Real Estate Brokerage

NEARLY HALF OF REAL ESTATE AGENTS SOLD NO OR ONE HOUSE THIS PAST YEAR

Consumers Benefit from Researching Recent Agent Sales Experience and Customer Reviews

 |  Press Release

WASHINGTON, D.C. – The Consumer Federation of America (CFA) released the third in a series of studies on the glut of residential real estate agents – too many agents for too few homes sold. [1] The report – A Surfeit of Real Estate Agents 3: Abundant Jobs, Inadequate Mentorship, and Few Sales — found that many real estate companies and agencies indiscriminately hire, then often fail to adequately train and supervise new agents.

“Through lax hiring and training, many companies sponsor agents that have too little knowledge and experience to adequately serve consumers,” said Stephen Brobeck, a CFA senior fellow and the report’s author.  “Home buyers and sellers benefit from considering recent sales experience and customer evaluations before hiring an agent,” he added.

The CFA report examined the annual number of home sales of 2,000 randomly selected agents working for major companies in four diverse urban areas – Central Pennsylvania, Orlando (FL), Tucson (AZ), and Minneapolis (MN).  This research revealed that nearly half of the agents (49%) sold only one or no homes the previous year and that nearly three-quarters of the agents (70%) sold five or fewer homes. [2]

“The residential real estate industry is truly a part-time industry with most agents working sporadically and holding another job, often full-time,” said CFA’s Brobeck.  “There is no other financial services industry or profession where part-time, marginal workers are so ubiquitous,” he added.

Despite the agent glut, most major companies continuously advertise sales positions.  On one major employment website, in five of six urban areas at least one sales position was advertised by all but one of six major companies.  This continuous hiring reflects four main factors:

  • A high agent turnover rate opens up job positions that companies feel must be filled.
  • Newly recruited agents bring with them new clients, often friends and family members.
  • These agents pay fees – ranging from $50 to $400 monthly — that help companies cover overhead expenses.
  • Since most agents are independent contractors not employees, firms have limited liability for the conduct of these agents.

This limited liability diminishes the incentive of companies to adequately train, mentor, and oversee the new agents.  Nearly all national and large regional companies offer training in the practicalities of selling property, but these courses are usually online and not required.  Mentoring programs are infrequent, and those brokers with responsibility for new agents often are given too many agents and too few incentives to adequately oversee.  As a result, notes the report: “The large majority of new licensees apparently are not required to take courses, participate in company training programs, seek a mentor, or receive active broker supervision.”

Moreover, most states do not require more active supervision of new than experienced agents.  Only seven states require stricter supervision, and only three (Colorado, Illinois, Montana) define what this supervision entails.

“Consumers do not benefit from the failure of companies to adequately train and oversee new agents,” said CFA’s Brobeck.  “Incompetent agents impose costs on consumers ranging from missed sales opportunities to disadvantageous sale prices to problematic homes,” he added.

State governments, the industry, and consumers can address these agent inadequacies.

  • State governments can require agents to take post-license courses on the practicalities of selling property (7 states do).  They also can require companies to more closely supervise new agents (7 states do).
  • The residential real estate industry needs to set higher standards for training and overseeing new agents.  These standards would increase agent competence, help ensure a smoother sales process, and enhance the reputation of the industry as well as benefiting consumers.
  • CFA urges home sellers and buyers to research the recent sales experience and customer reviews of agents before hiring one.  The most useful sources of this information are Zillow and Realtor.com.  “Researching agents will not only benefit individual buyers and sellers but also help ensure a more competitive marketplace where competent agents are more likely to succeed,” CFA’s Brobeck notes.

 

[1] Stephen Brobeck, A Surfeit of Real Estate Agents: Industry and Consumer Impacts (July 2023) and A Surfeit of Real Estate Agents 2: Is Entry Too Easy? (October 2023).

[2] The National Association of Realtors projects only 4.1 million sales of existing homes this year.  Between 2007 and 2022, except in 2021 (6.1 sales) these annual sales ranged between 4.1 million and 5.6 million, so that while 2023 sales are low, they are still within the range of the past 15 years.