Section 5:Why Many Agents Fail, and How Not To

It’s likely that few brokers and agents would argue that the last few years have been among the most difficult in their careers. If mortgage-rate fluctuations, mostly upwards, and inventory issues, mostly downwards, haven’t been enough of a one-two punch, there are the national lawsuits resulting in new buyer-agent commission challenges.

Is it any wonder that the bloom is off the rose for many people thinking of making real estate sales a career? Indeed, the Bureau of Labor Statistics shows that the real estate agent failure rate overall is between 43% and 54%. And, soberingly, 87% of agents fail within five years.

RISMedia sought to find out what those who have been in the business thought about the events of the recent past, whether they were confident they could continue to excel, and what their opinions were regarding all the dropouts.

Josh Jarboe, principal broker/owner of RE/MAX Empire, in Mount Washington, Kentucky, believes that “we’ll continue to see more agents and mortgage brokers exiting the industry in the coming years, and frankly, it’s a positive shift, and not because I’m worried about competition. It’s about ensuring quality service for consumers. Personally, I don’t see this as a good or bad thing for my real estate career. As my late grandmother used to say, ‘The cream will always find its way to the top.'”

Melissa Hoff, broker associate and team leader of The Hoff Group at Compass in Florida, feels that it’s finally being recognized that the job of an agent is much more than showing houses.

“There will continue to be a huge exodus of people leaving the real estate profession, but that happens in good and bad markets,” she says. “Some people get into the industry thinking it’s an easy job, but even in good markets they realize it’s not. I think this is a good thing because only the agents and brokers who are willing to really put in the work, continue educating themselves and immersing themselves in the market will survive and be of the most value to clients.”

Some agents, such as Rylie Schroeder, founder of Schroeder & Co. Real Estate, focused primarily in Austin, Houston and San Antonio, Texas, think it’s too easy to become an agent, and losing many now will be a positive going forward.

“I’m confident that the changes implemented by the National Association of REALTORS® (NAR) now and any future changes as this situation continues to progress and evolve will actually eliminate a number of agents,” she says. “As it stands today, I am of the opinion that the barrier to entry into real estate is far too low, and because of that, a negative opinion has formed around agents and the jobs we do. Elevating the industry by weeding out those who don’t take our duty to our clients seriously is a good thing, and long overdue.”

Pam Rosser Thistle, with Berkshire Hathaway HomeServices Fox & Roach, REALTORS® in Philadelphia, is dismayed about agents leaving the industry, feeling that while some may have properly taken on the challenge, others faced too many hurdles too fast.

“I have heard that there is an exodus, and that is sad,” she says. “These are hard-working professionals who help make people’s dreams come true and positively impact the economy. But if there is not an assurance of getting paid a living wage, they will gravitate to other jobs. 

“The consequence I am feeling is that fewer agents means that it may actually be harder to find a qualified agent willing to take on a client. Like seeing if a doctor is taking patients. Agents who stay in will be more selective, and may demand more work-life balance like other professionals. Do you talk with your accountant or attorney at midnight? Probably not. But you text your agent at 6 a.m. and expect an immediate response. Maybe REALTORS® will get more sleep in the future and not be as ‘on call’ as is expected right now…a give and take as we adjust how we do business and how we are paid.”

Blake Blahut, a broker associate and REALTOR® at Realty ONE Group Inspiration, in Orlando, Florida, thinks it’s simply a numbers game that competition will decide who stays and who goes.

“In all honesty, I do believe we will see less real estate professionals and mortgage brokers in the coming years,” he says. “The industry has become so competitive to where it might be unsustainable for the number of professionals currently in it. It is, for the most part, a good thing. It will likely lead to agents and brokers having to step up their games, provide better service and convey even greater value than ever before.”

Another REALTOR®, Tallahassee, Florida-based Danielle Andrews, with Realty ONE Group, doesn’t think the number of dropouts will be much different than it has been in the past.

“This business already had a high number of agents who didn’t make it past their first five years,” she says. “I do think industry changes will increase that, but I don’t think people will leave completely. I think we will see more people shift to a more referral-based business instead of actively practicing sales. Real estate is not easy, and it now more than ever requires a winning mindset.”

Lisa A. Harris, of RE/MAX Center in Northeast Atlanta, believes that “many will choose a different career path, especially the part-time agents and lenders who lack organization, training, guidance and expertise. When the market slows, there’s often a fallout among these groups.  While this can seem like a challenge, it actually benefits experienced professionals like me since it allows those of us with deep expertise and a solid track record to shine and provide unparalleled service to our clients. Quality over quantity always wins in real estate.”

The mass exodus of agents and mortgage brokers is a misnomer,” argues Jeffrey Decatur, a broker associate with RE/MAX Capital in Latham, New York. 

“It is unfortunate timing that it seems to be lining up with the lawsuits,” he says. “That may have some effect, but probably not as much as just the market changing does. When the markets shift, we lose dead weight, same as any other business. If the general public knew that real estate has a 90% fail rate and that the average agent sells three to four houses a year, they may have a different opinion. For example, in a nearby MLS there are approximately 4,000 agents, and last year more than 50% of them did one deal or less.

“Is it good for me? Hell yeah! I wish they would raise the standards higher. We are working with most people’s single largest financial investment. It is not a game, a hobby, a supplement. It is a career, a serious one, and should be treated as such.”

Tali Berzak, a broker with Compass in Brooklyn, New York, also thinks agents coming and going is cyclical.

“Interest rates have slowed down the market, and when there is less business, people tend to leave the real estate industry because the bar to entry is high,” she says. “The bigger picture is that the landscape is going through some major changes, and it’s hard to predict how it will look over the next year or two. The NAR settlement hasn’t played out yet, so we will need to see if that has any effect. At the moment, we have seen small ripples, but nothing major.”

10 reasons new agents fail
Agents we spoke to all had ideas about how to sidestep the main reasons newer agents fail to last in the business. Here they are in no particular order.

• Financial unpreparedness. Few agents succeed right away, and there are no paychecks until sales are closed, so new agents must have their finances in order until they sign buyer clients and seller listings.
• Poor lead generation. Almost all agents must eventually find their own leads and listings, which then lead to future leads and listings. It’s a tough go for those who cannot develop enough buyer and seller connections.
• Lack of enough local knowledge. Successful agents know every detail about what’s happening in their market, which changes constantly. The learning process must be continual, almost on a daily basis.
• Not being suited for the profession. If it’s not a 24/7 job, it’s close to it. Agents must be available whenever clients want to communicate with them. And again, if there are no sales, there is no income.
• Being unrealistic from the get-go. Very few agents have great success from the jump, unless they have family-and-friend buyer/seller contacts. Patience and hard work finding clients is key, and can take a year to get going.
• Trying to make it a part-time job. Unless you’re okay with trying to make extra money on the side, you can’t keep your day job and moonlight as an agent if you want to be successful. It can be a grinding profession. 
• Unsure marketing approach. With so many social media and other marketing options, agents must figure out how to reach potential clients, creating a website and focused materials they showcase on a regular basis.
• Wrong personality. If you’re not a people person, becoming a real estate agent is unrealistic. You have to deal with every kind of personality and be forever upbeat. Clients want self-assured, happy agents.
• Dishonesty. There are few shortcuts in the real estate industry. An agent’s reputation is huge, because referrals are a major way to gain new clients. Better to admit failings and work on them than to mask them.
• Simply not good at it. It’s a true skill, being a great agent. It combines salesmanship, personality, knowledge and the ability to negotiate, among other things. Your 1099 at the end of each year will tell you how you’re doing.