Challenges of being a real estate agent: No salary floor

Earlier this month, I shared some of the benefits of being a real estate agent.  One of those benefits was the fact that there is no upper salary limit.  What I basically said is that my upper pay limit is up to me, not up to a corporate Human Resources department, and that if I do a great job, I have the ability to make any level of salary.

And while that fact is truly a benefit, it is also one of the biggest challenges of being a real estate agent. As there is no ceiling, there is also no floor. So what does that mean?

It means a real estate agent could make nothing during the year.  Or they could make a very small amount. Or they could earn a poverty level income.  There is no minimum guaranteed income.  Recent statistics indicate the average salary of New York state real estate agents is around $35,000 per year, before taxes and expenses are subtracted.  So one of the challenges of being a real estate agent is figuring out a business plan that will enable a living wage.

In order to make money, a real estate agent needs clients, and needs to get those clients to either a home closing or a lease signing.  That’s it, so it should be simple, correct?  Get more clients, get more closings done, get more leases signed, and you make more money.  Easy peasy.  Rollin’ in the dough!

Nothing is that simple.  To get clients, people need to know that the real estate agent exists.  When buyers or sellers or tenants are ready for that one in five or seven-year event of moving, they have to know to call that agent.  While there is no exact science to measuring the effectiveness of marketing, it could take up to ten or twenty times before someone acts on marketing materials.  So marketing to potential clients has to take many different forms. An agent may need to send printed materials multiple times, meet people in person multiple times, provide an online blog with many posts and data points and market information, and perhaps develop and send out a regular newsletter.

pigIn addition to the marketing efforts, agents may participate in multiple lead systems, where they get leads from potential buyers or sellers who click on a listing and want more information. The agent then needs to contact every single lead, sometimes multiple times over a long period of time before getting a response.  The number of leads that turn into actual clients could be 1 or 2 per 100.  So the agent needs to pursue all sorts of avenues to get those clients.  And in addition to following up on these leads, there could be door knocking, volunteering at local events, talking about real estate in the grocery store, all in an effort to become the name that pops to mind when a person needs real estate assistance.

And then the work to turn that client into a closed deal gets underway.

  • If working with buyers, there could be 10 or 20 (or more) house visits, 1 or 2 offers, and a ton of paperwork. There are deliverables to be completed with attorneys, inspectors, appraisers, mortgage processors, underwriting departments and town offices. Anything can – and has – gone wrong between the start of a transaction and the closing. Sometimes closings don’t happen and everything starts again or the buyer gives up and decides not to purchase.
  • If working with sellers, there is the house preparation, the paperwork completion, the showings, the attorneys, the appraisals and all the things that could go wrong along the way (for example, showings are not allowed, pets escape, keys are lost, sellers want to price too high or buyers back out). Sometimes sales don’t happen and the seller decides not to sell or decides to wait.
  • And then there are landlords and tenants.  The landlord might not want to wait anymore for a tenant who can afford the realtor fee.  The tenant might disappear before the lease signing. Credit reports might be much lower than a prospective tenant indicated.  Landlords might have a last moment issue with a potential tenant’s pet(s).  As with sellers and buyers, there are showings, and paperwork, and legal documents and fees and more.

And all of the work above (starting at “Nothing is that simple”) is done on the agent’s dime and time. There is no mileage allowance or supply budget or hourly wage. So the fact of the matter is that while having an unlimited top level of pay is an incredibly exciting possibility, have no guaranteed minimum is an incredibly challenging reality.  In order for real estate agents to be successful, and to make not just enough to survive but enough to thrive, they must not only work almost around the clock following their own business plan but must be full of patience and a sense of humor because sometimes the pay can be nearly non-existent.

So if you see a real estate agent, ask if they could use a hug. Or perhaps a $20. Because while a benefit of being an agent is the lack of a upper salary limit, a challenge is the lack of a salary floor.

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