Real estate is essentially a research industry: trouble is, most agents and brokers think the most important research is about houses, prices, square footage and such. Considering the data that sits in most MLS systems – unverified and incomplete – you’d think they would know better by now. In fact, the best research for any sales industry isn’t the commodity data but the customer specs and competition capabilities. Knowing everything there is to know about the consumer – and the competitors who are trying to beat you to their door – is far more fascinating. And given the state of the housing industry, also more revealing.
If real estate professionals take a break from the steady flow of (mostly contradictory and useless) housing data that is emanating from every outlet in the industry, they will be well served to download a free copy of the Annual Profile of Members by their own trade group, the National Association of REALTORS. Even though this report is a few months old, it’s always insightful to review and compare it to your “local” marketplace. If you can see its conclusions in your office or Association, then you can draw some conclusions and adjust your competitive strategy.
Overall, the numbers tell a startling, if not always consistent picture of an industry in the midst of serious upheaval. For starters, the industry that just a few years ago was growing younger is once again graying; the average member is 54 years old. More than 60% are women, and the average member works a mere 40 hours a week.
Of course, that average member makes less than than a Boston school bus driver: Median sales agents earned $28,400 while median brokers earned only $49,300 (The all-member median was $36,700, with certainly far worse hours and benefits than that bus driver). Even members who were in the industry more than 6 years – a significant benchmark since some 90% of agents never make it that far – only earned between $42,400 and $53,900. An amazing 76% of those surveyed said real estate was their only profession, a waffling number since most also had other sources of household income.
Looking into the average REALTOR’s past is just as fascinating: One wonders just what is in the minds of brokers who are recruiting new agents. Less than 6% of REALTORS chose the business as their first career. About 19% came from other business or financial careers. Some 16% percent were previously employed in sales or retail industries. And nearly 1 in 6 (17%) came from jobs as administrators, office support staff or school teachers. Astonishingly, nearly 48% of REALTORS came from twelve other segments of industry that had nothing to do with direct-to-consumer sales.
Maybe, then, part of the troubles in the business stem from the fact that almost 65% of real estate agents had no prior experience in sales, business or finance before completing their “licensing” course. And even there, they didn’t learn any sales skills.
NAR’s report insists that technology is “vital” to its members’ success, but the numbers don’t tell a convincing story. While 90% said they used email every day, only 78% said they used a cell phone daily, and a mere 42% used a smartphone model. About 1 in 3 REALTORS had a social media presence (although 95% of buyers under the age of 44 had one way back in 2008). And a mere 4% of members said they read a blog daily, as statistically insignificant a number as the 1% who said they listened to a podcast regularly. Thank goodness you can still get 8-track tapes on Ebay.
In fact, only 1 in 3 of the million-plus sales REALTORS claimed to use a customer database daily (17% said a few times a week). A full 9% of those surveyed said their firm did not have a website, although a fraction of those said they planned to have one in the future. So maybe there is hope for newspaper classifieds after all?
Of those members who did have a website, the features and tools seem to be vintage Sears-catalog. While 91% of REALTORS featured their own property listings on their website, only 56% said their site featured virtual tours. Apparently they didn’t get the memo that virtual tours ranked number three on the customer’s most-wanted list in NAR’s similar study of buyers and sellers, just behind multiple photos and understandable property descriptions. Barely more than half of REALTOR websites offered community information, school data , while a third reported offering comparative market data or current mortgage rates.
Any question why the industry average was four inquiries per agent from their websites annually?
Overall, the average agent spent about $650 on technology products and services annually, and $670 on personal professional development.
Now, let’s put some of these numbers together, and create some segment profiles in the industry. After all, one competes against real people, who have certain characteristics that form the basis of their performance.
Bottom Third of Industry: 29% of REALTORS earned less than $25,000 last year. That’s about 450,000 people in neighborhoods nationwide, who are licensed to work with consumers, and do so with the following characteristics:
- 51% of this group has a website
- 46% have earned an industry educational designation
- They completed 1-4 transactions last year
- average 51 years of age
- 27% have been in the business 6 years or more
- generate between 0 and 13% of their business from repeat clients
Middle Half of Industry: 45% of REALTORS earned between $25,000 and $99,000 last year; This group was between 73 and 82% certain they would remain in the industry over the next two years. Their key characteristics include:
- 64% of this group has a website
- 40% have earned an industry educational designation
- They completed between 8 and 12 transactions last year
- average 53 years of age
- about 39% have been in the business more than 6 years
- generate between 21 and 24% of their business from repeat clients
Top Tier of Industry: 16% of REALTORS earned more than $100,000, with fully 8% earning more than $150,000. More than 55% of these high producing professionals had been in the industry more than 16 years. Their leading characteristics include:
- 75% of this group has a website
- 52% have earned an industry education designation
- They completed between 18 and 27 transactions last year ($4-8 million in sale volume)
- average 54 years of age
- about 90% had been in the business more than 6 years
- generate 35-38% of their business from repeat clients
To put these numbers in further perspective, consider how they occur in a typical real estate office. The average agent is affiliated with a firm of about 23 persons. Applying the profiles above, this means eight people in the office produce less than 4 deals annually, the next 11 generate an average of 10 deals each; and five agents generate the majority of the production. From a consumer’s perspective, this could also be seen as a 1 in 4 change of working with the best producers, and a 1 in 3 chance of working with the least productive members of the office.
Working with the best agents becomes a matter of chance: who is most likely to be sitting in the office answering the phone?
Rounding out the report are some general operational results for real estate brokerage firms that should, if anything, highlight avenues of growth for anyone planning to remain in the business next year. (Alternately, these numbers might cause consumers to take pause.) From the data (with some commentary):
- Only 44% of real estate professionals reported generating business from their open house activities, and most of those reported it was less than 10% of their overall business. Alternate view: 6 in 10 agents don’t actually sell the home they spend time in on Sunday afternoons.
- Only 80% of REALTORS placed their listings on REALTOR.COM; even fewer (66%) placed them on their local MLS system’s public website. Alternate view: 1 in 5 REALTORS don’t place their properties on the single most consumer-trafficked website (even if it has become a pop-up and banner ad hell).
- The typical REALTOR only generated four inquiries from their web site, the same as in 2007. So much for taking advantage of the internet revolution.
- Of REALTOR’s with a website, the median spent to maintain it was $240 annually. (Realtors who spent more than $1000 on their sites reported more leads – more than three times more – than the average.) Note that one grande Starbucks coffee each business day would equal $767 annually.
- The typical REALTOR only sold 1 of their own listings, but sold 4 of other agents’ listings. Maybe exclusive listing agency isn’t really such a great idea after all.
- 59% of all REALTORS did not participate in a foreclosure sale; 72% did not participate in a short sale either. Of course, those numbers will skew depending upon whether or not REALTORS from distressed marketplaces even bothered to respond to the NAR member survey.
So there you have it. While Case and Schiller and every other schmoo likes to report the state of the marketplace – as if homes could sell themselves – we at Matthew Ferrara & Company thought it might be important to look at just who is involved in trying to turn around the market. After all, REALTORS love to say it’s a “people business” – and we’d agree that it’s about time we took a good hard look at the people who make up this industry and see what that means for the consumer, a housing recovery and a huge chunk of our economic future.