Matthew Ferrara, Philosopher
 

Revelations about REALTORS

Real estate is essentially a industry: trouble is, most and 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 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 whileschool bus driver salary 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 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 , 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.

  • Matthew,

    What I found even more revealing, and compelling, from NAR’s latest profile; 42% of buyers and 38% of Sellers found their real estate agents through a referrral from a family member or friend. These numbers had historically ranked in the 80th percentile! Are our friends and family no longer referring us? Or, are the “referrees” checking online to validate these referrals?

  • Matthew,

    What I found even more revealing, and compelling, from NAR’s latest profile; 42% of buyers and 38% of Sellers found their real estate agents through a referrral from a family member or friend. These numbers had historically ranked in the 80th percentile! Are our friends and family no longer referring us? Or, are the “referrees” checking online to validate these referrals?

  • Steve Harney

    Great points Matthew. One question. What should we do about it?

  • Steve Harney

    Great points Matthew. One question. What should we do about it?

  • Matthew Ferrara

    Jim – great catch on the research. Here are a few thoughts. First, this very decrease is what worries me about why so FEW agents are using social networks online. There’s no easier way to keep up with past clients, friends and family than things like Facebook! But they’re still relying upon silly stuff like holiday cards, calendars and periodic mailings to somehow do the work – and NONE of those are either timely or interactive. They are just advertising blurbs. Useless!

    The other point is this: In a market where agents and brokers have LESS marketing money than ever before, it would seem like a GIFT to have so much business come from people who will LIKELY and GLADLY take your call or meet with you. FOR VERY LITTLE MONEY or effort. It just astounds me to see how much money we throw away on useless internet search engine market, mailings, and other attempts to find “new” customers when our past clients and our families are not only inexpensive to contact, but willing to help us out.

    It’s not that our friends and family aren’t ‘referring’ us because they don’t want to. They just don’t think about it, because we ignore them! They have lives. We have to chase them – that’s our job. While we still have one….

    Thanks Jim for your comments! You’re right on!

  • Matthew Ferrara

    Jim – great catch on the research. Here are a few thoughts. First, this very decrease is what worries me about why so FEW agents are using social networks online. There’s no easier way to keep up with past clients, friends and family than things like Facebook! But they’re still relying upon silly stuff like holiday cards, calendars and periodic mailings to somehow do the work – and NONE of those are either timely or interactive. They are just advertising blurbs. Useless!

    The other point is this: In a market where agents and brokers have LESS marketing money than ever before, it would seem like a GIFT to have so much business come from people who will LIKELY and GLADLY take your call or meet with you. FOR VERY LITTLE MONEY or effort. It just astounds me to see how much money we throw away on useless internet search engine market, mailings, and other attempts to find “new” customers when our past clients and our families are not only inexpensive to contact, but willing to help us out.

    It’s not that our friends and family aren’t ‘referring’ us because they don’t want to. They just don’t think about it, because we ignore them! They have lives. We have to chase them – that’s our job. While we still have one….

    Thanks Jim for your comments! You’re right on!

  • Matthew Ferrara

    Steve: that’s the question, isn’t it! I have two minds on the answer:

    First thought: do nothing! The market purges the lower performers anyway. And apparently customers don’t really seem to mind, since many continue to accept the “outcomes” of the lower performers year after year. It’s not until you’ve had champagne that you realize not every drink is lemon water. But that’s a bit cynical, even for me.

    My second thought is this: Given these research statistics, there’s a massive opportunity here for someone to totally dominate the marketplace. And not just locally. The national market is ripe for a vigorous-standards-based company to dominate. Think how McDonalds or CVS or Walmart dominated their industries – in every corner – within just a few short years, but creating a delivery system that was so good, consistent and affordable that customers demanded they come to their neighborhoods. Sure, the local burger or pharmacy didn’t like it, but customers LOVED it. What would it take? Actually, not that much:

    1. Every branch of such a company had to do things the SAME way by implementing a standardized, rigorous and mandatory training process. Like, oh, every other professional industry does.
    2. Every person in the branch had to learn to do things the RIGHT way (and there IS a right way to list and sell homes, as you know)
    3. Every manager would learn to lead and manage a sales TEAM, while allowing for superstars to shine (just like any other industry)
    4. Every operation would implement streamlining technology that even the tiniest of companies uses today to cut costs, communicate and save time
    5. Every opportunity would be taken to lower the cost to the consumer through such economies of scale, saved time, conserved effort and quality of outcome.

    There’s just no reason why this can’t happen in the business. And these numbers tell us we have fertile ground for it to happen. And it doesn’t have to be national. It can happen locally, of course. But it will start by recognizing the research facts, and then deciding if we really care about what they mean.

  • Matthew Ferrara

    Steve: that’s the question, isn’t it! I have two minds on the answer:

    First thought: do nothing! The market purges the lower performers anyway. And apparently customers don’t really seem to mind, since many continue to accept the “outcomes” of the lower performers year after year. It’s not until you’ve had champagne that you realize not every drink is lemon water. But that’s a bit cynical, even for me.

    My second thought is this: Given these research statistics, there’s a massive opportunity here for someone to totally dominate the marketplace. And not just locally. The national market is ripe for a vigorous-standards-based company to dominate. Think how McDonalds or CVS or Walmart dominated their industries – in every corner – within just a few short years, but creating a delivery system that was so good, consistent and affordable that customers demanded they come to their neighborhoods. Sure, the local burger or pharmacy didn’t like it, but customers LOVED it. What would it take? Actually, not that much:

    1. Every branch of such a company had to do things the SAME way by implementing a standardized, rigorous and mandatory training process. Like, oh, every other professional industry does.
    2. Every person in the branch had to learn to do things the RIGHT way (and there IS a right way to list and sell homes, as you know)
    3. Every manager would learn to lead and manage a sales TEAM, while allowing for superstars to shine (just like any other industry)
    4. Every operation would implement streamlining technology that even the tiniest of companies uses today to cut costs, communicate and save time
    5. Every opportunity would be taken to lower the cost to the consumer through such economies of scale, saved time, conserved effort and quality of outcome.

    There’s just no reason why this can’t happen in the business. And these numbers tell us we have fertile ground for it to happen. And it doesn’t have to be national. It can happen locally, of course. But it will start by recognizing the research facts, and then deciding if we really care about what they mean.

  • Yowser… those are some numbers, good work….. now I must go take over the world ; >

  • Yowser… those are some numbers, good work….. now I must go take over the world ; >

  • Matthew Ferrara

    Shouldn’t be too hard, all things considered, from some of these numbers… Somehow, I know you’ll do it, too, Jodi!

  • Matthew Ferrara

    Shouldn’t be too hard, all things considered, from some of these numbers… Somehow, I know you’ll do it, too, Jodi!

  • Your numbers are delicious. My hope is that education becomes much more important, and testing much more difficult. I’m ‘new’ to NC from HI, and knew immediately I had to go to the internet/technology to establish myself. It takes time and diligence, but is worth every blog post, market report, video, tweet, and photo set for what I have learned and the people I have met. Very thankful that you share your brilliance ….

  • Your numbers are delicious. My hope is that education becomes much more important, and testing much more difficult. I’m ‘new’ to NC from HI, and knew immediately I had to go to the internet/technology to establish myself. It takes time and diligence, but is worth every blog post, market report, video, tweet, and photo set for what I have learned and the people I have met. Very thankful that you share your brilliance ….

  • Matthew Ferrara

    Thanks, Susie! Sounds like you have the right attitude and are heading int he right direction! Keep up the good work!

  • Matthew Ferrara

    Thanks, Susie! Sounds like you have the right attitude and are heading int he right direction! Keep up the good work!

  • Frank Pinzon

    Matthew,
    I am a Home Loan Consultant and I saw you speak at the NAHREP Conference in Phoenix, AZ in 2008.
    I use my data base and believe in it, it is the easiest way to get “Real Leads” and you don’t have to convince them how good you are, your past clients already did.
    But most realtors I know DO NOT have a database, but they’re always complaining and saying how there’s no business. I am tired of feeding them business, because most of my clients call me before they call a realtor.
    How do I use that as a way to improve my “circle of productive realtors” and ensure they reciprocate with their leads to me.

    Frank

  • Frank Pinzon

    Matthew,
    I am a Home Loan Consultant and I saw you speak at the NAHREP Conference in Phoenix, AZ in 2008.
    I use my data base and believe in it, it is the easiest way to get “Real Leads” and you don’t have to convince them how good you are, your past clients already did.
    But most realtors I know DO NOT have a database, but they’re always complaining and saying how there’s no business. I am tired of feeding them business, because most of my clients call me before they call a realtor.
    How do I use that as a way to improve my “circle of productive realtors” and ensure they reciprocate with their leads to me.

    Frank

  • Matthew Ferrara

    Hi Frank: Good question! Here are a few ideas. First, you don’t need LOTS of referring realtors; just a few good ones. So cultivate some strong relationships “deep” rather than trying to collect “wide” swaths of agents. Second, be VERY targeted. Perhaps not every REALTOR has the kind of customers you prefer/can easily help with loans. So look for REALTORS who have quality customers, especially these days, where lending standards are higher than ever. And lastly, remember to ask for the business. That may sound simple, but like you, REALTORS are busy – and sometimes even our best friends forget we need them to keep recommending us. A gentle reminder by lunch meeting or email can go a long way toward maintaining a steady flow of business.

    Hope this helps! Thanks for stopping by and commenting!

  • Matthew Ferrara

    Hi Frank: Good question! Here are a few ideas. First, you don’t need LOTS of referring realtors; just a few good ones. So cultivate some strong relationships “deep” rather than trying to collect “wide” swaths of agents. Second, be VERY targeted. Perhaps not every REALTOR has the kind of customers you prefer/can easily help with loans. So look for REALTORS who have quality customers, especially these days, where lending standards are higher than ever. And lastly, remember to ask for the business. That may sound simple, but like you, REALTORS are busy – and sometimes even our best friends forget we need them to keep recommending us. A gentle reminder by lunch meeting or email can go a long way toward maintaining a steady flow of business.

    Hope this helps! Thanks for stopping by and commenting!