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that 50,000/4,000 implies that there are only enough listings for 5% of the agents, that is, if each one just HAD one. AS we know one listing won't put food on the table, you can say more like 1% of the agents will survive, if you want to call it that, with 5 listings apiece......sounds like the RE industry is pretty much finished in Phoenix!
Sorry, misread sales for listings....still, the same logic holds.....1 sale per month for 5% of the agents, if it was spread out as much as possible, which we know is not going to be the case. Using the 80-20 rule, you can figure on 1% of the agents making 4 sales a month, 4% making 1, and 95% making none......just as one scenario with the numbers.....you can even skew it worse than that....fact is, there isn't enough to go around for middling agents, such as part-timers, stay-at-home moms, retirees, etc., to even hang around. I would say that 70% of agents will simply stop practicing real estate, per board dues and office affiliations, till their license expires.
Hey, it was a fun ride while it lasted, but the real estate game is certainly over as we know it....now, we have more important concerns, like how our national economy and dollar will hold up/thrive.......
This sounds alot like the dot.bomb days. Computer people everywhere, you couldn't swing a mouse without hitting someone who was a tech. Then all of a sudden the job market went dead and people had to find other work. Looks like many who've jumped on the RE train will now have to change tracks (or take a bus) and find something else. The smart ones will be the ones who realize where they stand and do something quickly. The bigger question is I wonder what this is going to do to people who have listings. Until this shakes out how motivated are the masses of struggling agents going to be to do the proper marketing and invest the money that it takes to sell the current inventory? Does anyone think it's time for the BIC's of the agencys to take a close look at what each agent is doing (or not as the case may be) to move inventory and consolidate the listings of the stragglers? At least this would be one proactive way to protect ones office. As someone who's been through an agent who was not savvy in the current tech or advertising ways it would seem to me that these types would only put a drag on an office and if there's enough of them drag it down.
I have to say I feel sorry for all the agents that got caught up in the re2000 mess, it must really suck but didn't anyone see it coming or was it held so close to the vest that it was a complete surprise?
I think the fallout is far worse than the impact on real estate agents....this is a problem that stems from the lack of viable employment for a large number of people, even with degrees, in the US economy. Many of the downsized tech people went into real estate post 2001, just to survive, particularly on the west and east coast. We basically had two shell games in sequence....the tech one and the RE one. Neither had the proper resources to sustain itself, and sold itself to investors with false hopes of easy and fast profits, which eventually were not in either case able to sustain themelves. The problem ultimately stems from the downsizing in general of US employment. We started by letting our industrial infractructure rot and migrate overseas in the 80's, along with a multitute of living-wage jobs and a union base that is now essentially non-existent. What jobs were left in small and rural areas were eliminated by the big-box malling of America, so you were left with 7 dollar an hour Wal-Mart jobs as the only means of putting food on the table in small towns. Large and mid-sized cities began outsourcing as much as possible per their corporations, and what they could not they largely jobbed out on a contract basis(temp agencies). So, the question is, now that the tech boom busted, and the default option, RE sales, is defunct, and we have outsourced everything but the kitchen sink, what next? Hustling our booties on the street or corner park? Selling tupperware or amway products? The mind boggles with the possibilities!
The 4000 is the number of properties, and there are two transactions sides to a property; the listing side and the buying side. So to be technically correct, there would be 8,000 transaction sides to 4000 properties.
Also, the foreclosures, which are not shown there, are purchased by licensed wholesalers who sell them to investors who use agents. So, while there are also many properties that don't show on the MLS inventory, there are also many transactions for agents that don't show up there either.
It's a pretty well documented fact that about 20% of the agents do 80% of the production.
Many of the 50,000 agents are people who maintain a license but are retired or inactive. Some have licenses because they're investors and may operate and manage their own large multi-unit property. They don't work as a sales agent. I know many like that. One person I know is a builder of custom homes (one at a time). His wife is an agent and the only sales she does is the home that he sells after completion.
Still, there are too many agents who have their license hung with a broker who are not serious about the business, yet they add to the competition and make it harder for the really good agents who are extremely serious and consciencious about the business and their clients.
The good agents (the 20%) are still making a living, although their income has most likely been reduced to varying degrees.
It is the low bar to entry and other issues that I won't get into, that create a large number of non-productive or low producing agents.
One problem as I see it, lies in the lack of educating agents prior to them becoming licensed. Education both in the real estate business, and in how to operate a business. Many new agents have no idea of how to run an independent contractor business, nor how much it will cost them to develop and execute a business plan.
Consequently, these agents will opt for a 50/50 split so the broker provides some help in promotional material. However, without knowledge of the business, they don't develop a business plan and they can't properly market to get business, so these agents become a drain on the company finances.
I was at another Remax office yesterday and one of the first questions the broker asked me is "do you have a business plan". When I said yes, he said that 90% of the agents he asks that question to say "no".
The dot.com era is not comparable to the real estate business. That was a situation where many tech savvy entrepreneurs were able to get tons of investor seed money to invent and develop tech products. They hired good tech nerds, offered them stock incentives with low wages, and they worked around the clock trying to develop their business. These people were dedicated, and many of them became hugely successful.
One of the big problems in that era was that they were spending op's money like it was going out of style, and they drove the prices of office space through the roof throughout Silicon Valley and San Francisco. Then the money dried up so the era came to an end.
Neither is the comparison of the travel agency to realtors a valid comparison. If anyone knows a little about what services the realtor provides then it's obvious that this is an apples to oranges comparison.
Some years ago (I believe around 1997), the fee for service model had 18% of the market, and now it's gradually dropped to about 9%. It was widely thought that this model would take over. It didn't.
The problem I see is that the consumer does not know exactly what they are getting with that fee for service model. That's probably why Texas enacted the law requiring a minimum service level for listing on the MLS.
The full service agent who tries to do fee for service as an alternative may run into serious legal problems in this manner also. That's because if s/he's discussing full service with a seller, and the seller opts for less than full service, that client will remember much of what was offered as full service, and may later claim that he/she did not get what she paid for. In this litigous society, we must be aware of that possibility
The full service agents who have their fee based on a solid business plan where they know how many transactions they need in order to cover their expenses and have a profit, will hold to their fee (whatever they know they need) and not discount it because they know that the discount comes straight out of their profit. If they don't have a business plan, then they won't know that they are in trouble until it's too late.
Whan an agent discounts three clients each by 33 1/3 % which is typically what a customer asks for, then the agent must add three clients to make up for that lost profit. However, it's not quite that simple.
Adding three more clients means using more hours of his day to service them. It also means spending more time and money to obtain those three additional clients. Because of the time and cost of obtaining one extra client, it actually requires the addition of four clients to cover the lost income from those three.
I basically see the Remax 2000 issue as a the result of a too rapid expansion and the opening of too many offices. Each office creates a lot of overhead. Perhaps almost the same growth could have taken place with a smaller number of offices, in order to keep overhead down.
In addition, I can speculate that there may have not been sufficient internal audits so as to recognize a potential problem immediately. Agents not being able to pay their monthly fees is only a part of the story.
It's pure conjecture for anyone to say the RE industry is doomed because one office, or a few has a problem during a high inventory correction period. There will be others that will have cash flow problems, but if they are auditing properly they'll scale back their expenses early and adjust.
The RE market in about 5 states had a rapid growth and therefore has a high inventory that will be corrected. It will create problems for some brokerages and agents, but it will correct. This is not dooms day for the RE industry, and should not be predicted as such.
As I mentioned in an earlier post, the only reason this made the local and especially the national media is because the name Remax is an international name. So many people don't realize that Remax 2000 is an independently owned franchise with only 350 of the total 59,000 agents in the Remax international family.
Not once during the quick blurbs of coverage did the press clarify that this is an isolated incident with a small local company. Instead they played on the huge internationally known brand name of REMAX.
They only showed Dave Linegar a few seconds on the air. He cut short his discussion with the agent meeting to keep an appointment with them, and they spoke with him about 30 minutes. They also only gave Bob Kline, the Remax 2000 owner a few seconds.
They gave more coverage to the woman who was doing the yelling, because that was more "sensational", which is typical of their sensationalism method of reporting.
They spoke with her on two occasions; once before the meeting began, and again after she stormed out of the room. They followed and spent another 20 minutes with her.
I'm not speculating on the validity of her complaints. I'm only speaking to the method of reporting that the press uses.
They took shots of people cleaning out their offices, but didn't interview any of the people who could have given balanced information on the situation.
It would have been more responsible reporting had they clarified that Remax 2000 is a small company in the Remax family. But instead they left the impression that all of REMAX is in trouble. That type of reporting is damaging and irresponsible.
Had this been Joe Blow's Realty with 500 agents, it would not have made the local news.
Last evening they gave a very quick follow up blurb on this just to make a brief statement that the company was going to reopen some offices. But that wasn't "sensational" type news and wasn't worth over 10 seconds to the press. They had already done their damage.
It wasn't worth it to the press to report that all of the Remax offices got together after the general meeting and discussed ways to assist Kline to get back in operation. It wasn't worth it to them to report that there was agreement that there would be some liquidation of offices to some other franchises so Kline could reopen in a smaller fashion and save jobs of the dedicated office support staff and bring back agents who wish to remain.
So let's not be like the media and blow things completely out of proportion.
Bill
Well said....I think it simply stems from a lack of viable job opportunities now. What real alternatives do many people have per making a decent living that are not on a career path? At one point the US economy was very forgiving per either a lack of a degree, or a viable degree, per reasonable job opportunities. Now, either you have a very pragmatic career path going, and you are sticking to it, or you are lost in the woods of temp agencies, retail 7 dollar an hour jobs, and hyped-up opportunities like the RE was, as it was sold to those lost in the woods folks since '01 or so. Simply, if there were the job opportunities out there like there were in the past, you would not have so many agents in the "business".....The RE industry was never meant to absorb so many agents in the first place. It was as much greed on the part of the majors, such as Coldwell, C-21, the large regional majors, and such. They saw an opportunities to fill desk space(sometimes trippling agents on one desk), and cross-sell their proprietaty mortgage and title companies, while working the numbers game. This business is a local one, after all is said and done. When 50% of US transactions are processed out of Parsippany, NJ., something is wrong. When the majority of mortgages are originated out of CAlifornia, rather than local banks and savings and loans(pre '89), you have problems. The fact is, RE is just a local industry, and should be a locally funded industry, after all is said and done. When it became a large corporate enterprise(Re cendant, re/max, and such), it jumped the shark already. It was just a matter of time, then, before the corporate interests and monies hyped and oversold what was essentially a quiet, laid-back, local enterprise as something dynamic and mega money-making, poured far too much money into the hype, and eventually consumed it, destroying the locally based RE industry, just like the big-box franchises and restaurants destroyed the local stores and eateries......I think the only alternative is to completely dismantle the franchise structure, I mean completely, and go back to the local, slower, but more sustainable ways of selling real estate.
I speak the God's truth here, and I certainly don't expect any agents brought up in the days long after the national corporate interests took over local RE to agree, but thats the way it is. Time to say so long to the major and regional franchises, following Cendant's lead as it has so convenienty become defunct, and go back to the mom and pop corner RE office....
Hey, it was a fun ride while it lasted, but the real estate game is certainly over as we know it....now, we have more important concerns, like how our national economy and dollar will hold up/thrive.......
No it's not.
I have been in real estate for 40 years - this is the 4th cycle I have been through - exactly the same thing - same routines - same shaking out
The 4000 is the number of properties, and there ".
The dot.com era is not comparable to the real estate business. That was a situation where many tech savvy entrepreneurs were able to get tons of investor seed money to invent and develop tech products. They hired good tech nerds, offered them stock incentives with low wages, and they worked around the clock trying to develop their business. These people were dedicated, and many of them became hugely successful.
One of the big problems in that era was that they were spending op's money like it was going out of style, and they drove the prices of office space through the roof throughout Silicon Valley and San Francisco. Then the money dried up so the era came to an end.
Neither is the comparison of the travel agency to realtors a valid comparison. If anyone knows a little about what services the realtor provides then it's obvious that this is an apples to oranges comparison.
.
Bill
I get the impression that NOTHING is comparable to the RE business. It seems to be so special that it is beyond comparison to any business enterprise that has ever gone defunct/changed with the times/downsized. I think I have the answer to this. Business is Business........supply, demand, costs, profits, taxes, incentives, etc. all is the same.....Real estate is a business as well, last I heard anyway. It can overshoot its capacity just as easily as the other enterprises that have folded in the past have, and not just the usual .com or travel agent suspects. When you have too many people in the business, too much money chasing profits(Very germane to the .com bust, BTW, per all the money poured into the mortgage market), and not enough assets to sustain the enterprise, you have a classic overshoot....this industry was so overhyped and oversold it was just bound to collapse as it has. A more apt comparison, to spare the apples and oranges worries, would be ecological overshoot of habitat. If you graze too many animals in an area with finite resources, nature will do the job of culling itself. No apples and oranges here, as we are as part of nature as any other creature, and subject to the same culling per overshoot, whether RE or a pond in the Adirondacks.....Too many feeders + finite resources = rapid and complete
culling of feeders............
Talent Vacuum Sweeping Real Estate
by Blanche Evans
If you think there are too many Realtors, a new report by Deloitte suggests otherwise. High turnover rates and an aging workforce will soon result in a huge global talent shortage for residential and commercial real estate companies.
There will also be a hole in the number of first time buyers, as this demographic filters its way through the home buying cycle, which should
even this out. The rest will be web-mediated, per the lack of agents.The job opportunities are so small out there that if there is even a glimmer of a chance of making money in RE, there will be no shortage of agents whatsoever.... I'm sure all the agents leaving the business the next two years will be heartened by Blanche's analysis........
Do you ever get tired of flogging this dead horse?
Well, It looks like you live on here, so I'd say your staying power is unparalleled! And yes, its a dead horse, and no, I don't get tired of it, anymore than the media does......I think the whole nation is wrapped up in the whole real estate implosion......and it has repercussions that bubble up to the entire economy.....I don't get tired of it because I see it as the greatest hype and fiasco in the entire history of the American economy, even eclipsing the touting of stocks in the great depression.....and even more mind-boggling is how many agents still deny that this is happening, or think it just a passing thing. It won't be long before I DO get tired of it, though. A multitude of agents will be going through a very tough transition, particularly those in middle-age who will find it trying to retool their skills while paying the bills/raising a family. That I feel very bad about. Per that situation, I don't think I'll be "beating the horse" much longer. Then we can let the agents left sort it out for/amonst themselves, per the long fallout and reorganization of such.........
I have been in real estate for 40 years - this is the 4th cycle I have been through - exactly the same thing - same routines - same shaking out
Sure its the same.......but real estate was local then, and wasn't a driver of the national economy. RE equity wasn't an ATM machine for families then. Buyers put down 20% or more, and weren't leveraged to the point that foreclosure loomed as a possibility. Home values were also relatively affordable, not the insane appreciation that has skewed up far faster than incomes. Finally, home values are declining, and that hasn't happened since the great depression. This is a markedly different cycle than any of those other 3, which will redefine and completely rehaul the RE industry. Finally, there was no web during the other 3 cycles(I presume you are referring to the .com bust, early 90's, and early 80s as the other three major trough cycles). Per the.com bust, web-mediation was just getting started. Its a whole new game out there, my friend.....those rules per the other 3 cycles no longer apply......
Last edited by socrates1234; 12-28-2007 at 12:04 PM..
Sure its the same.......but real estate was local then, and wasn't a driver of the national economy. RE equity wasn't an ATM machine for families then. Buyers put down 20% or more, and weren't leveraged to the point that foreclosure loomed as a possibility. Home values were also relatively affordable, not the insane appreciation that has skewed up far faster than incomes. Finally, home values are declining, and that hasn't happened since the great depressing. This is a markedly different cycle than any of those other 3, which will redefine and completely rehaul the RE industry. Finally, there was no web during the other 3 cycles(I presume you are referring to
the .com bust, early 90's, and early 80s as the other three down major down cycles). Per the.com bust, web-mediation was just getting started. Its a whole new game out there, my friend.....those rules per the other 3 cycles no longer apply......
I disagree -
The era of "creative financing" ushered in the No Down - seller carry's - 80/10/10. Negative Am loans. No income qualifiers etc
Same as what we just went through -
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