Friday, September 30, 2005

Agency Not As Simple As It Looks

It's about that time of year when people start reviewing their professional lives and determine if they want to continue down the same vocational path -- and that thought process leads a lot of people to sign up for real estate classes.

Many real estate agents I've talked to say they made the decision to get into real estate after having purchased a home and seeing a seemingly easy job performed by someone with as much intelligence as they have and then walking away, it seemed, with a big wad of cash.

Now that they have started selling, they have realized that while the job of an agent is not difficult, it does require very hard work (kind of like the job of a ditch digger -- while the concept isn't hard, your back aches at the end of the day). The challenge of agency involves working days on end without any pay; having to fund most of your own business expenses; burning up a lot of gas and spending time with people who eventually don't buy anything; and questioning why you got in this business in the first place when the time between deals (pay checks) is weeks and months at a time.

The average agent in the U.S. in 2003 made about $45,640, according to the U.S. Bureau of Labor Statistics, while their broker counterpart brought in about $74,100. The funny thing about averages in this field, however, is that the rule of 80/20 definitely holds. While you may have a market selling $15 billion, about 20 percent of the agents sell 80 percent of it. Meanwhile, more and more people want to get their hands on the money, so more people are getting into the business every day and that means the pie is getting cut into smaller pieces.

As you seek out your new career in real estate sales, you'll invariably come across want ads in your local paper that read something like this:

"Real Estate Sales Your destiny has come knocking! Entrepreneurial challenge, creative passion, economic oppty. Outrageous splits and training that create super earners. New approach. Technology-driven advantage. Ongoing mentoring. Free software."

(By the way, the above is a real ad I saw in New Jersey.) However, the subtext should read something like this:

"Real Estate Sales (Work as long or little as you want). Your destiny has come knocking! (Yeah, go ahead and quit your day job, leaving behind health insurance, the matching 401K plan, paid vacations and sick leave.) Entrepreneurial challenge (Commission-only income, long hours, including nights and weekends, working with fickle clients and people who are also working with another agent without telling you), creative passion (create your own fliers, marketing materials and promotional stuff), economic oppty. (You only get paid if you come in 1st place, but the income is unlimited -- meaning there's no maximum you can make -- but there's no minimum either).

Outrageous splits (Fantastic -- as long as you actually sell something) and training (we'll point you in the right direction, then you have to do all the work) that create super earners. New approach (we have a new web site). Technology-driven advantage (we have a new web site). Ongoing mentoring (a really busy, successful, but tired agent OR one of our new agents who's had a few deals under his belt). Free software (here are some pirated copies of what I bought)."

Yes -- my comments are tongue-in-cheek, but I guarantee agents around the country are saying, "Yep, he's exactly right." The best thing about a career in real estate is the flexibility. The worst thing about it is -- flexibility. To be a six-figure agent requires hard work, business planning, consistent prospecting and learning how to close the deal. If you have these skills or are willing to learn them, then a career in real estate may be right for you.

Next week, I'll bust the myths about how "cheap" it is to get into the business and what kind of expenses you'll face while building your business.

Mr. Carr has covered real estate since 1989. He is the author of "Real Estate Investing Made Simple." His column appears locally in the Washington Times' Friday Home Guide and worldwide via

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