The unglamorous life of a real estate agent
The unglamorous life of a real estate agent
By Catherine Cashmore
Tuesday, 10 July 2012
You may have seen various job listings advertising a job in real estate as a sales agent. They are usually adorned with wording to the effect of:
- Want the chance of earning $100,000+ in your first year!?
- Passionate about real estate?
- Like working with people and have great communication skills?
They are all questions most of us would be able to answer with a positive response.
After all, everyone wants to earn a healthy wage.
Nearly all jobs require good communication skills, and as for a passion for real estate? Well, it's quite simply essential to our daily needs! A place for shelter, but also a place to express our territorial instincts, adorning our homes with elaborate renovations played out in both reality and fantasy – either with a trip to Bunnings or through the guilty pleasure of watching one of the many top-rating renovation shows on TV.
However, what is the life of a real estate sales agent really like?
Does it live up to the hype?
Is it possible to earn wages in excess of $100,000 working for your passion, while at the same time enjoying working in the community?
Well not surprisingly like most jobs, the fantasy is hardly representative of the experience. It’s well known most people have a low opinion of real estate sales agents. There’s even an ad doing the rounds that states:
''My son is dead – well... he's a real estate agent.''
Sales agents are branded as untrustworthy and “slimy”, driving around in their fancy cars, which many imagine have been purchased with overly fat commissions taken from innocent vendors for what most perceive to be minimal work.
So I thought I’d break from the norm this week and take a look at the reality behind the life of a sales agent, because once again we’ve had the annual Readers Digest 2012 list of most trusted professions released on which real estate agents barely make the cut above car sales people. In fact they sit just one step above sex workers, which leads to the question: “why would anyone take their clothes off in front of someone they trust less than a real estate agent?”
Having worked as a buyers’ agent for many years, it’s not uncommon to get many customers signing up for the service simply because they don’t want to deal with the sales agents. For the buyer at least, when they meet a sales agent, there’s this uncomfortable feeling they’re “out to get you” – or at least empty your wallet. It was interesting to see an article in New Zealand’s Sunday Star Times debating whether sales agents should be required to tell the truth when representing a property to buyers. In the article, Helen O'Sullivan, chief executive of the Real Estate Institute of New Zealand, was reported making a submission to Parliament that the: “Consumer Law Reform Bill could cause ‘confusion’, rather than protect consumers”.
It follows the premise that sales agents may not always know the truth regarding a listing with one of their agencies. However, no one’s asking an agent to convey information they don’t know. Even if a piece of information relayed to them by the vendor is false, it’s not lying to pass it on – it’s down to the buyer to conduct their own due diligence when it comes to assessment. After all, few would consider splashing a couple of grand out for a flat-screen TV or laptop without doing a comparative analysis of competing offers.
Thankfully – in Victoria at least – the Estate Agents (Professional Conduct) Regulations 2008 - SECT 11, states
All this aside, all you really need to understand as a consumer is: the selling agent works for the vendor. While you won’t get lies, you won’t get the “negative” side of the story, either. No property is perfect – beauty is firmly in the eyes of the beholder – however the sales agent is there to represent the positive, not to point out the flaws.
Is it worth coming bottom of Readers Digest polls?
Well for some, the answer is undoubtedly “yes” – however easy it’s not. There’s no doubt sales agents are somewhat compromised through the “commission only” model – or even the current alternative “flat fee” model. After all, they’re not going to get paid unless they sell the property – even if that means a little “vendor crunching” along the way – and in truth, most vendors have high expectations. What’s the alternative? Perhaps a “pay by the hour” model – pay for service, and take commissions out of the equation.
To last the road, a sales agent must build trust with their vendors. Without it, building up a referral database (the main source of business for any agency) would be impossible. Therefore, existing on a roll call of needless exaggerations is simply not a reasonable strategy no matter what the perception.
Not only this, the common perceptions of real estate agents not working hard are far from the mark (at least for those who desire to be successful).I've often pondered that the advert for employment as an agent’s representative should begin:
“Are you prepared to give up your weekends for the foreseeable future?”
Because a career in real estate - especially when you start – will ask you to do precisely that!
Saturday's will be spent opening houses, conducting auctions (especially if you live in Melbourne or Sydney), trying desperately to tie up a deal so you can report a positive result to the boss during the traditional Monday morning sales meeting.
But it's not just Saturdays you'll give up. Many vendors also expect their agents to be on hand Sunday as well! This means while everyone else is kicking back spending time with the family in shorts and thongs (well, in the summer months anyway!), the local agent will be standing in suit and jacket – rain or shine – donning a smile and welcoming house shoppers and nosey neighbours who only get the weekends to take a squiz at their short list of homes.
But don’t agents get a week day off to compensate?
Well yes, most do, but bear in mind while the agent may have a week day reprieve, it doesn’t mean the phone will stop ringing!
A real estate agent’s business is largely conducted over the phone. Friday may be their day off, but no one else will know it. You may think an agent should just turn the phone off? It's very hard to do when you work in a job solely reliant on commissions.
Turn the phone off, and the buyer calling may decide to contact someone else in the office about the house they're interested in. If so, you won’t get the commission should they purchase.
And even worse – what if it's someone calling for a “free” market appraisal – a potential seller? Well that’s a call you can’t afford to miss.
As for the open home, well merely conducting the operation is a joy to behold. Most agents have as little as 15 minutes to get from one listing to another and against all odds, they can't risk being late! (Not an easy task for anyone who may have noticed that weekend traffic is often worst than that during weekdays.)
The vendor is essentially the agent’s boss, so they won't be happy if the agent doesn't show up for work on time. Especially when they’ve spent the last three hours scrubbing and cleaning in an effort to create a show home masterpiece – all for the sake of a 30-minute open.
Should an agent dare to leave more time in between opens, once they get to open number nine, they’ll be an unhappy vendor wondering why their property is not being opened until 5pm, when everyone else has knocked off for the night.
The 15 minutes must also include finding a parking spot at each end of the street and popping the “open for inspection” boards out (if you live in an area that allows them). For the sake of timing this often requires stopping mid road switching the emergency lights on whilst struggling with a board flapping in the wind.
Struggling with the keys ,setting out the brochures and switching all the lights on – more often than not, with a queue of impatient buyers waiting outside to hand out names and numbers (which often turn out to be false) is another “perk” of the job.
As a sales agent, you’ll have to don a permanent smile while at the same time, pretending the train line running so close behind the house that the whole place rattles as it passes isn't really a negative because you can't hear it when the windows are shut and after all – it’s so handy being close to the station!
Situations like this are all part and parcel of the job.
Nor does an agent turn off in the evenings. Work hours prevent most buyers from conducting private inspections during daylight hours. Yet if they're interested enough to purchase a property, a private inspection is often a must. This means the agent will be required to work late – long after other workers have clocked off.
The agent’s mobile phone number is present on every advert – and most agencies will require the agent to use their existing mobile for business (few provide an office phone) therefore it’s also their personal “out of hours” number.
Most of us wouldn’t give out mobile numbers unless it was to a personal contact – someone we generally wouldn’t mind contacting us out of hours. However an agent happily hands his number to hundreds of people each week knowing full well there’ll be a proportion of those buyers who’ll take full advantage of the privilege. As I said earlier – it’s all well and good turning the phone off – however miss a call and you risk missing potential commission from an active purchaser or seller.
But let’s get to the crunch – what about the $100,000+ a year wage??
Contrary to popular belief, most sales agents are on no more than $60,000/$70,000 a year, and when they initially enter the business, the starting wage is more like $30,000 to $35,000 per year. This is because an agent typically works for a minimum retainer, which when I last checked is little more than $500 per week.
The retainer must cover most expenses, including a smart car and expensive-looking suit – (a well accepted requirement in the industry to at least give the impression of professionalism and expertise.) Therefore it will come as no surprise to learn many agents’ cars are leased, not owned, and the younger ones (in their 20s) usually still live at home.
As for the retainer, well in essence it's little more than a loan. Once a commission is earned, any wages received in the interim will be deducted before it's handed over to the agent. Remember sales commissions aren't commonly paid until settlement, therefore the lag between the accrued retainer and commission can be a number of months.
Average commissions differ from state to state and seem large to the home owner who often hands in excess of $10,000, $20,000 or $30,000 to the agency upon settlement. However the sales agent only receives a small proportion of this – often only 2,000 or 3,000, therefore considering the hours they work it's not all that great.
Furthermore – when an agent initially starts his career in real estate, it’s not unusual for it take up to and beyond a year to consistently earn in excess of the basic retainer. Any hint of a $100,000+ a year salary is firmly reserved for those who’ve weathered through five years or more in the industry, building up contacts and often working seven days a week in the process.
By far the greatest fear for an agent is the whiteboard at the back of the office that shows what each agent has sold or listed for the month.
If an agent falls behind on expected output, the director will start to question his use to the agency. An agent can be sacked with as little as two weeks’ notice if the boss doesn’t think he’s “paying for his desk”.
Yet real estate is a competitive business. It may be easy to pick up listings for the agent who's worked in the industry for a period of years with a substantial database of contacts. However for those starting out, often the only way to get in front of a seller is to literally walk the streets. Knock on doors, post leaflets through letter boxes, while avoiding those with “No Junk Mail” signs for fear of upsetting a potential vendor.
Every enquiry an agent receives from a potential buyer will be followed with the desperate and hopeful question: “Do you have a home to sell?” “Do you require a ‘free, no obligation’ market appraisal?”
Anyone entering the business better have a thick skin to combat all the angry responses and disappointments.
Real estate sales is a highly competitive industry – especially in inner-city precincts. When the initial free, no obligation market appraisal is booked in, most agents will be up against at least two competitors. With the fear of the whiteboard ever present in mind, it's no wonder one agent will aim to promise more than another when it comes to their estimation of the homes potential sales price (commonly known as “buying the listing”).
Once the vendor has signed on the dotted line, the real work begins.
The agent won't get paid a cent if she doesn't sell the property – therefore encouraging the vendor to “meet the market” (known in the business as “vendor education”), no matter what was promised prior to the contract being signed, is, of course, common practice.
Should the agent’s authority period run out on the contract (the period of time the vendor has given the agent to sell the property) before she’s managed to get both the potential buyer and seller to agree on price, then the sales agent will get nothing!
As for holidays, in the world of real estate they are few and far between. Aside from the odd long weekend or Easter break, the main holiday period in the real estate industry is Christmas. It’s the only time an agency can acceptably close.
Therefore, in the run up to Christmas agents will work harder than ever to wrap up sales and line up potential listings for vendors not making the pre-Christmas deadline.
The last thing an agent wants is a property looking tired as it hangs on the internet over the festive break slipping further down the default search list on realestate.com.au.
Furthermore, they'll want to collect as much commission as possible for their own festivities, therefore, a deal done prior to Christmas means extra dollars in the holiday bank account.
All in all the life of an estate agent is a tough one, and only really rewarding for those who truly love, live and breathe property (and there are a few!).
The real dollars come years down the line once the hard yards have been walked and the reputation of ‘experience’ earned. At that stage, the agent in question is often established enough to afford a PA to conduct the weekend opens and answer all enquiries.
Therefore, next time you pop through an open home, spare a thought for the agent, who sits at the lower end of most people’s perceptions, yet lives a reality very different from what you may perceive.
All this aside – we still have to ponder if such extreme commissions are worth the work involved? The agent may not get the dollars involved, but the agency does – and it’s no small amount. At some point the whole role of a sales agent is going to have to be re-assessed if they’re to claim back respect from the broader community. Perhaps “pay for service” is the way to go after all?
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.