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October 5, 2006

But What About All The Brokers?

skyline Guess how many real estate agents there are in this country? More than 1.2 million. During the boomtimes of 2002 to 2004, there was a 26 percent increase. Now, with the number of real estate transaction forecast to fall 7.6 percent this year, the question is how are all these folks going to continue to put bread on the table. The National Association of Realtors is predicting that those who came last to the party will be the first to leave: With less low-hanging fruit to pick, those without established networks will find it toughest to generate commissions. We're curious whether anyone's noticed a thinning of the ranks among brokers in our corner of the universe. How 'bout it?
Real Estate Downturn Hits Agents [CNN/Money]
Graphic from Lisa Saltman Real Estate

Comments

Yes it has slowed down. I don't think this business has ever been easy. With so many agents the competition is always fierce. Those who have been in the industry the longest have an advantage. The average age of real estate agents has crept up. I am wondering if some of these established agents won't retire. With the slow down they also will have to work harder and may not want to.

Posted by: teresa boardman at October 5, 2006 9:39 AM

Yes I agree, but it may not only be the "last to arrive" who jump ship. There is a lot of burn out in the business as it is. Tough market or not. Even those who haven't completely quit, seem to be spending a lot less time in the office. Strangley quiet for this time of year. I did a column on this a few weeks ago.
BC

Posted by: Brian at October 5, 2006 9:43 AM

Is that Roseanne Barr?

Posted by: Wallis at October 5, 2006 9:46 AM

Maybe they should not charge 6% anymore. When I go to sell my brownstone, I am not giving an agent 6% of 1.8 million. Sorry.

Posted by: Anonymous at October 5, 2006 9:48 AM

Time to go back to working at the foot locker, anyone need a size 9 ?

Posted by: Anonymous at October 5, 2006 9:48 AM

it's not about the 6% (and let me tell you, brokers EARN that money...every single cent of it). It's exactly what the article and others have said: fierce comptetion and everything is constant constant constant. you have to be attentive 24 hours a day (how many people can say that about their doctors!?) You have clients who string you along, mess with your head, dangle things in your face to make you sit up and beg. I am tired of people saying it's easy money or we don't earn what we make it's given to us. Yes, granted there are a handful of really really bad agents who give the rest of us a bad name. But I believe half the time the agents jump through hoops to make the deal happen. It might not be brain surgery or rocket science but it is a huge step in most people's lives and I for one are grateful to make them happy when I can.
I do agree that the market is strange right now and it's partly because of the media and partly because of greed. I for one am taking a breather from this rat race.

Posted by: me at October 5, 2006 9:57 AM

Time for people to stop being suckered into classes given by the South Slope company that advertises you can earn your license in 1 week. Their advertisements are EVERYWHERE. Schlock-shop.

Posted by: Anon at October 5, 2006 10:03 AM

everyone thinks it's easy money. this business has a 90%...yes, 90% failure rate. Guess it ain't so easy after all!

Posted by: anon at October 5, 2006 10:05 AM

No, the boom was strange. 300% ROI. The media argument cancels out because it was also there during the run-up.

Posted by: Anonymous at October 5, 2006 10:08 AM

For anybody that thinks being a broker is easy, there's a great program on Bravo called "Million Dollar Listing". One viewing and you'll see what we have to put up with and how often what we do leads to zero do-re-me. It's a tough, tough job. There's no such thing as "low hanging fruit" in this biz.

Posted by: Anonymous at October 5, 2006 10:14 AM

yeah...that's a great show. really shows the headaches aches and pains...on a grand scale!

Posted by: m at October 5, 2006 10:55 AM

Anon 9:48,

In this market you probably will end up having to hire a broker or at least make your brownstone an open listing to agents if you plan on selling it.

I just sold a prisitine townhouse and like you tried to do it myself, offering 3% to buyers agents. Nothing materialized, so I increased the commission to 6%.

Shorty thereafter, the place sold.

You may think you can "do it yourself," and who knows, maybe you'll get lucky, but if no real buyers show up, you won't be moving anytime soon.

Posted by: Anonymous at October 5, 2006 11:02 AM

seth godwin has a good quote on brokers. I won't retype it from his book but it basically says this:

Anyone on a percentage should realize that profit margins SHOULD fall as their sales get bigger. If he was a real estate agent he said he'd be plowing back part of his 6% (already higher in new york than the USA due to barriers to entry) into incentives, customer systems, staff, etc etc. Not just taking it to the bank.

Of course he points out that because brokers are on a percentage when the market booms, a lot more people become brokers which reduces the number of sales per broker on average.

But still. 21% more brokers over the last few years? prices went up by a lot more than 21% and then look at the previous 10 years. Prices outstripped number of brokers by probably a factor of 2.

Nevertheless, brokers have to realize that they cannot be on a fixed percentage of an appreciating asset when they have to do no more real work per sale in 2006 than then did in 1986. It was just as hard to sell a top apartment in the 80s as it is now. A fixed pure profit percentage has come under pressure like it or not, they have to give some back if they want to survive. Particularly in a downturn.

Posted by: Anonymous at October 5, 2006 11:23 AM

interesting insights into the trails and tribulations of brokers. still, a 6% commission on anon 9:48's $1.8M brownstone is $108,000. plenty of folks out here who follow things through only to end up at a dead-end, deal with crazy people, etc. for less per annum than the commission on this one hypothetical sale. I worked almost 2500 hours last year for two-thirds that much. please pardon me if I don't get out my hankie for real estate agents.

Posted by: Anonymous at October 5, 2006 11:31 AM

Being a successful real estate agent is like winning the lottery -- that's how hard it is and how much luck is involved to become Jerry Minsky (one of Brownstoner's pet agents) or any other top "celebrity" agent.

You folks who disparrage brokers might as well be disparraging lottery winners.

Most agents make 30k a year. Negotiate the commission if you want to, or don't use an agent at all if you prefer, but please stop fussing.

Posted by: ebomb at October 5, 2006 11:55 AM

Here's the breakdown on a $108,000 commission (if you're lucky enough to land one):

I take home half of this check if I happen to be the listing agent and the buyer is also my customer (rare occurence). Half the check goes to my agency: $54,000.

If I am the listing agent only, or if I am the buyer's agent only, I get half of half. $54,000 half goes to my agency: $27,000.

If I am a co-listing agent (in other words, there are two agents selling the property), and we don't have the buyer, I get half of half of half. $108,000 cut to $54,000, I split that with my co-agent. I get a check for $27,000. I split that with my agency. I end up with $13,500.

Posted by: Anonymous at October 5, 2006 12:07 PM

I'd never buy or sell without being repped by a professional. To me, it's like the saying about attorneys, "He who represents himself has a fool for a lawyer." Would a legit writer rep himself on selling a book and negotiate his own contract? If the realtor's firm gets you more traffic, and thus gets you 6% more money than you'd get all on your own in a slow market, doesn't that earn their commission? I just don't get it.

Posted by: Anonymous at October 5, 2006 1:00 PM

Please, I have never paid a 6% commission and have sold over 12 properties in Brooklyn. One that just went into contract yesterday. If your paying higher than 4% you my dear are a fool!

Posted by: Anonymous at October 5, 2006 1:52 PM

I accidentally watch Million Dollar Listing sometime, because it come on after Project Runway and I can't be bothered to change the channel. Those brokers are a bunch of self-absorbed babies, and don't seem to be working all that hard. The plastic surgery nightmare lady Dia just breezes by Open House that her husband is running (BTW: that man looks like he needs a good dermatologist, is that a melanoma on his nose?). Dia eats some of the poorly laid out cheese (not cut and on paper plate !?!) and then breezes off to her massage appointment.

Posted by: Anonymous at October 5, 2006 3:07 PM

I dont know that most people think 'being a RE agent" is "easy" - I think people think that with the ability of the internet to publish a listing to virtually everyone and to 'show' a listing thorough digital pictures and floor plans, an agent just isnt all that necessary (except due to the monopolitic tactics brokers foster), and not worth 6% to the seller.

Posted by: David at October 5, 2006 4:04 PM

To the individual that has only had to pay 4%, that is because you had 12 properties and I am sure you tell all the agents that you give the listing to that "there is more listing to come."

Posted by: Anonymous at October 5, 2006 5:02 PM

In California, real estate agents don't have lawyers to do the paperwork. They have to do all the contracts and disclosures themselves. Not to mention the time spent driving around between far-flung appointments (tho I guess that would apply to just about anywhere outside of New York)

Posted by: west at October 5, 2006 6:05 PM

Who else thinks that this seller's 4% deal is going to end now that he's blabbing about it and now that the market is slowing and listings will stay around longer??

Posted by: Anonymous at October 5, 2006 11:29 PM

"I worked almost 2500 hours last year for two-thirds that much."

So maybe you are in the wrong profession? Not to disparage what you do cause maybe you love it. I love what I do too and work hard at it to serve my sellers and buyers. I put up with a lot of crap from buyers and seller and shield my clients from a lot of wackos and unqualified/unserious buyers who just "want to look." So, yes I want to get paid for it and there is a big difference in service between getting a 3% commission and a 5 or 6% one. I will possibly take 3% but I will tell the seller straight up what amount of service that 3% gets.

There are a lot of crappy RE agents out there but those of us who are serious about this work. Who are in it becasue we love the business more than say our next audition. We earn and deserve what we make.

Posted by: morkfrombrooklyn at October 5, 2006 11:52 PM

i guess i would be curious as what a 6% commission would get v. a 3%? that sorta goes against any logic since you only make money if you sell. wouldn't you do the same work to get the deal done regardless of percentage?

i think the internet is harming the profession because of the transparency that a buyer or seller can get via real estate related website. hopefully this increase pressure will weed out the bad brokers from the good.

Posted by: Anonymous at October 6, 2006 12:58 AM

"i guess i would be curious as what a 6% commission would get v. a 3%?"

Mainly advertising. Less money at closing means less money into advertising the property. And with a stabilising market, advertising counts a lot more than during the go-go days of past years. There is a huge difference in profit between 3% and 6% and, believe what you will, the bottom line is this IS a business.

Posted by: morkfrombrooklyn at October 6, 2006 10:13 AM

The guy that sells those shlocky $200 real estate classes drives a big Hummer....I bet it's leased.

Posted by: Anonymous at October 6, 2006 12:31 PM

Paying less than 6% appears to be fairly common outside of NY, and even in NY you can easily negotiate if you avoid the major firms (Corcoran, Halstead, etc.) I paid 4% when I sold my 1-BR condo through an experienced independent agent last fall; the arrangement was 5% if the buyer had an agent, or 4% if not.

With more expensive properties most buyers will presumably want to use agents and the marketing expenses will likely be higher, so paying the full 6% may very well be justified. However, I found that several comparable apartments to mine repped by those larger firms were priced very high - in some instances over $150K more than my apartment despite having an identical floorplan (but on a higher floor).

Those properties also sat on the market months after mine sold. Of course, the seller may not have been willing to compromise; I had to sell quickly in order to close on my new place and settled for less than I had expected, but still a great profit over what I originally paid.

Posted by: eeeck at October 6, 2006 1:12 PM

how do you know if the 4% even got you near your best price? your discount broker most definitely didn't co-broke so you probably got less than you could have.

Posted by: Anonymous at October 6, 2006 8:15 PM

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October 5, 2006

But What About All The Brokers?

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