The Department of Justice is hot on NAR’s trail. The problem is that they are looking at it from the wrong angle. They are trying to change the MLS rules to allow more competition. They’re objecting to clauses that require a broker to be a resident of the area, to have a physical office in the area, or to have office hours in the area they are doing business. This only addresses the controls that the NAR’s is trying to exercise.
Instead, they should look at the business process of real estate agents and Brokerage firms. The only reason Brokerage firms hire real estate agents is because they don’t have to pay for them. They have no vested or long term interest in the agents. The Brokerage Firms have no reason to support or promote agents. In fact, there is no promotion for an agent.
The only change is in compensation. If the agent can sell enough homes, then the percentage she earns goes up. There is no change in title, no change in perceived status, there is nothing to differentiate her from a new agent who walked through the door this morning. That is, unless the client is smart enough to ask the right questions.
So, you have a business that doesn’t support it’s own employees. In fact, the employees support the business by providing advertising, at their own costs, that promotes the Brokerage Firm. In fact, the employees aren’t called employees. They are called independent contractors which forces the Brokerage Firms not to interfere in how they run their business.
The fallacy of real estate agents earning a good wage continues. And until agents admit that the number of deals and the income they receive from the deals they do isn’t what everyone believes it is, this will continue.
According to NAR, in 2006 “Median income was $47,700 in 2006, down from $49,300 which had also had declined from 2002.” “Realtors® in the business for two years or less earned a median of $15,300, while those with three to five years of experience earned $44,200. For six to 15 years, the median was $64,600, while members in the business for 16 years or more earned $76,200.”
In Santa Clara County, California, with any of the above numbers you would qualify for low income, not even moderate income, affordable housing. Since salary information seems to be a carefully guarded secret, it is difficult to say exactly what an agent makes in any City. However, many who start in the business find out that the income they expected isn’t there.
My premise is that the Brokerages are taking advantage of perception of the industry and naïveté of new agents. Yes, I was naïve. I thought this might be a great job. Freedom from punching a time clock. The ability to earn as much money as I wanted, depending on how much I was willing to work.
The reality was, large expenses, many competitors for the business, and because of the numbers, many who were willing to promote themselves and make the deal work regardless of whether or not it was in the best interest of their client.
This pushing the envelope, saying whatever it takes to get the job done, is exactly what got the housing market into the trouble it’s in now. It’s the desire and need to make the deal at any cost. Well, at least any cost of the client.
No wonder we have the reputation of being like used car salesmen. We are trying to sell a used product, trying to gloss over any defects and trying to get the deal into contract before the buyers’ excitement deserts her. Once in contract, we continue to try to get keep the buyer in contract by trying to “overcome objections”. We keep trying to point out the good and gloss over the bad. Isn’t that exactly what used car salesmen do? Only they sell a lot more cars each year than we sell houses.
© 2007 by Judy Kane
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