WHY DO SOME NEW AGENTS "FAIL"? WERE THEY EVER CEO MATERIAL? FOLLOW THE MONEY!!

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

A REAL ESTATE AGENT IS A COMPLETELY UNIQUE WAY TO EARN AN INCOME!

In an economy of employers and employees, only the real estate industry functions as a conglomeration of self employed individuals under the supervision of an employing company

Inspired by a thoughtful article by Karen Rice, Why Some Agents Fail, responding to a RealtyTimes article by a writer who, IMO, has little understanding of the real estate business and attempts to make the success or failure of licensees all about "feelings".   Karen attributes the failure of many agents to lack of training.  I agree but I believe it goes much farther.  I believe that agents often fail simply because, like learning to swim, if agents are simply forced to jump into the deep end of the pool, how many would learn to swim on their own??  Even deeper, I believe that most new agent failures is due to the lack of MONEY.  From personal experience, I know that I was shocked, shocked that my new broker didn't hand me a pile of buyer or seller leads when I joined his office with a mega company.

FACT:  A new agent is beginning a new business with NO BUSINESS.
FACT:  A new agent must advertise their services which costs MONEY.
FACT:  A new agent must pay their own expenses which costs MONEY.

WHERE DOES THE MONEY COME FROM??   How many new agents understood that, to be successful in a new business, they needed CAPITAL, significant savings or an ongoing source of income (retirement, spousal, other employment) other than from their new real estate business

Only in the real estate business are new agents expected to succeed or fail with a minimum of training and supervision.  Many agent tout the "training" provided by their individual companies.  Yet, most new agents in those companies would have been long dismissed if their retention depended on their production as in most employing companies. 

The Independent Contractor Myth.  The very term self employed itself is misleading since it is only for taxation purposes.  Although denied by many employing brokers who fail to exercise supervision over licensees over whom they have license law responsibility, the company holding that license is the employer.  In fact, when there is no written Independent Contractor Agreement between an employing real estate company anCashd a licensee (agent), that employing company should be treating that agent as they do any non-licensed employee of the corporation, meaning:

Paying them an annual income,
Deducting F.I.C.O,
Providing access to health insurance,
Retirement plans,
Regular hourly pay up to 40 hours and
Overtime for work performed over 40 hours. 

 

What does a new employee (not real estate) receive as a new hire by a company providing a service? 

1.  Money on a regular basis with deductions for F.I.C.O, etc.
2.  A description of their duties as an employee of that company (doesn't have to be in writing).
3.  Training to produce a desired result in their job.
4.  Supervision

When a person is hired by a company to fill a job, they are joining an ongoing business and are paid from day one to perform duties for which they were hired.Agent

ENTER THE REAL ESTATE AGENT.  An individual joins and completes a course of instruction to prepare them to take the examination to obtain a LICENSE TO SELL REAL ESTATE.   Once the individual passes the real estate examination, they are eligible to receive a LICENSE TO SELL REAL ESTATE.  However, that LICENSE can only be used after they are HIRED BY AN EMPLOYING REAL ESTATE BROKER OR COMPANY.  Once hired and employed, their license is held by the employing broker or company. 

WHAT DOES A NEW REAL ESTATE LICENSEE RECEIVE?  Does that newly hired real estate agent (license) then receive any of the benefits of an employee??   Do they receive a regular paycheck?  Do they have access to the company health insurance if any?  Do they have regular hours for which they are paid an hourly wage and over time for more than 40 hours?  HA!

WHERE'S MY CHECK?  Where is the paycheck at the end of the first pay period?  HA!  Until that new agent has managed a sale, there is no pay period.  Most new agents have not recognized that their "pay period" is usually:

Marketing your services (yourself) for days, weeks, months to real estate consumers until there is a contract of sale for a buyer or seller client.
Managing the contract of sale, which (for resales) may be 1, 2, 3 months until the projected settlement date,
Receiving your commission check from the employing broker/company.  May be 1-14 days depending on the company structure. 

THAT FIRST COMMISSION CHECK may be 2-6 months from the date your were first hired by your employing broker.

WHERE IS THE HARD COLD CASH TO JOIN THE REAL ESTATE INDUSTRY?  Over the years, I've interviewed many newly licensed real estate Cashagents.  I would estimate that only about 30% of them were financially prepared to start a new real estate business.  They were, like a salaried employee in any business, just looking for a job.  Further, I would estimate that fully 30% of these newly licensed agents had the funds to join the MLS, pay the Real Estate Association dues.  Even with spousal support, it takes HARD COLD CASH to be a neLennw real estate agent.


Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988,
serving home buyers in MD and Northern Virginia.

 

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Wallace S. Gibson, CPM 02/14/2013 09:09 PM
  2. Blatt + Cutino 02/15/2013 10:43 PM
  3. Mary Yonkers 02/16/2013 09:01 AM
  4. Lizette Fitzpatrick 02/17/2013 06:19 AM
Topic:
Real Estate Sales and Marketing
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independent contractor

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Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

Well, Lenn, that is one awesome post!    I started the business with $35K in the bank, spent every bit of it the first year learning what to do for advertising, marketing, etc.  Made some mistakes, and then made some money.   Seven years later, I still am spending every penny on the business, but am making plenty of money (and spending the same each year on building), have my own brokerage with 5 agents on board, - and have a long term plan that is on target. 

It takes money to make money!

Feb 16, 2013 10:58 AM #88
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Debbie Reynolds
Berkshire Hathaway HomeServices PenFed Realty, Your Clarksville Real Estate Professional - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Lenn, When I got in the business in 1980, my husband said he would give me $500 to start my career. There was no prelicense classes back then and taking the test was only $25. Board dues was a whopping $180 per year. Business cards were about $15 and ads in the newspaper ran about $30 per month. We had no lockboxes or cell phones. I got right to work and had 2 sales my first month. It took another 4-6 weeks to close them. I never had to use all of the $500. Things are sure different now.

Feb 16, 2013 12:13 PM #89
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Pamela.  That's not taught in real estate school.  Especially today when most of the schools are recruiting tools for mega brokers.

Carla.  There's no recipe for running a successful business.

Bob.  Sad but true.

Dorte.  Indeed.  As the costs go up, the knowledge base needed expands too.  It's not only more expensive, it's much more complicated.

Dagny.  Sounds good.  I stopped employing agents when the risk they presented was more than I wanted to deal with.

Debbie.  Things were quite different then.  When you started all one needed was a simple business license.  When the government got involved, they committed their usual overkill. 

 

Feb 16, 2013 06:58 PM #90
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Lizette Fitzpatrick
Lizette Realty - Lexington KY - Richmond KY - Lexington, KY
Lizette Realty,Lexington KY MLS - Kentucky Homes -

This is excellent Lenn! I will re-blog for my new agents to read. Hopefully, they do. I wish more newbies were prepared.

Feb 17, 2013 06:28 AM #91
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Bob Crane
Woodland Management Service - Stevens Point, WI
Forestland Experts! 715-204-9671

Hi Lenn, I have seen so many people wash out of the Real Estate business over the years, and I have always thought that it should be an ethical violation for those who sell them the training and license when it is clear that they will never last more than a few months.

Feb 17, 2013 06:47 AM #92
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Lizette.  Hopefully your new agents are prepared.  It's never too late.

Bob.  This is so complicated.  Licensure is quite easy.  Businesses of all type fail, but the real estate industry is quite unique in that the primary involvement is through folks who may be the least prepared (agents).

Feb 17, 2013 06:37 PM #93
Rainmaker
1,306,894
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Lenn - some how they foreget to tell you about the cost of going into the real estate business.  It is not an easy profession and it does take some money to succeed!

Feb 18, 2013 11:27 AM #94
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Stanley Stepak
Howard Hanna - Avon Lake, OH - Avon Lake, OH
Realtor - Avon Lake, Avon, Bay Village, Westlake,

SO true. THere is so much here that people dont learn about the cost to make this work.  You have to have budget plan from your income to cover advertising more business.

Feb 18, 2013 11:47 AM #95
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Joan.  I learned pretty quickly. 

Stan.  Without other income you have to have money just to live on in the beginning.

Feb 18, 2013 06:38 PM #96
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Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Lenn,

I got no training and was basically being used for my contacts.  I did loans when I started.  If I was to do it again I would shop harder for a good broker and probably go with one of the larger firms that I understand does provide leads and training, but just takes a big hung of the commission.  

Feb 19, 2013 02:27 AM #97
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Gene.  That is the trade-off.

The big companies generate leads, but the agent winds up with about 35%.

They often give training but the NAR has that covered in my area.

 

Feb 19, 2013 03:21 AM #98
Rainer
32,604
Gijs Van Breugel
TERRA FRANCE | International Estate Agents for France
TERRA FRANCE | International Estate Agents
Wow. That really sounds a bit like the french structure. I also had a cold start and had to cover all my costs. Now we engage independent estate agent but the agency covers all costs of marketing, training, fees etc to make it worthwhile for the agent. Indeed at a lower commission but that is in balance all agents say.
Feb 19, 2013 07:52 AM #99
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Gijs.  That is the difference between the agency structure in Europe and the U.S. 

We in the U.S. prefer to have choices about how we practice and the freedom to affiliate with companies/brokers that suit our income and practice preferences.

Most licensees in the U.S. start with the mega brokers but, once they gain experience and can generate sufficient business, prefer to manage their own practice and benefit from the higher commissions that are generated.

 

Feb 19, 2013 06:19 PM #100
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Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Well said Lenn and so true!

Feb 19, 2013 07:49 PM #101
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Lenn Harley
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Thanks Allison.

Feb 19, 2013 07:53 PM #102
Rainmaker
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Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Lenn, Great post. I have enjoyed reading all the comments and your replies. I came to RE from owning a heavy truck dealership. I am still flabbergasted at the hiring and training practices of this industry. You are so right , having some money is the key.

Feb 19, 2013 10:40 PM #103
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Torn.  The old saying about "brokers will hire anyone who can fog a mirror" is, sadly too often the case.

 

Feb 20, 2013 03:47 AM #104
Rainer
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Vince Bono
Macomb, MI
Vince Bono

Very Informative Post.  Thanks for the Info!

Real Estate is a tough business for someone who has never run their own business.  I am a new agent myself but have run my own businesses and expect expenses and time to ramp up from marketing.

I think a lot of new agents dont really think about everything it takes to get going, they think they're going to get their license and start selling houses.

Tough business, alot of competition and I have a lot of respect for people that make their living doing this.

 

Vince

 

 

Mar 26, 2013 01:27 AM #105
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
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Vince.  Good insight.  Getting a license, going with a broker and becoming a Realtor are one thing.  The rest is the tough part.

Mar 26, 2013 02:19 AM #106
Rainmaker
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Kathy Lakowitz
New Rochelle, NY

New agent here & wishing I read this blog when I signed up to get my license last year.  I admit I'm shocked at the amount of money I had to spend & limited expenses to match my income from severance pay & unemployment insurance.  This year, expenses are limited to my IRS refund check until I make a sale.

May 10, 2014 04:16 AM #107
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