are held all over the country by brokers wanting to hire new agents and schools that want the tuitions. And the state’s don’t mind because they make tens of thousands of dollars every month from real estate licensing fees. 

The barrier to entry is so low that most people jump into real estate thiking they’ll just give it a try, and why not- it only takes a month of schooling and a few hundred bucks to get the license. They don’t know the whole truth about a career in the business, and it’s so easy to get in that they figure it’s worth a shot. They’ll try it part-time until they can go full time or they jump in full time confidant they’ll be wealthy by next year.

This hurts the real estate industry, the people getting into the business, and mostly it hurts the general public who hire these new agents and have horrible experiences with them before they eventually leave the business.

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Many say that the responsibility lies with the brokers who hire and train the new agents. These brokers need to take responsibilty for their training and the agents need to take the business and their responsibilities seriously enough that they will go through the training and have mentors and will prepare for the financial and emotional stress that getting into the business can bring. Well to those people I say Bravo for an ideallistic and ridiculous view of how we can fix the industry and improve it’s standing among professions and the perception is has (earned). The reality is that the brokers make money from these new agents getting into business and will not, and have not, fixed the problem. In fact the brokers (in general and as a whole) have been one of the main reasons so many unprepared people get into the industry in the first place.

Consider for a moment the responsibility placed on a professional real estate agent. Representing someone with their greatest financial asset, coordinating and enabling people to relocate their families, coordinating and following up with people as they walk strangers through their homes. These are things that individually merit enormous responsibilty and care, yet state-given licenses are handed out like candy to anyone 18 years old with a month to go through school and few hundred bucks.

Licensing should be much different than it currently is. It should prepare agents for what being a real estate professional is supposed to be about and educate them to how to perform the work and train them on the responsibilities, not just a brief history of the business and memorizing a hundred terms they’ll never use again.

So what should real estate licensing look like? Since I’m complaining about it, what is my answer for it and my great idea that would supposedly fix the problem? Stay tuned…

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12 thoughts on “Real Estate Licensing Makes a Mockery of the Industry

  1. I agree with you, licensing requirements are almost nothing. Even here in Colorado where we don’t have sales agents, only brokers. If becoming a Realtor was taken seriously and people were actually trained before they started selling everyone would be better off.

    The brokers aren’t doing it because they want as many agents as possible so they have more people paying monthly fees.

  2. This is a problem that will not be fixed until Independant Contractor status is stripped away,(by IRS) making all licensees employess, forcing brokers to:
    1. Pay salary plus bonus.
    2. Becomeing more selective in hiring process.
    3. Providing uniformed training.
    4. Taking back control of the lead from the agent, foring agents to report inquiries-leads-appts-sales and conversion ratios.
    The industry will be a mess until these things are changed.

  3. Dishonesty is making a mockery of the industry more than incompetence is.

    I have been in Real Estate for about a year. About 1/4 our class could not pass the final and about 1/4 of those who did could not pass the state exam. Easier than a Bachelors, but not that easy which makes me wonder if there is lots of cheating going on. I say require a Broker to have AT LEAST an Associates just to weed out the cheaters.

    My opinion of Real Estate after 1 year:

    The main thing that seems to be lacking in the industry is honesty. I’m 44 and I know for a fact that I’ve seen more dishonesty in the last year than in my entire prior 43 years. The entire industry seems corrupt to me. Corrupt sellers, corrupt lenders, corrupt appraisers, corrupt inspectors. Lies, dishonesty, and corruption abound in the Real Estate industry today. How do you teach and test for that?

  4. Jackson,

    Integrity in our business, or any agency, is imperative. If the process of becoming a licensed agent was more of a comitment, as I think it should be, it would take a more dedicated person to become licensed, and therefore I believe would help the business as a whole be more honest.

    When it’s so easy to get into, all sorts of people are attracted, including those who just want to get-rich-quick without regard for the client. If it were a more serious process only those who truly cared to enter into a career in real estate would make it through.

    There will always be good and bad in every profession, but if someone has to really work for something and earn it, they are less likely to take it lightly.

  5. Greg: Then why are there so many corrupt attorneys, doctors and politicians? Many of these folks went to school for 6+ yrs. Integrity cannot be trained, it’s ingrained from parental guidance and love. If the State is involved, or any form of Gov’t., it will only become messier. Since the State cannot do it, and brokers don’t know how (or care), it falls on the shoulders of the Realtor Associations. They must unfortunately:
    1. Raise fees to get marginal agents out of the business.
    2. Maintain strict continued education.
    3. Create testing for contnued membership.
    4. Govern themselves better with stronger penalities for behavior infractions.

    But in the end, the public must also be educated about why they should use a professional instead of their newly licensed, part time hairdresser agent who never answers her cell phone or returns calls.

  6. Newly-licensed does not necessarily mean bad. In fact, it may even mean better. I have worked with five realtors and the only one who did a really good job for me was a brand new agent, while others who were “top producers” and “experienced” not only didn’t care about my concerns and didn’t bother to do their work, but were incredibly rude and indifferent too. Professionalism, knowledge, dedication, and attention to clients’ needs matter. Without these, no amount of experience matters.

  7. JJ – I am fairly newly licensed in two states. My first listing came because I actually called the guy back, and have been sending updates every two weeks. I have a business plan, I answer my phone, have two blogs and have been doing my job.

    I have a deep interest in what happens to my unique community and when a “professional” “top producer” moved in, it was apparent a local voice was needed .. the rest is history.

    Inter-gritty is not learned and not trained in adulthood and not something that comes over time. I think a person has it from childhood or they do not.

  8. I agree with many of the comments here. But let me ask, who’s fault is the credit crisis? Why do I ask this question? Because people do not take responsbility for their own actions and decisions andthey try to get away with blaming others for their failure.

    I for one know that MANY real estate companies want to provide lots of people with the opportunity for success and in doing so they also offer tons of training and support but as the old saying goes “You can lead a horse to water but you cannot make it drink”. Pre-licensing knocks a lot of people out of the opportunity, brokers allow anyone a chance but it is up to the individual to maximize the opportunity, to provide quality service and build a solid trusting identity.

    Being new to the business does not mean bad, it means that many are seeing opportunity and a need for change. Seasoned agents have for a very long time lived off the fruits of other peoples labor and have given less than steller service (not all seasoned agents). This topic is much more involved than a simple answer.
    Seasoned agents dislike new agents becuase new agents can come in and make a difference. Maybe it is time for the real estate industry to look beyond the borders of other companies agents and hire real sales people.
    Maria Mull, AlignMark

  9. I’m a consumer, that has always prided myself on knowledge and being a responsible Home Owner. However, here in Oklahoma, Responsibility, Ethics and Integrity seem to be an outdated philosophy, (heck, I don’t think they even realize what the words mean).
    Guess what? If you get a bad house here, and the chances of you doing that are extremely high, (contractors don’t have to be licensed to build), Home Warranties Don’t work, Attorneys are paid to look the other way, Home Inspectors that are paid by the Buyer, but, Actually have their allengience to the Seller & their agent, Escrow Companies steal your closing costs, but don’t do the work, so, after the sale, the new homeowners get stuck paying back taxes for the previous owner, and or the commission for their agent, because the Listing agent keeps the whole amount, minus kick backs to the escrow companies, home inspectors and many of the so-called contractors that are supposed to make repairs BEFORE you close the deal..
    And, you can’t look to the Real Estate Commission to do anything about it, because most of the board members own Real Estate Schools and, or, are so entrenched in the corruption, that they won’t stop it….
    I’m so fed up with this state, that I want to scream out loud…..
    Any suggestions?
    Lora Mac Alistaire, consumer

  10. I also live in OK and it took five years to settle a case against a home builder, who left out required materials, and left us with a new house that had foundation failure, a roof that didn’t meet code, and other problems. A home warranty company seemed to complicate things rather than assist. We were fortunate that we found a way to avoid the warranty’s arbitration clause, which would’ve probably prevented us from recovering all our damages. In the end we settled and came out about even, but the years of stress and uncertainty about our future were almost unbearable.

    I suppose the “good” news is that it’s not just Oklahoma; the entire country seems to have this problem, and in all (or nearly all) states and federally, the building industry lobbies hard to make sure laws protect builders. The consumer goes into a home purchase dangerously naive about the legal system, warranties, contracts, politics, etc.

    Like Lora above we were not uneducated. We’d purchased two new houses before without problems and we both have college degrees and are not fools about consumer issues. We did our homework. But unless a person has close personal experience with the legal system, construction defects, etc, or a formal education in these areas, they can assume they have a lot of protection and recourse that really doesn’t exist, or that’s highly impractical and expensive to pursue. Also, in OK and some other states, consumer complaints are not readily available to the researching public. This is what tripped us up early…we were not told by the state agencies that they kept complaints confidential when we were doing our homework first. We were told that AFTER we had a complaint and were angry that it wasn’t made public. The BBB, a business membership org, similarly told me they don’t make complaints public, AFTER I inquired as to why they didn’t make ours public. I found out later, too, that there had been complaints on file on our builder when we did our research, but we were told there were none when I called. Years later, the BBB changed the builder’s rating to unsatisfactory. Then not long after, even that scrolled off the radar, and they had no report again. The builder had long left the state by then.

    I found a lot of good help from Homeowners Against Deficient Dwellings (hadd.com), which is made up of people who were going thru, or had gone thru, what I was. I credit that org w/ giving us info that probably saved our bacon, actually. Sad to say, I didn’t get the best info from the many lawyers I consulted with. The lawyers mostly said, “Sorry, it looks like you have a valid case and would probably win, but there’s not enough money in these cases.” I can see their point, given the builder-friendly laws. Even if you “win,” you may never collect.

    However, we do need better consumer protection on houses in EVERY state, so that there is realistic and meaningful recourse for the homeowner who has gotten ripped off by so-called professionals. Now the big thing is mortgage fraud; not only from lenders but from builders who are steering buyers to in house or affiliated lenders, another nationwide problem. Oklahoma may not have seen quite the bubble that some states did but it still hit here and I believe, and have read in news and govt reports, that industry insider fraud was behind the majority of that whole problem. It’s disgusting that now these industries say they’re “victims” and need a govt bailout!

  11. Fraud in cases of “dual agency” is also endemic. I myself was victimized by a “presumed buyers agent” who switched roles at the very last moment to become a sellers agent without my informed consent. To find out more about my case, go to Google and type in “Joel Stern”, then “Weichert”: you’ll find numerous blogs and websites about this common bait and switch scam. Feel free to contact me personally for additional details, which could benefit the public at large, which is completely ignorant of these problems of faulty (or no) disclosure.

    Joel Strn
    202-261-8812 (9-5)

  12. The real estate industry is a great industry and the brokerage profession is too. What makes the industry and brokerage profession so great is that the sky is the limit in terms of personal, financial, and professional growth. The issue regarding ease of entry into the profession may have some negatives but so does the creation of artificial barriers to entry. The latter of which limits competition and opportunity.

    Entry barriers don’t make an industry or profession better, nor do they serve public interest. Usually, entry barriers are self-serving regardless of the industry or profession. What many folks fail to understand is that the brokerage profession is a “business” profession, it’s not a job. And it’s been a business profession since before becoming organized as an official industry during the 1920s.

    Historically, the industry pre-dates licensing. There were successful practitioners before there was Continuing Education (CE) and Licensing Requirements. When the industry started to organize and require licensing and CE many of the already successful practitioners objected because they felt such requirements would take them away from their day-to-day operations.

    Successful businesspeople don’t want to spend all of their time (while losing money) in classes or schools when their “feet should be in the street” developing and growing their business(es). And this is where the real estate profession differs from many other professions especially those requiring extensive schooling. Obviously, compromises were made by the states and associations which is why the classes and schooling and licensing periods are short. But again, keep in mind that it’s a business profession for business-minded people.

    Unfortunately, some that enter the profession didn’t get that memo so believe that it’s a “job” profession. So they enter the profession with the wrong attitude and impression. When an individual decides to become a real estate agent/broker, really what they’re doing is making the decision to become a small business owner by providing real estate services.

    That’s really what’s occuring. They’re not obtaining a traditional job. Just as it’s not difficult to establish or open a business, it’s equally not difficult to obtain a real estate or broker’s license. Likewise, it’s challenging running a profitable business, it’s equally challenging running a profitable real estate practice or brokerage firm. Hence, the reason for high business failures (in general) and agent attrition (specifically).

    The real estate industry and profession are often singled out as having incompetent practitioners when, in reality, all industries suffer from incompetencies regardless of licensing and CE requirements and increased or strict entry barriers. Ease of Entry is Not the Problem!

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