On Being a Real Estate Agent

Someone called today, seeking advice on becoming a real estate agent in Phoenix. We chatted about the pros and cons, and then they asked, “So, how’s the competition? Just how many real estate agents are there in Phoenix?”

Good question. The answer off the top of my head was “a boatload”.

Just over a year ago, I posted that there were 47,675 individuals in the Phoenix MLS area with an active real estate sales or brokers license.

How does that look today?

Returning to the publicly accessible data at the Arizona Department of Real Estate, I down loaded a whopper of a file that contains info on current, expired and former license holders in Arizona. I culled and massaged it until I got all of the active sales and brokers licensees for both Maricopa and Pinal counties into one spreadsheet (barely).

As of May 8, 2008, there are 45,243 active real estate licensees of one flavor or another in Maricopa and Pinal counties — roughly the coverage area for the Arizona Regional Multiple Listing Service (ARMLS) which covers the greater Phoenix metro area.

There are currently 7,997 folks holding an active brokers license (up from 7,694 in March 2007) and 37,246 with an active sales license (down from 39,981 in March 2007).

While the overall numbers are down over the past 14 months, it’s not quite the exodus that many (myself included) thought would happen. 943 have received freshly printed licenses this year alone. The real estate schools are still churning them out, albeit at a slower rate than in the peak year of 2005. Yes, people are leaving the business, but new people are still coming in. I’ll dig through the expired and inactive licenses later and see if there is anything of note. I’m curious to see if there is any correlation between expired licenses and how long they were active (ie: is is just new people letting licenses lapse, or are the “old-times” getting hammered too?)

Of note, “active” license does not mean the holder is actively selling real estate for a living. It simply means the license is active from the Department of Real Estate’s perspective.

Many people get a real estate license and do nothing with it. Many property and commercial managers hold licenses, never intending to use them to transact physical real property. Countless hundreds (if not thousands) are part-time agents at best.

But still. 45,243 people with active real estate licenses in the Phoenix market qualifies as “a boatload”.

If you are interested in starting a career in real estate sales, be aware there are a ton of competitors. Many of which are absolutely brilliant real estate practitioners. Others… meh. Not-so-much. Pretty typical of any large industry.

How does this affect real estate buyers and sellers? Simple — you have a LOT of people to chose from. Choose carefully and wisely.

While there is far more than “years of service” that define a qualified real estate agent, time on the job is none-the-less an oft discussed item. As such, I present you with these summary statistics for the population of 37,246 currently holding a real estate sales license:

Mean number of years licensed: 6.8
Median number of years licensed: 4.1
Standard deviation: 6.9 (in other words, the “spread” is large)

Maximum time licensed: 49.8 years
Minimum time licensed: 4 days

Below are a couple of charts showing the number of agents with current licenses and the year they were first licensed. These charts reflect real estate sales licenses only — no brokers licenses. Why? Because the clock “resets” when one gets a brokers license. For example, my license date in the database is February 2008 — when I got my brokers license. There is no reflection of when I first got my sales license. This confounds the data so it’s best to separate sales and brokers licenses for this particular analysis.

Also, don’t look at this chart and think, “Wow, hardly anyone got a license between 1958 – 1976.” That is not true. This chart reflects the number of people currently holding a license. The simple fact is, everyone except one person who got a license in 1958 is either retired from real estate, passed away, or moved on to something else.

This chart is the same data, only from 1997 through 2007. It just gives you a better look at the last 10 years….

I’m relatively certain these types of posts bore many readers to tears. For that I apologize. But this blog is the best place for me to store data and trends for future comparison. And lets face it, some people like them.

Personally, I can’t help myself. I blame it on 20+ years in the semiconductor manufacturing industry. While not an engineer by education (I’m not counting those two hazy years of Chemical Engineering classes at UT), you hang out with engineers for 20 years and something is bound to wear off on you.

For better or worse.

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James Thorner, St. Petersburg Times Staff Writer, penned an article last week titled, “Paying a 6.5% commission made sense“.

Looks like Mr. Thorner instructed his real estate agent to offer a “higher” commission to the buyer’s agent in order to motivate buyer’s agents to show his home.

I’ve discussed buyer’s agent incentives here before, and my opinion on this is clear — any agent that specifically sets out to show their clients homes with higher buyer agent commissions/bonuses is doing their client a disservice. Your job as a buyer agent is to find your client the right home, at the best price for THEM, not for YOU. Period, end of story.

Mr. Thorner makes some interesting points in his article. Yes, he is a journalist and part of his job is to sell newspapers. But what I find disturbing here is Mr. Thorner is writing from the perspective of a home seller. That he feels the way he does should be a wakeup call to every agent out there. I have no doubt that Mr. Thorner is not alone in these thoughts:

A commission is prize money.

Interesting. I wonder how many people out there think of their own paycheck as “prize money”? I work my ass off for the commissions I earn. This so-called “prize money” pays my mortgage, clothes my children and allows my family to live.

All things being equal, a buyer’s agent will show a home paying a 6.5 percent commission to one paying 4 percent.

Undoubtedly this is true in some cases, but certainly not in all cases. I know countless agents that don’t consider the buyer side commission and/or have their buyer clients sign buyer broker agreements (BBA) up front that outline all commissions paid. In most BBAs, the buyer’s commission is offset by the commission the seller pays. For example, if I have a signed BBA at 3%, and the seller is paying 3%, then the buyer owes no additional commission. If the seller is paying less, the buyer makes up the difference. If the seller is paying more, then that additional amount is rebated to the buyer at close of escrow. This is all clearly discussed and disclosed up front. The buyer knows exactly what the numbers are before they even see the home.

Less than two weeks after my Realtor and I signed the contract for 6.5 percent, we had a deal on my house. An acquaintance living nearby who offered 4 percent hasn’t sold his house in a year.

Congratulations. I’m not completely familiar with the real estate market in St. Pete, but I suspect two weeks on the market is well below average. However, it would be interesting to know how your acquaintance’s home was comparatively priced, its condition, and the seller’s motivation. Commission is just one of many factors involved in the sale of any home.

Call it luck if you must. I priced my house toward the lower end and left it spic and span.

Hmm. Isn’t plausible that the condition of your home and the aggressive pricing were just as responsible for the quick sale (if not more so) than the extra half a percent of commission? Pricing your home at the low end and keeping it spotless isn’t luck. It’s smart.

But you can’t go wrong playing to an agent’s self-interest.

As hard as it is for many to believe, real estate agents are human beings (well, at least most of them are). And yes, some will put their own, short-sighted interests first. The savvy agent however will realize that taking care of the client, assisting them in every step of the process, and getting them the best deal possible will over time serve their own self-interests far more than pocketing an extra half a percent in commission. It’s called building a loyal client base, gathering repeat business and getting client referrals. I’ll take that any day over some “extra” commission or bonus.

To the agents reading this, think about Mr. Thorner’s perspective the next time you talk to a potential client. There is a very good chance they feel the same things he does.

To the folks out there that may be considering buying or selling a home, think about Mr. Thorner’s perspective when you interview agents. Do you want an agent to help you that is motivated by the highest commission they can get? Find an agent interested in you as a person, interested in helping you get the best deal you can. Of course your agent is going to be concerned about the commission, it is their paycheck after all. But you can find an agent with enough business acumen to realize that putting your interests first and foremost will also help their own business in the long run (not to mention it’s just the right thing to do. Something about that Golden Rule… it has worked for a really long time…).

H/T to Jessica at Inman

Technorati Tags: real estate commissions, buyer broker agreements, public perception of realtors

The Department of Justice (DOJ) yesterday launched a website to ostensibly "educate consumers and policymakers about the potential benefits that competition can bring to consumers of real estate brokerage services and the barriers that inhibit that competition". (DOJ press release is here).

The site links extensively to an April 2007 report from the FTC and DOJ titled, "Competition in the Real Estate Brokerage Industry."

There is little doubt this site was born out of the long-standing Sherman anti-trust suit the DOJ originally filed against the National Association or Realtors (NAR) on September 8, 2005. Very briefly, this suit alleges the NAR maintains and enforces a policy "that restrains competition from brokers who use the Internet to more efficiently and cost effectively serve home sellers and buyers". 

As one who feels they use the Internet more efficiently than a significant portion of agents and brokers, I can only say this…

I wish both the NAR and the DOJ would cease and desist with their squabbles and find better ways to spend my dues and tax dollars respectively. 

But that's just my opinion. Other's mileage may vary. 

If I can ever find the time, I'd love to do a "site review" on this site. But I only had about 20 minutes to poke around. (I'm surprised I didn't see more about this site launch across the real estate blogiverse today.)

The DOJ's website is large, and there is some good information there for real estate professionals as well as real estate buyers and sellers. There is a section on state laws showing which states have limited service regulations and which states outlaw commission rebates. "Consumers" may find this of interest.

There is clearly no "NAR Spin" on the DOJ site that I've been able to find. Flat-fee "MLS Only" brokerage rates are posted along side typical full-service brokerage fees. Fee-for-service models are also discussed at length.

I suspect this site will be appealing to the real estate buyer and seller as it highlights "savings" that can be had with various types of brokerage models. There is no question that one can reduce the cost of commission for selling a home by enlisting a "MLS Only" service. What is not discussed on the site (at least that I can find) is any mention of the success (or lack thereof) of actually selling a home utilizing flat-fee deep discount brokerages. An honest and thorough analysis of commission savings has to include opportunity cost, time-to-sell, holding costs and various other considerations — all of which appear to be missing from the DOJ site

I may be drawn and quartered by some "traditional" agents for saying this, but I've got no problem with flat-fee and/or discount brokerages. I think having different types, styles and pricing models for real estate brokerages is a good thing. It promotes competition and innovation — both of which this industry desperately needs.

I just don't think we need either the NAR or the DOJ telling us how to do it.

Updated - Others Opine: Jim Duncan, RealCentralVA makes a great point. Inman Blog. ARDELL at RCG, never short of an opinion!,

Technorati Tags: NAR, DOJ, discount brokerages, disintermediation

The NAR (National Association of Realtors) sent our buddies at RealtorGenius.com a cease and desist notice. Their domain violates the NAR trademark "REALTOR". Huh. Mayhap they should have gone after whoever has parked the domains "RealtorsStink.com" or "RealtorsSuck.com" or "FuckRealtors.com". Those would all seem just a wee bit more derogatory than RealtorGenius.com… One would think the NAR could find a better use of their time. And my dues. From RealtorGenius:

It was a lot of fun while it lasted as the site has won several awards just by its peers and is proud of that fact. We’ve not decided whether to move it, or just /close the domain. More to follow in the following days.

My comment there was:

1. Jay Thompson (199.64.0.252) wrote:I say transfer it to NARGenius.com — which was available until I bought it seconds ago. I’ll gladly transfer it to you, no charge.If the NAR whines about that, tell them to take it up with the National Association of Rocketry, Nucleic Acids Research, NAR-anon, the hip-hop group NaR, or the Merrill Lynch S&P midcap 400 index fund that trades on the Amex under the symbol NAR…

Others opine: Bloodhound, Comeover.com, sellsius,  3 Oceans, Jonathan Dalton,

Technorati Tags: NAR, National Association of Realtors, RealtorGenius.com