“When I read about the evils of drinking after golfing I gave up reading.”
DAILY REAL ESTATE NEWS | WEDNESDAY, JUNE 03, 2015
June 01–What keeps Realtors up at night? The National Association of Realtors says the No. 1 threat to agents — ahead of declining commissions, dwindling relevance or a repeat housing collapse — is other agents.
According to the giant trade group’s recently released “Danger Report,” the biggest menace looms in the form of “masses of marginal agents” — unskilled salespeople who lack the experience to coach a consumer through the purchase or sale of a home worth six or seven figures.
“The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents,” NAR’s report says. “This knowledge gap threatens the credibility of the industry.”
Getting an agent’s license in Florida requires only a high school diploma, 63 hours of classroom training and passing the state real estate exam.
“It’s an easy-entry business,” said Michael Pappas, head of Keyes Co. Realtors in Miami. “For 63 hours and a couple thousand dollars in upfront costs, it’s the last bastion of independent sales where you can make a significant income.”
Thanks to the low barriers, there are nearly 30,000 licensed real estate agents in Palm Beach County alone. NAR counts more than a million members, and hundreds of thousands more agents hold state licenses but aren’t Realtors.
For years, accomplished agents have griped about their less-than-competent peers, but real estate has remained a freewheeling industry that welcomes all comers.
“It’s clearly a continuing problem,” said Scott Agran, head of Lang Realty in Boca Raton. “I don’t know if it’s a bigger threat than it has been every time the real estate industry has started to come back. Usually the new agents who don’t know what they’re doing sell a couple houses to friends or family and then are out of the business.”
The Danger Report, sponsored by NAR and authored by real estate consultant and author Stefan Swanepoel, stresses the modest education needed to earn a real estate license.
“Becoming a cosmetologist requires an average of a 372 hours,” the report says. “But to become a licensed real estate agent requires an average of only 70 hours, with the lowest state requirement being 13 hours.”
That lack of training underscores longtime gripes about the uneven service delivered by real estate agents.
“The NAR report correctly describes the structure of the industry and some its implications, notably the glut of agents and ridiculously easy entrance requirements for these agents,” said Steve Brobeck, head of the Consumer Federation of America.
Pappas isn’t so sure that more classroom training would necessarily weed out the poor performers. Simply holding a degree for a top university doesn’t mean an agent has the blend of persistence, resilience and empathy needed to succeed at selling homes.
“Those dynamics aren’t necessarily taught in a classroom,” Pappas said.
While star agents pull in six-figure incomes, most agents make much less than that. In a separate report, the National Association of Realtors last year said the median gross income for its members was $47,700 — from which agents, mostly independent contractors, paid gas, marketing expenses, Realtor dues and other business expenses.
The typical agent handled 12 deals a year, up from seven transactions in 2008 and 2009, but not exactly a breakneck pace.
“We have people making millions of dollars — that’s the allure,” Pappas said. “But the excellent make it, and the masses don’t.”
Agents are worried about commissions, too. That threat places second in the Danger Report.
While NAR scrupulously avoids publishing average commission rates, Realogy, the nation’s largest broker, has reported for years that its average commission is about 5 percent. NAR’s report notes that agents in other countries charge less; the typical commission in Britain is 1 percent to 2 percent.
Consumers are “placing increased pressure on real estate agents to reduce their commission rates,” the report says.
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