The number of members of the National Association of Realtors® has increased from 976,960 in 2003 to 1,357,732 in 2006 (NAR’s website). This is a 38% increase in members. Based on the CAR membership information that I pieced together, CAR had 136,977 members in 2003 and 209,459 members in 2006. An increase of 53% in the number of Realtors® in three years. (To find the 2005 Report and 2007 Report, if you are a member of CAR click here.)
As an interesting side note, in 2003 there were just under 350,000 people with Real Estate Licenses in California. There are currently 521,330 licenses in California. In other words, 521,330 people could sell real estate. [Real estate licenses are required for some other types of jobs as well.]
For California, sales in 2005 and 2006 exceeded 600,000 or 2.86 sales per Realtor®. Since a transaction includes two sides, the buyer’s side and the seller’s side, there are 2 Realtors® that may be involved in any transaction. This leaves a total of 5.72 transactions on average per agent. So any agent producing more than 5.72 sales per year, is producing over the average available.
Sales in California are expected to be at or around 400,000 for 2007. This results in 3.82 transactions per agent expected in 2007. That is a reduction of approximately 33%. Bottom line, agents are going to leave the business. CAR and NAR both expect this.
What makes a successful agent?
In order to remain in this business, agents must meet a certain number of transactions per year. This is business. Agents put together business plans that consider how many listings and buyer transactions they need each year. Agents have goals and need to meet these goals. An agent’s income can increase by either doing more transactions or working with more expensive property.
An agent must put their interest of closing a sale ahead of their client’s interest of finding the perfect house at the right price. It is in an agent’s best interest to complete the transaction in the least time and with the least effort possible.
Have you heard, the only time a real estate agent likes his client is when they agree to be his client and when the agent gets the commission check. Everything else is the process to go through to get paid.
What about the client? The client and the agent are in direct conflict from the time the client agrees to work with the agent until the agent gets paid. If the agent is working her business plan, then she is working on producing sales. Obviously, it is in the agent’s best interest to know the market, to find the right home and to write a decent offer.
But if an agent says to a client, “this is the best house you’re going to find at this price” should you believe it?
There is not one answer for this. If you are working with an agent that cares about her clients, that is looking toward a long term career and repeat business, that agent may do a great job.
If the agent hasn’t done a transaction in six months, has maxed out her credit line and is worried about how she is going to make the next mortgage payment, that may be another deal.
Why do agents prefer to show vacant houses? You can close the deal quicker.
Some people will tell you that 70% of all people work with the first agent they meet. They don’t ask for recommendations, they don’t check testimonials or references; they don’t even check the DRE to make sure that the agent has had her license for more than a month. (www.dre.ca.gov) They move forward with one of the largest transactions in their life with that agent because the agent is a good sales person. The agent has sold themselves to the client.
Argument against reducing commission on a listing: If I can’t manage to negotiate with you to keep my commission at this rate, how good am I going to be at negotiating your deal?
The client has just been sold on an agent. An agent they can trust, count on to work for them, and get them the best deal possible. And they met the agent at an open house last weekend.
Next: How Real Estate Agents Get Paid
© 2007 by Judy Kane
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