The National Association of Realtors recently commissioned a study by industry expert Stefan Swanepoel called the Danger Report (definitive analysis of negative game changers emerging in real estate). In his report he cited that the number one danger to real estate agents is the “large number of part-time, untrained, unethical and/or incompetent agents”. He goes on to suggest that one of the main reasons for this is the low barrier of entry to the real estate business. As an agent for more than a decade, I couldn’t agree with more.
The study shows that on average, to become a licensed real estate agent in America requires only 70 hours of instruction or education (one state only requires 13 hours!) He compared that to the average education requirement of 372 hours involved in becoming a cosmetologist. So if you think about it, you are far more likely to find a true professional to do your hair or makeup than you are in finding a qualified, competent and professional real estate agent to trust the sale of your family’s most important asset to.
The lack of professionalism among my peers was one of the main reasons I almost left the business before starting Terrace 24. Not only because I was sick of cleaning up the messes left by other part time, incompetent or just plain unprofessional agents, but because they gave me and all of the good agents out there a bad name. There are far more incompetent agents than there are professional, full-time agents.
Nearly every real estate transaction I’ve completed had another agent, on the opposing side, representing the Buyer or Seller and after hundreds of deals, the number of times I can honestly say that the other agent’s client was well represented is way too low, and the scary part is that most of the clients had no clue as to the risk their agent had exposed them to in the deal, or how unprofessionally they were being represented.
Why is it allowed?
The traditional real estate brokerage model is built on the “warm body” principal. The more agents a broker can get to hang their license with them, the more money the broker makes. Agents are responsible for getting their own business and brokers usually get a cut of every commission one of their agents brings in. Not only that, but brokers usually charge their agents other monthly fees for use of their office and resources. Even if the agent is a part-timer, who only does one deal a year, its no skin off the broker’s back. The broker is getting a nice chunk of money off that one deal and they have a monthly cash flow stream with that agent’s office dues. If the agent has a great year, then even better for the broker. So the interview to hire an agent consists of one important question…do you have a heartbeat? Brokers would make much less money by increasing the standards of licensed agents. Increasing the standards in this industry is the only way consumers will truly know they have trusted their investments to competent agents.
The National Association of Realtors can always lobby to increase professional standards but they exist on the association dues their members pay. This clearly isn’t a system that is a “checks and balances”. Everyone in the industry makes money off more agents being in the industry so no one will lobby for agents to have higher standards.
You might be surprised to know that licenses are doled out by the state, which dictates how much education is required to obtain and hold a license. In Georgia for instance, 75 hours of pre-license training is required before you can take the test that is far too easy. If anyone were to mandate more education, it would be the state licensing authority, but any talk of increases is met with opposition by the Realtor associations at state and local levels because it will make it harder and more expensive for their members.
So for now, it’s up to you Mr. and Mrs. Seller or Buyer, to do your research. Ask the hard questions of potential agents. There are plenty of excellent agents out there, and a good agent loves answering the hard questions. The incompetent hide from them and depend on the old tactics of guilting family and friends into using them.