With its promise of lucrative deals and flexible schedules, the real estate industry often attracts many individuals seeking success. However, a recent report from the Consumer Federation of America (CFA) sheds light on the harsh reality faced by many agents in what it deems a “bloated” industry.
The report, the third in its series, exposes the challenges posed by a surplus of real estate agents, emphasizing the struggles, particularly among part-time and inexperienced professionals.
The Industry’s Bloated Landscape
The CFA’s report underscores the high number of agents (over 1.55 million, according to NAR) and the disconnect with the actual number of successful sales.
As revealed in the report, the majority of agents are closing only a handful of deals per year, turning the residential real estate industry into what the CFA dubs a “part-time industry.”
Examining a sample of 2,000 agents from 20 major brokerage firms across four U.S. regions, the CFA found that almost half of the agents surveyed (49%) reported either no sales or just one sale in the past year.
Furthermore, 70% logged five or fewer sales, emphasizing the part-time nature of the industry. The median number of sales stood at just under two.
Financial Struggles of Part-Time Agents
Part-time agents often juggle multiple jobs or rely on family members for financial support to survive. The report indicates that some agents even dip into retirement savings or other investments to make ends meet.
With the median age of agents sampled being 56, it paints a picture of experienced individuals struggling to find stability in the industry.
While older agents may dominate the industry, the report highlights that new entrants grapple with financial hardship. Citing NAR’s 2023 Member Profile, the report notes that 52% of agents with two years or less experience reported a gross income of less than $10,000.
The challenges these inexperienced agents face are pushing some out of the industry, contributing to a decline in NAR membership.
The report speculates that changes in the industry, particularly those affecting buyer’s agents, could lead to more agents leaving. With uncertainties about guaranteed compensation on the buy side, the challenges faced by agents are likely to escalate. The recent decline in NAR membership hints at the beginning of this potential exodus.
Recruitment Practices and Lack of Support
The CFA report sheds light on varying recruitment practices within brokerages. While some, like RE/MAX, prioritize experienced agents, others cast a wide net, recruiting new agents who may be well-connected but lack experience.
The report criticizes the industry for lacking support, especially mentorship, with only eXp standing out for its mandatory mentorship program for inexperienced agents.
The challenges highlighted in the CFA’s report call for reevaluating the real estate industry’s structure and support mechanisms. As the industry faces potential changes, there is a growing need for mentorship programs and support systems to ensure the success and well-being of both new and experienced agents.
In light of the challenges faced by part-time agents, do you believe the real estate industry’s accessibility contributes to its struggles, or is there a need for a more stringent entry process? Considering the limited mentorship opportunities for new agents, how could increased support and guidance impact their success and overall satisfaction in the industry?
With potential changes affecting buyer’s agents, what strategies do you think can help these professionals navigate uncertainties and maintain their financial stability?