What You Get When You Buy A Real Estate Agent ~ Jeff’s Jabb #11

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August 16, 2016 by Jeff Lowen

Ever wonder if there’s a reason much of the real estate community, and yes, I’m talking about agents, get lumped into one big bucket in the eyes of many consumers? Why is that? Who are these people that brave the storm with as little as 40 hours of education¹ (And a fist full of dollars) to become knighted as Realtors®?  26168797214_e6399520c3.jpg

Based on a random sampling of the National Association of Realtors® membership, the Member Profile² strives to answer the question: Who are REALTORS®? It looks at a variety of economic and demographic characteristics, and business practices. Check it out:

  • In 2015, the typical agent had 11 transactions, unchanged from 2014.
  • Thirty-four percent of all REALTORS® had a transaction involving a foreclosure and 24 percent had a transaction involving a short sale.
  • The median sales volume for brokerage specialists increased to $1.8 million in 2015 from $1.7 million in 2014.
  • Difficulty in obtaining mortgage financing was the top reason limiting potential clients for the previous four years.
  • The typical property manager managed 40 properties in 2015, down from 45 properties in 2014.
  • Most REALTORS® worked 40 hours per week in 2015, a trend that has continued for several years.
  • The typical REALTOR® earned 14 percent of their business from repeat clients and customers and 18 percent through referrals from past clients and customers.
  • REALTORS® spent a median of $80 to maintain a website in 2015, down from $130 in 2014.
  • Members typically brought in one inquiry and one percent of their business from their website. Income and Expenses of REALTORS®
  • Percentage split-commission continues to be the prevailing method for REALTOR® compensation, at 70 percent, up slightly from 69 percent in 2014.
  • The median gross income of REALTORS® was $39,200, down from $45,800 in 2015.
  • REALTORS® with 16 years or more experience had a median gross income of $73,400 compared to REALTORS® with 2 years or less experience that had a median gross income of $8,500.
  • The median business expenses fell to $6,300 in 2015 from $6,710 in 2014.
  • The largest expense category for most REALTORS® was vehicle expenses, similar to last year, which increased to $1,790 in 2015 from $1,770 in 2014.
  • Sixty-five percent of REALTORS® are licensed sales agents (up from 58 percent in 2014), 21 percent hold broker licenses, and 16 percent hold broker associate licenses.
  • The typical REALTOR® has 10 years of experience, down from 12 years in 2014.
  • Sixteen percent of members have at least one personal assistant.
  • Fifty-four percent of REALTORS® reported having a website for at least five years, 11 percent reported having a real estate blog, and 70 percent of members are using social media, up from 65 percent in 2014.
  • The most common information found on REALTOR® websites is the member’s own listings and home buying and selling information.
  • Eighty-three percent of REALTORS® are very certain they will remain active as a real estate professional for two more years.
  • The typical REALTOR® is 53 years old, white, female, has attended college, and is a homeowner.
  • Sixty-two percent of all REALTORS® are female, up from 58 in 2014.
  • Sixteen percent of REALTORS® had a previous career in management, business, finance, sales, or retail.
  • Only four percent of REALTORS® reported real estate was their first career.
  • Seventy-four percent of REALTORS® said that real estate was their only occupation, and that number jumps to 86 percent among members with 16 or more years of experience.
  • The median gross income of REALTOR® households was $98,300 in 2015, a decrease from $106,800 in 2014.
  • The majority of REALTORS®—81 percent—own their primary residence.

 

With all that said, one thing to consider is this; Realtors® are agents/brokers that belong to the National Association of Realtors. There are approximately 2.5 million real estate agents/brokers in the U.S., but only a subset of them (about 1.2M) are members of NAR.

Does this mean as a consumer, you’re more likely to encounter an agent that is not a member of NAR? Depending on your locale, that may or may not be true. According to some interesting studies in metro areas across the country, approximately 80% of consumers don’t have a clue as to the difference between a Realtor® and a real estate agent! Do they even care? Perhaps the necessity of this fact is what’s really in question, yes? As a state licensed real estate agent, are you not bound by certain regulations of law that require similar, yet not as well articulated as the Code of Ethics by the National Association of Realtors®?

Interestingly enough, there are a thousand studies out there claiming the average annual income of a real estate agent, including the one that NAR puts out. However, none I’ve seen can determine if being a Realtor® constitutes a larger annual income.

Debates run left and right and from every corner of the country about real estate. Public policy, homeownership, affordability, business practices, and the list goes on. You’d think that the occupation at the forefront of it all – the agent – would at least be the clear, concise, well-defined, almost a pinnacle in the eyes of consumers.

The National Association of Realtors® is America’s largest trade association, according to themselves. Perhaps much debate stems from the fact that the primary purposes of trade groups, particularly in the United States and to a similar but lesser extent elsewhere, is to attempt to influence public policy in a direction favorable to the group’s members. So… Where does that leave the consumer?

A common criticism of trade associations is that, while they are not per se “profit-making” organizations that claim to do valuable work which is ultimately for the public benefit, they are in reality fronts for price-fixing cartels and other subtle anti-competitive activities that are not in the public interest.

What do you think?

At further inspection, although the NAR deems itself a trade organization, it appears to distance itself from the very definition of what a trade organization is. Chalk that up to things that make you say, ‘hmmm.’ NAR doesn’t seem to be on the Washington Business Journal’s list of the top 10 associations, either, alongside the likes of AARP and the NRA. But then, its criterion rests primarily on revenue. Isn’t that the opposite of what’s its definition is? or is it?

This isn’t a bash on the NAR. Interesting statistics, albeit taken from less than half of one percent of industry professionals. You be the judge.

One thing is for certain, though. Trade associations appear to be just another term for labor unions. It sounds prettier, doesn’t it? Although, Labor unions are sometimes more associated with a specific company or group of people (Aren’t real estate agents a group of people?). Sooner or later, based on a drop of participation in labor and trade associations in the last few decades, the consumer will ultimately dictate where the industry goes. For now, I think everyone is safe for the time being, however. Consumers apparently don’t seem to care, anyway.

Resources:

In March 2016, NAR e-mailed a 96-question survey to a random sample of 150,024 REALTORS®. Using this method, a total of 10,194 responses were received. The survey had an adjusted response rate of 6.8 percent. The confidence interval at a 99% level of confidence is +/-1.27% based on a population of 1.1 million members.

¹ State of Massachusetts requirements.

² The 2016 National Association of Realtors® Member Profile is based on a survey of a small portion of its members.

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