I have heard people say real estate agents fall lower on the professional totem pole of respectability than ambulance chasing attorneys. When buying a home comes up in informal conversations at gatherings, everyone has a personal story to share of working with an agent they felt was shady.
Despite the profession’s poor reputation, there are a whopping 2,000,000 real estate agents in the US (according to the National Association of Realtors). After much thought and personal experience, I think there are two significant reasons for the public’s distrust of the profession.
The first, is the inherent flaws in how real estate agents are licensed and governed. It’s incredibly easy to get licensed. All it takes is a 4-week course and passing an exam which the instructor basically gives the answers to in class. You don’t need a college degree and once you are licensed you are considered an “independent contractor” and pretty much on your own.
The second reason the public has a negative perception is because they think agents are way over paid when the truth is just the opposite. They watch television shows like “Million Dollar Listing” and “Selling Sunset” where all an agent does is show one house, put in an offer, and they make $150,000 in commission. Sell two of those a year and you are in the top 5% of earners in America. Easy money – right?
The reality of being an agent is vastly different. The actual median sale price of a home in the US in 2019 was $312,100 (according to Zillow). Based on the facts, agents earn, on average, $5,426 in commission per transaction. They would have to sell 55 homes to get into the top 5%.
In the real world good agents work hard for their buyers and are adequately compensated. A great deal of preparation goes into showing houses and unlike on the TV shows, buyers typically preview 10 homes before they buy one. What they don’t show is the amount of work an agent puts in before the showings. Activities such as:
• Preparing a list of all homes in the buyer’s price range in their towns of interest
• They hone it down based on buyer wants and needs
• From the final list, the agent goes to visit each home personally to make sure it’s in a good location and in good shape.
• Lastly, they analyze the market data on similar priced homes on the market and recent sales in each neighborhood to decide if the list price is high, low or well priced in case the buyer wants to make an offer
What the public also isn’t privy to is that the acceptance of the offer is merely a starting point. There’s a long road before the deal gets to the closing table with a myriad of steps, each of which can become a stumbling block to the sale going through. These include;
• Negotiating price
• Writing up and presenting the offer
• Attending the general inspection
• Reviewing the inspection report with buyer’s attorney to figure if there are issues that require attention
• Attending the specialty inspections
• Attending the bank appraisal
• Settle on a final price.
All of these work hours come at a high risk to the agent because a buyer does not have to formally commit to the agent until almost the end of the transaction. The buyer can pull out any time before then and the agent gets nothing. This flawed system sets up an inherent distrust in the buyer/agent relationship. On one hand buyers wonder if agents try to push any house on them just to make a sale, while the agent is trying to decide if their buyer is really going to go through with the final sale.
I was a college educated sales executive at a major media company when I transitioned into real estate. I put in the hard work and my colleagues would tell you I was a natural. But, despite my skills and earlier sales experience it was still challenging to build a robust business after 9 years. I was blind sighted by the inherent risk I had to take on each transaction. Though I watched the “Reality” shows with skepticism, I found myself still disappointed in my income. I found most agents I worked with to be honest and hard-working.
They deserve our respect because they are taking risks every day, flying solo and often work hard on deals that don’t materialize. To get the respect they deserve, we have to fix the system governing residential real estate to make sure equitable agent / buyer relationships are put into place. Then all that’s needed is to insert disclaimers on the real estate “reality” television shows saying, that they are anything but.
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You’d be surprised how hard real agents really work and how little they make on each transaction.
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