I just downloaded the latest roster of Chicago Association Of Realtors (CAR) members and was delighted to see that the number of realtor members plummeted by over 4,000 in the last year. At December 2007 the number stood at 17,266 and as of January 2009 it was at 13,051. That’s almost a 25% drop. And based upon what I know about the productivity of individual agents right now I would guess we are going to see even further declines.
While I sympathize with people who are having a hard time making a living I have to believe that this is a welcome change for the industry. Chicago just had way too many agents. But more importantly, I would imagine that many of the weaker real estate agents have left the business and both the industry and the customers are better off without them.
However, there is a flip side to this story as well. Some of the agents that are leaving are ones whose real estate skills are fine but they just don’t know how to generate business. And generating business is in fact the hardest part of real estate. It’s so difficult that the median net income for a realtor in the first two years is only $9,400 per year and 80% abandon the field in their first year.
So why do so many people go into real estate in the first place and why do they keep banging their heads against the wall? Presumably it’s because of the promise of substantially more money down the road. Some agents make a lot of money, with 13% of the realtors with 6 – 15 years experience netting over $100,000 per year. There is really no other explanation as to why these folks continue to starve while trying to get their own business off the ground (especially in this environment).
Of course, we think this approach of agents trying to run their own business no longer makes sense and that’s why we’ve created a different and better model. Our agents do not do any prospecting or lead generation. We do it for them so that they can focus their efforts on providing real estate services and in the process earn much higher commissions.
The amazing thing is that so many real estate agents are still clinging to the old way of doing business and starving while reaching for that brass ring.