You're a New Realtor? Are You Prepared for the Shock?

By
Real Estate Agent with Bill Cherry, Realtor 0124242

Most New Realtors Are Not Prepared for the Shock.

My guess is that most people who enter the real estate business as salespersons have never attempted to establish and maintain a personal financial life based on commission earnings.

They are in for a shock.

Real estate sales is an odd business, really. Earnings come in erratic large chunks of money, and those chunks disappear just as fast through erratic stoppage of earnings of those same magnitudes.

How can a family expect to live like that?

In my own companies, I observed many agents, even some who had been around for a long time, who never learned to prepare for lean times.

Walking that tight rope probably has more to do with good agents leaving the business than any other reason.

Many kidded themselves by thinking if they made, say $15,000 this month, that it was a sign from Heaven Above that a pattern was now set.

They figured they could expect enough closings to give them at least $15,000 every month thereafter.

Of course that doesn't and didn't work.

Some asked me to put their earnings, as they came in, into the company trust account, and then to give them a check for a specific portion of their earnings every month.

At the end of the calendar year, I would give them a check for the balance, and we'd start over on January 1st of the following year.

But that wasn't as effective as one might surmise at first blush. Often they'd want to "borrow" from their own account for some reason. I had no choice but to write the check. It was their money.

So in the long run, their financial planning failed.

Real estate brokerage offices would be wise to encourage their commissioned sales people to engage a Wealth Coach -- someone trained at helping people set up a wealth building plan and to stick with it.

Someone who can't be bamboozled by an excuse to not follow the plan.

While there are undoubtedly others, I not only teach how to do it, but I've successfully done it myself for more than forty years.

This might be a good subject for a sales meeting.

Call or email me if you think it would at your Dallas area office.


                            William S. Cherry and No Company
                                      America's Financial Management Coach

                                              972 677-7028


 

close

Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Bob Crane 06/30/2013 01:31 PM
Topic:
Real Estate Best Practices
Location:
Texas Dallas County Dallas
Groups:
Realtors®
The Lounge at Active Rain
Texas Real Estate
All Thing's Texas
Everything is Bigger in Texas
Tags:
dallas real estate
new agent
dallas realtor

Spam prevention
Show All Comments
Rainmaker
516,039
Elva Branson-Lee
Solid Source Realty GA - Atlanta, GA
CDPE - Atlanta Real Estate & Short Sale Agent

The important thing, Bill, for new agents to internalize before they even take their license exam, is that launching a real estate practice is launching a business. Being prepared for this emotionally and financially is as important as getting licensed. If possible, start out with a business plan that allows for the time it will take to ramp up your operation and begin closing business.

Jun 26, 2013 12:30 PM #15
Rainmaker
444,194
Graziella Bruner
NCS Premier Real Estate - Detroit, MI
Associate Broker - Serving Wayne & Oakland County
Great tips, I agree with Elva, you need to look at it as opening a business and sit down and weigh the cost, because just like any other business, you will have all the start up cost to start a business. When I use to train the new agents, we would go over their goals and how to set them and achieve them, and the first thing they had to know is what will it cost me to be in business for a year? I would have them total their expenses for one year, which included their fees, state, license, their home expenses and even food and gas for the year. Once they had that total, depending on the area they were working to list or sell homes we would then figure out how many homes they had to list and how many buyers they needed. Some agents had no clue on the real cost of what it really took to be a Realtor.
Jun 26, 2013 12:59 PM #16
Rainmaker
1,317,757
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

One has to realize that 1 few months of great sales may not be sustained throughout the year.  In fact in a State like NH where we get a lot of snow, things come to a halt when the snow /ice is on the ground.

Jun 26, 2013 01:54 PM #18
Ambassador
4,307,769
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Bill, Real Estate is a business - and most who start in Real Estate have a background in a job. They forget that we in real estate are paid at closings and not on 1st and 15th of the month! Habits die hard and that's when things don't go right for them.

Jun 26, 2013 02:05 PM #19
Rainmaker
1,143,982
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

So true are those words! From being in a commission based arena almost my entire life I cannot begin to tell you how many I have seen either enter and exit fast or enter have a good month or two (multiply that by 12 lol) and go get major into debt they cant afford.

I am not sure of current stats but from past and my own current experience... you hire 8-10 and 2 are good and make it

Jun 26, 2013 03:17 PM #20
Ambassador
1,241,378
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Especially in these volatile times, yes, a wealth management advisor is critical for many professionals--especially those in the real estate business. Thanks for the post.

Jun 26, 2013 03:22 PM #21
Rainer
87,527
Amber Boyd
Novus Real Estate - Wylie, TX

This is a great post. This is my 1st full year as doing Real Estate on my own after being my brokers assistant. It is very important to manage money well. Trying to pay off any debt I have so it makes it easier in those winter months lol

Jun 26, 2013 03:27 PM #22
Ambassador
2,011,382
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M
Bill - It can be difficult to manage up and down income, and yet it is a very important skill.
Jun 26, 2013 03:54 PM #23
Rainmaker
869,887
Jane Chaulklin-Schott
TEAMCONNECT REALTY - (407) 394-9766 - Orlando, FL
TeamConnect Luxury Homes - Orlando, Florida, 32836

Self-discipline and a strong financial plan has to be the foundation for not only new real estate agents but all agents. Bill, I agree that many new agents must be in shock during that first year and especially if that 'first year' happened to be in the last few years.

Jun 26, 2013 04:30 PM #24
Ambassador
2,269,011
MichelleCherie Carr Crowe Just Call...408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Yes, when I got in the business I was told I needed to either have a spouse support me or have 6 months of savings.

Jun 26, 2013 04:36 PM #25
Rainer
156,837
Tina Lam
Archers Homes - Santa Clara, CA
Residential REALTOR, Broker - (408) 320-5261

If residential Realtors can't stomach the ups and downs financially, just imagine the careful planning needed for a commercial real estate broker.  You'd almost need to have the patience of a cicada as you may go for years between a major deal.  Then again, one good commercial deal can cover you for 3-5 years.

Jun 26, 2013 05:37 PM #26
Rainmaker
791,344
Carol Zingone
Berkshire Hathaway Home Services Florida Network Realty - Jacksonville Beach, FL
Global Realtor in Jax Beach, FL - ABR, CRS, CIPS
Bill - consistency is a key component of any successful plan.
Jun 26, 2013 08:00 PM #27
Rainmaker
2,017,365
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Savings, living below your means and tucking away, stashing the cash so the ride starting out is less bumpy is first order of business. Then finding no and low cost recreation, making sure your everyday spending is lean and mean as you hone your skills wearing the blue and gold R lapel pin. Interest rates were 16% adjustable, my first house loan was an attractive at the time 12.25% fixed rate and with an oil embargo to boot, 1980 was a supper sobering, real world time to start the list, market, sell (repeat) process. Never forget valuable lessons learned.

Jun 26, 2013 08:59 PM #28
Rainmaker
375,056
Lynda White
Bluegrass Homes & Farms Realty, Agent Know How - Louisville, KY
Admin. Mgr., Keller Williams Realty

As someone who has worked as an admin for over 8 years, I understand by watching agents come and go that they certainly do NOT understand the process. And yes, even the seasoned ones get tricked into thinking they can live large, then they have to lay off people at Christmastime. 

Nevertheless, agents make more $$ than admins and I'm jumping in! I'll be taking the test in two weeks and I have a great team to work with. I understand that taxes are outrageous and am thinking of establishing a separate account just to put tax dollars into.

Jun 26, 2013 09:14 PM #29
Rainmaker
134,040
Kevin Henry
Henry Realty - Fort Wayne, IN

Great blog! I hope you are able to help some of these agents that do not have a plan.

Jun 26, 2013 09:38 PM #30
Rainmaker
434,788
Dick and Dixie Sells
Sells Real Estate, LLC - Trinity, FL
Realtors, Tampa Bay Florida Homes For Sale

Good post,  It is true, this business can be a roller coaster ride to be sure. Rainy day money is essential.

Jun 26, 2013 09:41 PM #31
Rainmaker
3,331,485
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

I think the surprise comes in two ways...unpredictable income and that some agents don't understand that the expenses...just of being an agent...dues, insurance, etc. continue with or without income.

Jun 26, 2013 10:32 PM #32
Rainmaker
509,157
Ricki Eichler McCallum
CastNet Realty - Corpus Christi, TX
Broker,GRI,ABR, e-Pro, TAHS

hi Bill,  I agree this is the hardest thing to teach new agents.

Jun 26, 2013 11:16 PM #35
Ambassador
2,081,067
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

It is one of the most overlooked meeting agendas for agents everywhere.  . 

How to keep your money and a budget

Jun 26, 2013 11:17 PM #36
Ambassador
4,849,721
Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Bill this is great advice in the real estate industry as well as others.  I always cringe when I see new hires who just got out of college starting here and overspend their future earnings, it generally ends badly.

Jun 29, 2013 01:58 PM #37
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
393,656

BILL CHERRY

Broker & Wealth Coach
Ask me a question
*
*
*
*

Additional Information