The Law of Diminishing Returns Is Against Realtors.

By
Real Estate Agent with Bill Cherry, Realtor 0124242

The Law pf Diminishing Returns is a basic law of economics.  

It says that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield are smaller.

 

The classic example is of a farmer who has, say, four workers picking cotton on his property.  He figures that if he increases the number to eight, the cotton picking will be completed wice as fast.  Intrigued, after seeing that worked, he doubles the number of workers to sixteen. 

 

But now there are so many workers picking cotton, that they are falling over each other.  Lo and behold, his labor cost has increased whereas the amount of cotton picked by each worker has decreased. The net result is that his cost of labor has increased, whereas his production per worker has decreased.

 

The Law of Diminishing Returns can easily be applied to the number of real estate agents there are in the universe.

 

The number of people who want to sell their homes or buy a different one at any one time, in the main,  has no significance to the number of real estate agents who are in the market looking for clients.

 

But the number of agents, continuing to increase, reduces the productivity of the majority of agents.

 

The NAR’s business objective is to increase the number of agents, without considering whether or not the increase is needed.  That is the same objective as that of local Associations and of most franchise companies.

 

However, the business objective of each licensed agent is to have enough prospects to make what he/she considers an effective living.

 

Note that the NAR, local Association, and that of most franchises' objectives ignores the Law of Diminishing Returns; while the licensed agents’ objective wishes that they would abide by the Law of Diminishing Returns.

Bill Cherry, Realtor
Dallas
214 503-8563

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Ambassador
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Bill- what a well thought out post.  And yes, the ease with which people can enter your field is not good for the industry or for those entering it.  Yes, there will be a good  number who will not stay in the profession but is it fair to them or those in it. 

Sep 28, 2017 05:46 PM #7
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Liz and Bill Spear
RE/MAX Elite 513.520.5305 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Bill, I think the profession would thin significantly if a) agents at entry into the profession actually had a REALISTIC view of what they were about to enter into (how many think just big checks and easy money?)  b) the bad apples actually got weeded out...but that's a pipe dream too.

Sep 28, 2017 06:48 PM #8
Rainmaker
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BILL CHERRY
Bill Cherry, Realtor - Dallas, TX
Broker & Wealth Coach

One final comment, and it's a personal one:  Why do I pay money that I earn to anyone or any company or association that actively recruits my competition? I must be crazy......!

Sep 28, 2017 07:32 PM #9
Rainmaker
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Brian L. Sirota, Esq.
Bristar Realty (Realtor/Attorney) - Orange, CA
For Solutions: (714) 501-7660

Bill, I think of the law of diminishing returns more in terms of eating ice-cream.

Sep 28, 2017 08:02 PM #10
Rainer
320,590
Linda Metallo DiBenardo
RE/MAX Impact, Lockport, Illinois - Lockport, IL

More agents equals more dues money for the NAR heirarchy.    They have no vested interest in whether an agent makes money or not.

Sep 29, 2017 05:38 AM #11
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Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Interesting perspective. I've often felt their are realtors everywhere although I also suspect a lot of them are less than full time

Sep 29, 2017 06:08 AM #12
Rainmaker
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Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Meaning found here thank you

Sep 29, 2017 06:56 AM #13
Rainmaker
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Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

I've always know this but you have said it very well. Every brokerage in this area has a sign in the window that says they're recruiting. 

And regarding lowering the bar - our association just announced that starting in 2018, all continuing ed classes will eliminate tests. Just take the class and leave.

Sep 29, 2017 07:31 AM #14
Rainmaker
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Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

BILL CHERRY ~ so true and so sad on many levels! And then, add to the mix companies like opendoor, purple bricks, and even Zillow and we've really got a mess... Just take a look at what's going on in Beaufort SC, a picture can say a thousand words and it can also let you know what to expect, too

 

Sep 29, 2017 12:13 PM #15
Ambassador
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

                    

                                                  Thank you Bill. 

Sep 30, 2017 06:03 PM #16
Rainmaker
3,549,963
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Bill. Licenses provide the state fees. Some brokerages charge to hang your license. None of these give a damn to the active agent side of the law of diminishing returns. Enjoy your day!

Oct 01, 2017 05:01 AM #17
Rainmaker
5,323,862
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, BILL CHERRY real estate agents ARE a plentiful group....but that does not influence the business of the well-versed full time and full experienced real estate agent... 

Oct 01, 2017 05:25 AM #18
Rainmaker
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Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Bill. Interesting post and I think it is about time the industry was thinned.

Oct 01, 2017 07:03 AM #19
Rainmaker
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Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

I can see why Kathy chose to highlight your post this week...well done!

Oct 01, 2017 07:47 AM #20
Rainmaker
3,614,378
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi, Bill --- this is a very well-written post.  I didn't "see" it in the gold star group but "found" it today in Kathy's weekly post.  A very worthy inclusion for both.  

Oct 01, 2017 08:17 AM #21
Rainmaker
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Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

I don't care if it's Zillow or purple or HelpU whatever, there is always a market for discounters, Bill. They don't affect the agents who know what they are doing. Plus with newer agents in the business, we experienced agents look so much better by comparison.

If we didn't replenish the forces, the agents who can't make it and quit would thin the population too much. I don't mind competition.

Oct 01, 2017 09:14 AM #22
Rainer
157,530
Corey Martin
Martin Presence Group - Ruston, LA
Real Estate and Management Solutions

So true! A great post! Very well thought out. Thank you for sharing!

Oct 01, 2017 06:15 PM #23
Rainmaker
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John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

I feel you made your point clear.

I am confident that no matter the level of proficiency of an agent, that the larger the number of agents in the pool there will be a diminishing return

Oct 03, 2017 10:55 AM #24
Rainmaker
201,808
Eva B. Liland Century 21 Doug Anderson
Century 21 Doug Anderson - Lancaster, CA
Glad to be of Service 661-714-1643

I feel that would-be agents are lured in by the thought of easy money. A few months later, their bubble has burst and they go on to just about any J.O.B.

Oct 05, 2017 06:22 AM #25
Rainmaker
526,014
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

I have not seen any recruiting material from NAR, nor from my state association or local association. 

I believe my local association of Realtors is dedicated to providing good quality services to its members, but I have not seen any public-facing material targeting non-Realtors to become Realtors.

Oct 27, 2017 01:09 PM #26
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