Why 87% of Real Estate Agents Fail w/in 5 Years
SPRING IS IN THE AIR!!!
I see bustling spring-time activity and that good, get-up-and-go energy all over town right now!
And also, there is another thing that I see a LOT of these days:
More and more (and more) people are becoming real estate agents.
We track the Whatcom County agent count in our weekly data, and every week it goes up. The current number is 1392 agents in Whatcom County.(Quite a few, considering that as of this writing there are exactly 215 homes for sale across the entire county. That's 6.5 agents per listing... which SHOULD mean that it's the greatest, highest level of service of any industry!)
:)
Much like the rapidly-increasing prices, I find that constantly-growing number concerning.
Don't get me wrong: I am ALL FOR pursuing your dreams, leaving behind a job you don't love, and striving for success every day of your life.I also believe anyone at any age is capable of getting on a career track that they were BORN FOR, and raising the bar of that entire field with their passion, their discipline, their work ethic, contribution, and commitment.
What concerns me, having been in the business as a Realtor for 15 years and a firm owner for 6, and also as a home inspector for 3 years prior to any of that, are these two things:1) It is far too easy to become a licensed real estate agent, and then be turned loose into the market.
And...2) The 5-year failure rate of agents is 87%, according to the National Association of Realtors.
In this article, I'm going to share my personal observations and opinions from a decade-and-a-half in the field.
I will go into why the failure rate is so high. And also, setting humility aside for a paragraph or two, the flip side:
Why are our (BNP's) agent's not just "surviving" in this lean market... but absolutely crushing it?
I'll give you a hint: It is in large part because of something I learned about 10 years ago from a book titled, "The One Thing You Need to Know" by Marcus Buckingham.
Read til the end... and I promise to share "the one thing" that you can use in your career too, whatever your career may be.
Failure Reason #1: Entry is just SOOO easy...
There's a saying I once heard on Jocko's podcast:
"If you want the most, make it easy.If you want the best, make it hard."
The WA State Department of Licensing obviously wanted the MOST licensed real estate agents (now technically called brokers), because fulfilling the requirements to go from zero to 100% licensed is about as hard as making toast.
If you are:
18 years old
Have a high school diploma or GED, and...
Take an online course...
You're 95% of the way there.
The last 5% is finding a real estate firm at which to "hang your license"... after which you are in full compliance with the law to be drafting listing agreements, purchase and sale agreements, advising buyers and sellers on their real estate investments and transactions with no financial limits, whatsoever.
I mean, with those staggering "barriers to entry", why WOULDN'T everyone just jump in??? You can make a fortune, can't you???
OK... but once you get that license and you still have to find a firm that will "hire" you, right?
Yes. And that's even easier than the online requirements.
There are multiple firms and multiple team owner/leaders who state as their hiring policy exactly this:
"Anybody with a pulse."
That is a direct quote from two different owners I have recently talked to.
Let me be clear: I'm not trying to slam young people or any category of people. I'm slamming the real estate industry for this ridiculous lack of required qualifications or training.I'm also trying to make a point that -- even though a blind squirrel finds a nut once in a while -- turning an almost-completely un-trained person loose into the real estate market armed with an app that will unlock homes across the entire state of Washington, the expected legal knowledge (and liability) of an attorney, and over 200 various, complex, ever-revised, MLS-provided addenda... and most often with the sum total of "professional guidance" equal to a pat on the back and a "Go get 'em tiger!"...
...IS COMPLETELY INSANE!
Here's me scrolling through a small fraction of the forms we use, any one of them capable of landing an agent, their client, their designated broker, and their insurance company in a court of law.
Failure Point #2: The Diversity of Tasks
The point above relates only to forms. That's just the "held to the same standard as an attorney" part of the business, the contract writing.That has NOTHING to do with any of the following:
Actually knowing houses, condos, land, multifamily
Knowing the materials and systems that comprise the above
Knowing the market at a meaningful level, and...
How to interpret that market
How to articulate that market
How to operate within that market unique to
Buyers
Sellers
Knowing:
financing
appraisal
inspection
title
escrow
surveying
environmental
general contracting
accounting
zoning
building codes
FIRPTA
Fair Housing
Privacy laws
estate law
divorce law
landlord tenant law
probate
Not to mention...
Knowing marketing
Knowing advertising
Knowing sales
Knowing leadership
Knowing management
Knowing bookkeeping
Knowing financial planning
Knowing financial analysis
Knowing mobile and desktop tech
Knowing how to manage your:
contacts
time
calendar
phone reception
business checking account
business legal entity management
daily Extremely-Busy-Person ("EBP") habits and routines
EBP health
EBP wellness
EBP diet
EBP sleep hygiene
EBP relationship management
not to mention your partner's and/or kid's of the above...
All while being "always on call" and ready to rapidly, constantly, seamlessly:
change hats
change directions
change moods
change expectations
change plans
change appointments
And change your mindset...
...24 hours a day.... 7 days a week..... 365 days a year, and 366 on leap year.
Those bullet points above include a lot of different skillsets and, really, a lot of different professions' entire focus.
Yet a lone-wolf real estate agent, to be successful by her- or himself -- that is, to make it into the 13% who last -- needs to encompass a healthy portion of most or all of them.
AND... the ability to toggle, multi-task, or "switch-task" between them, at a moment's notice, day in and day out.
Here's the catch...
The type of personality, or at least the part of the brain, that makes someone good at sales and leadership, for example, is usually the polar opposite of what makes someone good at data analysis, bookkeeping, sit-at-a-computer-and-do-mundane-repetitive-tasks-for-hours-on-end type work.But for the solo, lone-wolf agent -- which is the industry standard -- that's the job.Yes, it's very interesting and diverse. No two days are the same. It can be fun!
Up to a point. And that point is this:
It's interesting and fun until the demands on your time and mental bandwidth exceed your capacity.
Let me give you an example...
Say you're a lone-wolf agent. Your name is getting out, the phone is ringing, and you've got a handful of people who'd like your help to sell a house and buy the next one.
You've also got some new-to-town buyers who are living in an AirBNB until you can land them a house!You've also got 3 sales that are mid-transaction... one in Lynden, one in Sudden Valley, and one in Bellingham's Lettered Streets.
You're on fire! For the first time since you became an agent, you're going to make an actual living this year and stop living off savings.
It's Thursday morning at 9 o'clock, and you've blocked off the next 3 hours to do a careful CMA (comparative market analysis) for one of your upcoming sellers.
This is usually the most focused, careful, left-brained work any Realtor does (if it's done well) and you are ready! Coffee cup is full, computer's warmed up...You settle in and get started, pulling past sales or "comps" from the MLS.
At 9:11 the phone rings.
The AirBNB people's dream house just hit the market and they want to get in there pronto! If they love it, they'll have you writing an offer that morning to see if they can beat the rush that is sure to follow.
Absolutely! You promise to make the appointment and confirm with them right away
.You open a new tab, research the property and its information, print the agent detail sheet and directions, digitally request the desired appointment, call the listing agent to tell her your people are super interested and beg her not to accept any other offers before you show it, confirm with the buyer... then settle back in to work on your CMA.
9:27 am: Ring!
It's an appraiser who needs access to the vacant house one of your seller clients have pending in Lynden. She's gotten behind and needs you to meet her there to open the door at 1 pm.... or risk not hitting the appraisal deadline.
Absolutely! Can't hold that up! You promise to be there.
9:34 am: You habitually check your email and there's a message from one of your Active listings... the flier box is empty! The seller says they also don't like the lead photo you chose, or the paper you used last time, so could you make some changes and print the next batch on something glossier? They'd like those by the end of the day.
Absolutely! You pop open a Photoshop tab, make some quick edits, then plan to hit Office Depot on your way to the showing for some glossier paper.
9:50 am: Ring!
The escrow officer on the Sudden Valley transaction needs a photo of the gauge on the propane tank, so they can credit the right amount to the seller, or it's going to hold things up.
Absolutely! You'll just zip out to Sudden Valley right after the Lynden appraisal.
You hang up on that last call, look down at your now-empty coffee cup, then at your CMA, and you're not quite done with the intro paragraph.
But the day is young. You'll be sitting in a home inspection ( the presence of a licensed agent is required by the MLS) starting at 4 pm, for 3 hours, so you figure you can work on it then, that afternoon and evening.
9:59 am: Ring! Another of your buyer clients calls, super excited, and -- whuddayaknow? -- they want to get in and make an offer on the same house the AirBNB people do! How fast can you get them in there, they ask?
Absolutely! You say that, but in actuality you have no idea how you're going to do it. You wonder if you have time to make another cup of coffee.
10:08 am: You hang up with that buyer, your stress now starting to percolate, and you notice that you've missed 11 text messages in the past hour. Each one of them opens a new loop with a new person.
10:19 am: Ring! It's one of your buyer clients, asking where that transaction calendar is that you promised? Remember... the one-page summary of the 18-page Purchase and Sale Agreement that was signed around two nights ago? They need that list of contingencies and deadlines, right away!
Absolutely! No worries, you think to yourself. Just 10 more hours of this and I'll be pouring a nice glass of Pinot Grigio... or maybe the whole bottle.
Now, reader, you're thinking, "Ha ha! He's exaggerating to make a point."
Really? Ask any busy-ish lone-wolf agent how accurate the above timeline is, and I'll bet you lunch they say, "That sounds like an EASY morning
"The example above isn't just true. It is ubiquitous throughout the entire industry. It leads to frustrated buyers and sellers, bad public perception of the profession, burned-out agents, broken families, lost health and wellness...
AND AN 87% FAILURE RATE OF AGENTS INSIDE THEIR FIRST 5 YEARS!!!!!
Digest that for a moment. I'm not saying 1 in 4 agents don't make it. I'm saying 9 out of 10 don't make it.
Why? Because the lone-wolf agent model is antiquated and, in a word, broken."Anyone with a pulse" who's old enough to vote can get on a real estate team.
Those 1392 agent in Whatcom County I mentioned? As of this writing, almost halfway through the year, 424 of them haven't sold a single property.
The next 400 have sold 1, year to date. Usually it's their own, or mom and dad's.
How and why BNP is different?
Before I started Brandon Nelson Partners (BNP) in 2015, I had already spent nearly a decade as a lone-wolf agent. I knew VERY well how insanely difficult the lifestyle is that I describe above.But I had gotten a taste of a different approach, and my eyes were opened wide.
I had hired Kate, who works for us to this day, to help me with the left-brained tasks on that massive to-do list, so I could focus on the right-brained tasks.
My health and happiness, my income, and most importantly the quality of our service (and customer satisfaction) sky-rocketed! It was like finding the holy grail.
So with BNP I sought to answer the question:
"What if we did this same thing for a small group of A-list agents?"What if we took the "arts and crafts", the menial errand-running, the transaction coordination, the long-, medium-, and short-term marketing projects and campaigns, the bookkeeping, the folder and file management, and everything else that isn't a first-need priority or related to working directly with the clients......and we put those essential elements of the business in the hands of professionals that were wired for it, passionate about it, and could focus exclusively on it?
Enter Grace Young, Kate Polselli, and Jessa Loudon -- our support team members.
And also...
"What if we introduced these A-list agents directly to A-list clients who were "RDB" -- "Ready to Do Business"?"
After all, if an agent doesn't have to knock on 100 doors or make 100 random calls a day to keep a continually regenerating stream of prospects flowing, they could focus on actually delivering the service they promised to their clients. Right?
And finally...
"What if we fronted and proportionally covered the A-list agents' expenses and allowed them to operate at the level usually reserved for the highest-earning luxury agents, but right from the start, on every single transaction, 365 days a year?"
Nationally, the median gross income of a Realtor in 2019 was $49,700. How much can an agent with that gross (pre-franchise-fee, pre-tax, pre-food-and-shelter, pre-gas-for-the-car, pre-any-business-expenses-at-all) afford to spend having a client's home staged, professionally photographed, and printing a stack of 12-page, full color, magazine-style marketing materials -- to name just a few items?
Here's a hint...
So... has it worked?
I would say, Yes.Of the 1392 Whatcom County agents, the top 10 individuals have sold 10% of the entire market share, year to date.BNP has not one, but TWO agents solidly in the top 10.As of this writing, the #1 top lone-wolf agent in Whatcom County has sold 35 properties, year to date.
BNP has sold 67 properties, and has another 31 pending, as of this writing.
If more than one buyer wants to write an offer on the same property... our model ensures both will be professionally represented with no conflict of interest.
If a listing needs 6 different sub-contractors to engage in the pre-listing optimization process, our model ensures they'll be managed, met on site, and paid on time without any one agent's hair catching on fire.
If a BNP agent or support staff needs a week or two out of town for vacation or family matters, our model ensures their clients and tasks are covered.
Have the last 6 years and nearly 1000 transactions established that the BNP model -- a model that I don't suggest we "invented" entirely, but that evolved and continues to evolve -- might be a better version than one that has an 87% failure rate?
Thus far, that is a solid Yes.
So... what is the"One Thing You Need to Know"?
Ahh, yes. The book I mentioned that changed my perspective, and that singular rule I learned and continuously strive to implement.
Through his extensive research, author Marcus Buckingham identifies that the common denominator to achieving and -- most importantly -- SUSTAINING individual success, whatever profession you're in, whatever your role, is this:
FIND OUT WHAT YOU DON'T LIKE DOING... AND STOP DOING IT.
If you are committed to a career as a real estate agent, and you want to interrupt the pattern of the 87% failure rate, look closely at that (partial) list of tasks near the top of this newsletter.
Better yet, invest in some personality and strengths-finding tests, and truly identify what you're wired to do, what you were born for, what you LOVE.
And then, find a way, or find a firm, that allows you to hand off the rest.
Do that, along with a few other factors outside the scope of this discussion, and the length of your career and level of success you can achieve are without limit.
