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Because it's much harder than it looks. Most people are not cut out to work on a straight commission. Most people have an employee mentality rather than an entreprenuer mentality.
A real estate agent regardless of the brokerage whether they know it or not they're running a small business and most small businesses also fail within a year.
Nancy Robinson Ranked ...
Royal Oak, MI
Raymond E. Camp
I thought it was something like 80% of new agents fail. It's due to a lack of information about what the job really entails up front, lack of financial cushion for first few years, lack of training/mentoring/etc, lack of determination, and I'm sure there are more reasons.
Raymond E. Camp
Warner Robins, GA
This should generate some interesting comments. But my take is that the industry is much harder to gain a foothold than most individuals imagine. Real estate is a business and like any business it needs a business plan, marketing budget and careful planning. The failure rate ofmost small businesses is highreal estate is no different.
Mitchell J Hall
Locally I heard something like 90% fail. Perhaps because the licensing process teaches NOTHING about running a business??!!
Rancho Cucamonga, CA
As with most new businesses there is a few reason they fail:
- Not enough capital to make it for 1-2 years while the business grows
- No business plan-they wing it
- No realization that this is a real job, and you have to work and show up
- Lack of support from significant others while they make no income for a while
Candice A. Donofrio
Fort Mohave, AZ
Unreal expectations of what the job truly entails.
Manager not telling the truth as to what it truly entails.
Fantasy expectations of selling homes that look like the pages of Architectural Digest.
'I can decorate' syndrome. Since I am talented I can sell these homes.
Not having a plan. Not having a backup money reserve.
Rancho Cucamonga, CA
I thought it was a much higher failure rate than that, but regardless, what @Mitchell Hall said is pretty much what I believe, as well. We are entrepreneurs, not employees, and as such, need a plan and capital.
Expecting the business to come to them, rather than having an action plan for going out and finding business.
Lake Forest, CA
Unrealistic expectations of what it takes to succeed in real estate.
Saturation. There are way too many agents in the business.
The fact that they are "new".
So many people think we make easy money. I don't think many people realize how difficult our profession really is, and how much it costs.
Lack of training and planning. Most have no clue on how to run a business. Real estate can look easy. It is not. It takes a lot of work and money to run a business.
Paul S. Henderson, REALTOR®, Broker, Tacoma Washington I believe the number is higher and a much higher percentage drop out of the business after the first year. The reason being many find this business is much more than showing properties. It requires hard work, persistence, and proper capitalization to run a business.
Easy answer - the only place success comes before work is in the dictionary!
Paul S. Henderson, REALTOR®, Broker, Tacoma Washington I think that a 40% washout rate is quite low.
In my experience and through my personal analysis, the washout rate is upward of 70%.
But, as to why . . .
There's such a low barrier to entry, that anyone who can read and write can get a real estate license.
It's not to say one must or should have an advanced degree, because I think that's total BS.
However, the lack of understanding regarding what's involved in being a successful real estate agent, combined with pre-licensing education that's not designed to educate, but to merely pass a test, tends to result in licensing mills that really do no one (the agent, the broker, and the public) any good.
Perhaps, if pre-licensing was more in-depth (e.g. 240 hours over 6 weeks of full-time - 40-hrs per week) that provided a more intense and expansive view of both the legal and practical sides of the real estate brokerage business, the entire industry would be better served.
The other side of the coin, is that most real estate brokerage firms fail miserably at providing new agents any useful, practical training. If they provide anything, it's more of an indoctrination as to how THEIR company operates, as opposed to how to help the agent to become more generally knowledgeable and productive.
This has been an area of my deepest interest for decades. I've even developed a new agent training course that I've used in my own brokerage firm to help new agents.
It's a 40-hour / 6-day course that's intended to be the beginning of an ongoing series of shorter courses and seminars.
However, when I tried to market it, I couldn't sell it to anyone, I can't even give it away because there are so few people interested in elevating their skills, because they all want to make money, NOW.
Thanks for a GREAT question.
Ken Jones, ASA, SCGREA...
I believe it's a higher figure than that and from what I've observed over the years might be as high as 8 or 9 out of 10. Maybe it depends on the market.
It is not easy to get people to work with a new agent.
Besides the other great answers; I think the local board is just looking for the cash.
In my case I was promised training however, that didn't happen. My first broker was out for themselves. Number two it takes funds to get your feet on the ground and thankfully I had those funds, most don't.
Unrealistic expectations. We are are running a business. Most consumers think we're out showing houses all day, every day and business falls into our lap.
There is little financial reality with many new agents who don't understand expenses continue even when there is no income...and that the phone doesn't just ring automatically when you are licensed.
I think "fail" means they run out of money and need to bring in a regular income. Real estate is hard work and not everyone is an "instant" success. But some are, and that brings in so many hopefuls.
I thought the failure rate was a lot higher than this. Maybe it's gotten better!
Paul , your entry level must be higher we have abut an 80% fall out rate. I think one other issue I did not see posted here is that some agents come into the market because they have a friend or family member who want to buy or sell and that makes it look easy and then when they do not have that any longer they fade away.
There's something about the stamina and drive that it takes to work 100% commission - that's terrifying to some and others, just don't know how hard you have to work. When they find out, they're OUT!
- They don't have enough money put back for them to last until they are consistently closing transactions.
- New agents often have unrealistic starting expectations - they don't know what they don't know and often expect that it's going to be like their previoous jobs.
- They are often unable to quickly digest the firehose of new information and apply it for long enough to realize results.
- Fear of the unkown and being unable/unwilling to engage in activities that are outside their comfort zone.
Unrealistic expectations, work ethic and ability.
I think they may have unrealistic expectations. They are told about how much money can be made in the real estate business, but not always told what it take to build a successful business.
Expectations are that this is an easy career choice, easy money, and most do not have the reserves to stay in long enough to make it.
When I was hiring agents, I could teach them everything they need to know...
What I could not do is pay their bills while they were learning. My main concern with new hires was "who is going to support you in the next few months?"
I've been in this industry for over 20 years and still can't verify that people leave at this rate. Most of our new agents seem to suceed and flourish. I've heard these numbers forever. They must be tainted by people that weren't really going to ever sell homes anyway.
Without data in front of me, I suspect it's because they don't consider the expenses involved. Even if they are "average" in the first year, they are well below average income once expenses are calculated.
I heard it is more like 80%. I think most people have unrealistic expectations
Paul S. Henderson, REALTOR®, Broker, Tacoma Washington - one reason - they don't join ActiveRain.....lol!
On a serious note, they are not guided and are on their own!
Education makes the difference.
Because it's not "easy money" the people make it seem. They're not expecting or used to the level of work, doing the so called "working 80 hours to avoid working 40"
Because real estate school does not teach you how to sell homes.
I would say they don't realize how hard it is and how much face to face as well as money it takes to build.
I mentor Agents in our office and once you work the numbers backwards it is always eye opening.
training and mentoring is lacking....
It's closer to 8/10. I tell everyone on my side it takes 6-12 months to get going--if ever...Many come in expecting to knock it out of the park right away. While I admire the spirit, it just never works out that way.
Seen quite a few throw in the towel just as it gets going for them. That one has always baffled the Hell out of me.
long term success is about lasting. The longer you last, the more likely it will turn into a career...Just my take...
It has something to do with not having any money left in their bank accounts.
They watch too many reality real estate shows and fail to understand just what it takes for success!
Lack of money, I have my newbie keep a job till they have 3 deals under there belt that they have money for marketing.
Most people think its a cushy job and we all make huge sums of money... they don't realize how hard it really is. Their expectations are not realistic... if you are not a self motivator you are not going to make it.
No business plan, no daily schedule, no prospecting, no accountability.
Many cannot work as independent contractors and need a regular paycheck. Financial pressures keep them distracted with the continual outgo making it where they cannot focus on the long term results.They get disenchanted and start failing to do the daily routines of what it takes to build a business and spend less and less time on it. The spiral continues downward until they say, This isn't for me.
I think most of the major contributors to failure have been mentioned. One that I haven't seen is the failure to transition from early business (i.e. the family and friend connections that make up a lot of agent's early business) to a sustainable operation. There are a lot of agents that can sustain themselves for a year off of the first step of networking and connections. But turning that business into new business is something that many cannot accomplish, whether that be inability to successfully network or failing to recognize when it is time to do so. This is where a lot of Year 2 failure comes from.
It is as simple and as rewarding as it looks. Also some are not suited for this profession. A
I would say they have unrealistic expectations of what "Real Estate" really is, as well as the actual "costs" to being an agent...it's not just lets look at 3 houses and they buy and you get a "HUGE" check .... and some of it also is the education to get licensed does not teach you how to "be" a Real Estate Agent
Lack of steady/predictable income
They are independent contractors who have to work their own schedule to create business. And if they have no closing, they have no income. This can be a challenge for many.
Any service or sales business would have this as true.
They have visions of grandeur of becoming a millionaire over night
Death by lack of experience....#1 killer
Financial inability to stand the test of the time it takes to make a sound business operation. Also lack of understanding they are now running a business and the buck stops here.
They are not ready, dont have a built up savings to get through the the learning curve and time it takes to close a deal. Learned to take a test but not sell homes. Chosen a company that does not provide mentoring to teach the agent how to succeed.
Many are not prepared for the challenges.
Why? Because Brokers are irresponsible and greedy folks.
They suffer NO CONSEQUENCE when their process creates the long enduring failure system. Trump University has the same success rate and that did not turn out well.
The solution is SIMPLE. Unfortunately, way too much new money is being harvested through the existing failure system.
But, first, one must define, "What is success?"
That is an important question because a great many agents who have not failed do not make a living income.
I don't think they realize all the work that is involved to become successful. Plus, you definitely need to have a financial cushion to keep you going until you start making money.
What exactly is failing? Did they not make any money? Not enough money? Not represent any buyers or tenants? No listings first year? Just decide that real estate wasn't for them after getting a couple listings and representing a couple buyers? Did they get a job but kept their license active?