Most agents barely making it in this ‘part-time industry’
In its latest report, the CFA continues to cast a critical lens on what it sees as a bloated industry where too few agents can succeed.
Key points:
- The Consumer Federation of America’s third report on “A Surfeit of Real Estate Agents” highlights the high number of agents and low number of sales.
- Most agents have only five or fewer sales in a year, and half report just one — or none.
- Few brokerages offer the mentorship that inexperienced agents need, the report states.
Real estate sales has a relatively low barrier of entry — nearly anyone can become a licensed agent with as few as 40 hours of education and a small financial investment. But that doesn't mean success comes easy.
In a challenging market, and at a time when the industry may be forced to change, it has only gotten tougher for the massive number of agents — over 1.55 million of them, according to NAR — to make it.
A new report from the Consumer Federation of America (CFA), the third and final installment in its series titled "A Surfeit of Real Estate Agents," suggests that this so-called "glut" of agents is even more of an issue than previously reported.
Half of agents completed just one deal in the past year, or none at all
For its report, the CFA looked at a sample of 2,000 agents from 20 major brokerage firms across four U.S. regions, and found that the vast majority of agents are only closing a few deals per year, suggesting that "the residential real estate industry is clearly a part-time industry."
Almost half of the agents surveyed (49%) reported either no sales or just one sale in the past year, and 70% logged five or fewer sales, the report said. The median number of sales was just under two.
To get by, those part-time agents are often working other jobs or depending on a spouse or other family member to make household ends meet, CFA researchers said. Some also rely on retirement savings or other investments. The CFA notes that the median age of agents sampled was 56 years old.
Inexperienced and part-time agents most likely to leave the industry
While agents tend to skew older, it's the newbies who are barely scraping by, often earning an income from real estate that falls below poverty thresholds.
NAR's 2023 Member Profile revealed that 52% of agents with two years or less experience reported a gross income of less than $10,000. The median net income for new agents was $8,500. "Certainly some of these younger agents still lived with their parents. Many of these agents eventually decided to quit," CFA researchers suggested.
And the numbers appear to bear this out. According to the latest membership data from NAR, the organization lost 17,000 members between November and December and posted its first year-over-year decline since 2012.
Changes across the industry could push more agents out, especially buyer's agents who may be unwilling or unable to promote their value in a world where buy-side compensation is not guaranteed.
Laura Ellis, who leads strategy for Chicago-based brokerage Baird & Warner, recently offered this advice to agents in light of legal challenges to commissions practices: "In order to make it in the real estate business moving forward, you've got to give it 110%. You're going to have to put in those hours and be highly trained, and that takes time, it takes energy and it's more than a full-time job, especially in the first few years."
Mass recruiting, but limited support
Some brokerages focus on recruiting more experienced agents, the CFA notes, highlighting RE/MAX as a company that "is well known for its emphasis on recruiting the most productive agents from other firms."
But not all large firms are selective, CFA researchers said. Some brokerages cast a wide net because new agents are typically "well-positioned to sell property to their friends and relatives," bringing new leads to the firm.
And sometimes recruiting is purely a numbers game: Each additional agent is a source of revenue through fees and commission splits. But the litany of fees can also cause lower-performing agents to get out of the business.
"The most frequent complaint about fees … is that for these payments, the companies do not provide either promising leads or adequate support, especially mentorship for new agents," the report said.
While many firms offer basic training (often online), few provide formal mentorship opportunities. Of the major brokerages, eXp is the only one that requires inexperienced agents to participate in its mentorship program, the report stated.
Some firms, the report concluded, "have no interest in mentoring or coaching. They recruit an excess of agents, throw them into the pool, then retain those able to swim and even a number who just thrash around on the surface."