Why do new agents fail?

Real Estate Agent

I keep hearing some depressing stats in our industry. I am a big believer in the 80/20 rule, and I know that principle also applies to our business 20% of the agents make 80% of the sales. I also remember to hear that the turnover rate in real estate is 75% in two years.

Last week I was told that in this current market only 10% of the agents are making 90% of the transactions and that 40% of the agents in my area have only close ONE transaction in the last 12 months.

I was doing the numbers the average sales price is $200,000 and the average commission is 2.5% so the one sale a year only brings $5,000. most of the agents in my area are associated with traditional broker splits of 50/50 to 60/40 I will take the later. So that means that 40% of the agents in my area have only earn $3,000 in 12 months. I know the local board is $580, MRIS is $660, license $90, business cards $100, sentri card $175. Total investment is $1605. That leaves a profit of $1,395. divide that by 12 months and that is a $116 monthly income.

Well the problem with new agents and most agents in general is that they have the employee mentality. They think that they work for the broker or company and they usually call their broker or manager their boss. They expect the BOSS to give them the business, they usually do floor duty and become unpaid receptionist for the company waiting for leads. Then they will go out on a limb to show houses to the people who call without verifying finances or buyer's ability to purchase a home. 

Some go to many trainings or classes to become better agents, and try all kinds of things to see what sticks and works for them. Also they do the open houses for the office top producers, etc.

So after several months of frustration the agents that feel they are wasting time, and sure they are, go out and look for hourly paying job, and become "dual career" agents. Usually they don't do a good service to their leads or clients and ended up losing business because they are part timers. And after a few years they will drop out of the business.

I understand that there has to be a level of apprenticeship, and mentorship, but also most important it has to be a business plan. When you open a new business and you have to go to a bank to get financing, or to leas a pod, you need to have a business plan. To be able to grow your business you need to know where you are going and you  need a business plan to guide you.

I know most new agents don't know what that is, and most brokers don't spend time with their agents helping them develop a successful business plan and set goals. The only way you can be successful is to set goals and know how to achieve them. We can't drive without a map or destination.

In my opinion new agents fail because they don't have ownership of their business. They don't have goals, plans, they have the employee mentality.

Comments (6)

Debbie Laity
Cedaredge Land Company - Cedaredge, CO
Your Real Estate Resource for Delta County, CO

Yep...your market's agents are doing what ours are doing. We ran the numbers. Most agents in our area make $3000 a year.

Oct 25, 2011 02:56 AM
S. Leanne Paynter ☼ Broward County, FL
United Realty Group, Inc. - Davie, FL
Davie, Plantation, Cooper City & Weston Specialist

I think most new agents simply don't know what to do.  The licensing class doesn't teach you how to list & sell real estate and many brokerages don't provide training.  Combine that with the mentality that most new agents have about this business being easy money and the majority are doomed to fail.  Brokerages don't care much since newbies tend to provide them with new business in the form of friends & family but once that dries up, the agent gets discouraged and leaves because they're not being 'handed' new business.  In my opinion, new agents rarely take the business seriously & that's part of the problem.  Like you said... employee mentality.

Oct 25, 2011 03:04 AM
Debbie Holmes
John L. Scott - Boise, ID
Gets the job done!

It is true.....I think I might be the only on in my real estate class still in business.  I would trade it for a good day job with benifits so that I could spend weekends with my families....Overall I love what I do....Everyday is different.  I did OK with my first year....Then ran for Congress....Got sick in 2009... and have been doing OK but not great for 2010 and 2011....One sale a month...My goal next year is 2 sales a month....We will see....

Oct 25, 2011 03:05 AM
Ken Brandon
Coldwell Banker Sea Coast Advantage (Jacksonville, NC) - Jacksonville, NC
Camp Lejeune, Jacksonville, NC

Couldn't agree more. Most new agents enter this business thinking they are here to service the real estate needs of the world. While I believe it is essential to have the "service" mentality for long term success, I also firmly believe agents must understand they are running a business and decisions that impact whether they continue in this "business" or not must me made with that manner of thinking.

Oct 25, 2011 03:13 AM
Mary Ann Daniell Realtor
Coldwell Banker United, Realtors - Subsidiary of NRT LLC - Killeen, TX
Delivering Successful Results Since 1999

Lack training and setting realistic expectations are often the reason new agents fail.  This is not a business of "easy money".   It is hard work, often at times that are inconvenient to you and your family.  New agents have to make a commitment that failure is not an option.   They have to be ambitious self starters who don't sit around waiting for something to happen!   With all the information online these days, there's plenty of training available to everyone.   They just need to take advantage of it.  Or move to a brokerage that provides great training.   

Oct 25, 2011 04:37 AM
Kathy Knese

The new agents have no clue what to do. They dont have the hunter mentality to do the prospecting,  the organizational ability to keep track of their leads, the funds to bankroll the start up until it is generating closings. The fail rate is huge.  In my market which is Philadelphia and the PA/NJ suburbs the numbers shook out to every agent sold 1/2 a house.

Oct 25, 2011 06:55 AM