We’ve discussed at length over the years what the ideal size for the number of Realtors in America is and most people have been too shy to actually put a number out there. Perhaps because there’s a risk of being wrong, but more likely because of the naysayers who point out that anyone can practice if they want to.
This week, we spoke with Ron Peltier who is the Chairman and CEO of Home Services of America, who was willing to not only say that the number of Realtors is oversaturated but that he has a number in mind of how many is too many (hint: we’re at that number right now).
Peltier said, “The real estate industry currently has too much capacity in all areas whether we are referring to sales associates, brokers and or mortgage loan consultants as well as title operations. When we reflect on where the market is today, we are back at the year 2000 level, which had approximately 5 million existing home units.
To that end, at that time we had a significantly smaller universe of players—approximately 800,000 sales associates— as compared to a high of 1.4 million to where we are now, which is right around 1.2 million sales associates. We need fewer people in the industry and clearly the bottom 30% do not perform. Likewise we need fewer brokers and fewer loan and title providers.”
Peltier continued, “We bubbled up to about 1.4 million members [in 2006]. We don’t need 1.4 million. We need probably 750,000 agents.”
In other words, there are too many Realtors. That’s a pretty big statement coming from someone who offers brokerage service and relies upon agents. Most companies maintain a burn and turn team mentality that recruits new agents, gets their five familial leads before they fizzle off into the land of “incapable of lead management” and go off to the indie brokerages.
Naturally, the National Association of Realtors (NAR) benefits from membership dues even if there is no activity from individual agents. What would happen if NAR allowed agents to freeze their accounts and dues if they have zero closings in twelve months? Or maybe there should be minimum production levels for membership?
None of this will happen because the goal is to increase membership to increase dues, but in a Utopian society there would be ways to legitimately alter membership.
Is a healthy membership level done through educational measures and the boring old “raising the bar” conversation? Is a healthy membership level the responsibility of local associations that are more in touch with their membership? Is a healthy membership level the responsibility of brokers not engaging in mass recruiting of useless agents? Is it the responsibility of agents to remove themselves from the membership if they can’t produce?
How do you think the industry should get to 750,000 Realtors? Or should it be left as it is? Add your thoughts in comments.
Eric Hempler
November 12, 2010 at 5:00 pm
I recall hearing about there being too many Realtor back in ’06. I didn’t realize it was this high. Maybe the half that don’t belong is this business will leave as the economy drags on.
Jim Duncan
November 12, 2010 at 8:53 pm
You’d think they’d be gone by now, but the threshold is so low – educationally and financially – that there is little incentive to leave. Most of the (unproductive) agents aren’t dependent on real estate for any income other than “on the side” money.
The Pareto Principle has been in effect for eons, and this recession isn’t changing it.
We have too many agents – and Realtors – and too few transactions. And I think that that is never going to change.
Note: CCIM has productivity as one of their criteria. Maybe the NAR should look at that (some more).
Jewelee
November 12, 2010 at 5:24 pm
I think there are definately more agents to go around than there is profitable business to go around. I don’t think you can base the gross numbers on how many we should have though. Some agents are perfectly fine with only doing a few transactions per year in their spare time. Maybe they are retired and just help close friends or family? There are also agents like myself who have been licensed for several years but not really producing much. That is OK to me because I am still going through college, working on my second degree and rasing young kids at this time. At this point in my life, I stay active as a Realtor but am not so much chasing leads but rather here for friends and family and their referals until I have more time after my education is finished. I think society will work itself out and those who don’t produce as they would like will either learn how to get leads or fizzle out.
Vito Boscaino
November 12, 2010 at 7:12 pm
Yes there are way too many agents, as the numbers in your story illustrate. Too many players in this industry rely on “headcount” to sustain themselves, whether it is the local MLS organization (monopoly), the state real estate organizations (controlled by lobbyists who favor continued higher headcounts), or national organizations such as the NAR which has no real purpose other than to collect fees based on headcount. Then there are the compounding intricacies whereby the local MLS REQUIRES membership in the state Realtor organization and the NAR. Clearly the agenda here is that all the participants primarily care about is driving up membership levels. Very, very little of this benefits industry participants, and even less benefits consumers. The solution to reducing the size of the herd? Require much higher education levels and performance thresholds in terms of transactional accomplishments in order to participate in the industry. Lawyers face these types of requirements. Financial advisors and brokers face these types of requirements. Healthcare providers have obvious comprehensive requirements in order to practice. So should the practice of professional real estate. Get rid of the part-timers. Get rid of those who are under-capitalized and lack commitment. The whole “Realtor” brand is a farce. It says nothing about the qualifications or success of the individual. Increasing the barriers to entry will help all those who are capable of achieving and exceeding the heightened requirements.
Brianna
November 12, 2010 at 8:03 pm
It seems like the number that matters more is the number of active real estate agents. It seems that all that would really matter is how many agents are competing against each other. If there are a bunch of dud agents, that is the loss of the individual agents not the industry.
stephanie crawford
November 13, 2010 at 3:44 am
It’s not just boom times when the numbers swell. People getting laid off from their “real” jobs can enter real estate easily in down times too. NAR is going to try to get as many dues paying members as possible. Can’t fault ’em for that. But I do like the idea of giving more “props” for education, longevity, and transaction totals. Exactly how to do this; I’m not sure.
Michael Sosnowski
November 13, 2010 at 7:55 am
As stated many times above, NAR has NO interest in the quality of its membership – they are driven only by the overall number.
The reason there are so many realtors is that the market allows them to survive, even if marginally so. If consumers actually considered qualifications and experience would poor performing agents have clients? Probably not.
Paula Henry
November 13, 2010 at 8:23 am
The numbers speak for themselves, there are way too many Realtors. When you look at the numbers, many here don’t even do but a few transactions a year. They have full time jobs and don’t stay up on what is new in the industry. I’m talking little things such as using our most recent contracts, knowing what the state mandated short sale addendum is. It takes more than 16 hours of continuing ed.
Sheila Wall Bell
November 13, 2010 at 8:36 am
As ever, Mr. Peltier has a good grasp of the state of our industry! If all of our numbers were productive (in whatever aspect of real estate practiced), that might change my thoughts. But, as it is, far too many Realtors, Brokerages, Affiliates are not productive and, certainly, not profitable. However, this is nothing new to the real estate industry and those of us contributing must keep vigilant in our production to overcome those who don’t contribute much/not at all/very little!
Marilyn Wilson
November 13, 2010 at 8:17 pm
What I would love to see is a new organization meant only for top producers. The entry stakes would be a lot higher – How about a four year degree or at least an INTENSIVE training program much like CFP (Certified Financial Planners) have to go through. After all agents advice consumers on their most important asset. Why shouldn’t agents be trained and prepared in understanding not only the elements of a transaction, but the financial ramifications of a transaction as well? Why can’t members of this new organization be skilled in sharing market statistics and trends? Maybe there could be a new brokerage model much like UBS or Merrill Lynch use, where the organization supports the professional until they get the equipment of their “CFP”?
The cost of membership would be a lot higher for this group as well – in exchange the organization would promote the RELEVANT differences between Certified Real Estate Professional and just regular real estate professionals. Consumers would be trained to understand members of this group are true professionals. Each member agrees to abide to and be evaluated against a ratings program like QSC (Quality Service Certified). Each agrees to be fully transparent about feedback from their past customers AND the amount of business they have done. Instead of being driven by a political agenda, this group would be driven purely by a commitment to providing exemplary service with a deep understanding of the nuances of real estate.
Anybody in?
Marty Hunt
November 14, 2010 at 10:22 am
While the debate will continue about how many agents are too many, there should never be any doubt that a very large percentage of Realtors handle ZERO or very few transactions. Although they pay dues and are part of the head count and NAR revenue stream, they aren’t really part of the production numbers because there is no production.
This isn’t a criticism of those who renew their NAR membership each year in hopes of hanging on for better times, or those who want to have a license for a personal transaction here and there over the years, or ESPECIALLY the proud Realtor members who have paid dues for many years and are now retired or semi-retired (by choice, not due to the market) and want to continue to support the Realtor brand they’ve been proud to represent over their career. And please, can we stop the debate about the standards to enter the profession or raising the dues so only the “serious” Realtors can belong to the club? Do you think people try to enter our profession to blow a few thousand bucks and fail miserably or do you think they genuinely hope to be successful and have fallen short for one reason or another? And when State regulators and local, state and national Realtor Associations need dues revenue, those who get in and get out DO pay the freight for those of us who are fortunate enough, skilled enough, gritty enough, blessed enough to hang in there!
Some rough numbers and quick observations: We have about 9,000 members in my local Association over the past couple of years; it fluctuates a bit but that’s fairly close and consistent. Add in 2,000 to 3,000 new members and drop off another 2,000 who have dropped out at any point during the year, according to my rough figures we had about 13,000 members who paid dues at some point in the year. Those folks would also have paid NAR dues so there’s 13,000 dues paying members of which 9,000 were actually “in the business” at any given time.
Of the 13,000 members during the year the report I ran shows only 6,700 with any closed transaction sides in calendar year 2009. So nearly half of all agents who wrote a check to the Realtor cause didn’t have a closing. It gets worse…1,700 members had ONE closing in a year, another 1,000 members had two transactions! So about 8,000 of the 13,000 members who wrote a check for their dues actually had between zero and two transaction sides. Hardly in the business, hardly competition…and yes, we can whine about those members skimming transactions from the “good agents” or those are the “part-time agents” that give us the “bad reputation” (PUHLEEEZZZZZZE!!! Some of the biggest producers are the ones who don’t return phone calls, respond to email, etc…in the big picture it’s not the ones who do no transactions that give us a reputation.
So if 8,000 agents out of 13,000 do two transactions or less, that would leave only 5,000 agents who produce a measley three transaction sides or more. I still wouldn’t call that “full-time” but if we need 750,000 agents and have 1.2 million who pay dues I would suggest that RIGHT NOW we have less than 750,000 agents who do three transactions sides or more in a year. I realize I used some extrapolation and suppositions but a member who pays dues is not at all synonymous with an agent who closes transactions.
Thanks for listening:-)
Bill Rovillo
November 15, 2010 at 12:20 pm
Marty, you hit the nail right on the head.
Anytime someone grumbles to me that “there are too many REALTOR’s”, and ” there ‘oughta-be a RULE against that!” I respond with “good thing that rule wasn’t in place when you first got started huh?”
That usually ends it right there………..
Eric Hempler
November 14, 2010 at 11:10 am
It may not be a bad thing to have members that aren’t producing. Wouldn’t the over supply of agents help keep the membership costs down?
Marty Hunt
November 14, 2010 at 1:49 pm
Absolutely Eric. If the non-producing (for whatever reason) members who pay dues would no longer pay, either the dues would have to double or services would have to be cut at the local, State and National Association level.
There’s also confusion about having to belong to the local and state association and NAR in order to have MLS access. I don’t believe that is true but that’s a discussion for another day.
I know there are anti-trust reasons to not talk about dues dollars but what we pay each year to wear the Realtor name and what we pay for MLS services and what we pay for lockbox access/tools is pretty insignificant if one is selling any real estate. My MLS gives me a HUGE positive return on my dues dollars with the consumer web site alone at MyFloridaHomesMLS.com/Marty ! Any lead that results in a closed transaction might be worth, on average, enough to pay my dues for ten or fifteen years! And that’s before I even start with six or eight other very significant tools and technology that return to me at least $50 for every $1.00 I pay in dues.
I understand the value may not be equal in all Board and MLS’s but ours is a profit center for me, not a cost. I think that a lot of agents that complain about the costs aren’t using the tools we have available but that too is another topic for another day.
Steve Nicewarner
November 14, 2010 at 10:49 pm
In the professions [doctors, CPAs and lawyers], the difficulty of the exam increases when there are too many people in the profession. that is one of the ways those professions self-regulate. So if there are too many agents now, fewer would be allowed in until attrition reduced the number to something more appropriate.
Going to that model would be one way we could raise the bar and improve our own professionalism.
Coleen DeGroff
November 15, 2010 at 10:31 am
Lani – I think we need to leave it to market forces to determine how many agents are in the industry. We are a capitalistic society after all. If non-producing agents want to stay in the business for one or two transactions a year, and want to support our national and local organizations financially, then that is their choice. If brokers want to “turn and burn” agents in order to reap their SOI, knowing full well many new agents won’t be able to make a go of it….that’s their business….and I mean that in a financial sense. I don’t agree with brokerages that do this…but if they want to pay $15,000-$20,000/year for each agent, anticipating that they will make a profit on each agent even with this overhead, then that is their choice. If that plan does not work out for the brokerage financially, they will either a) stop doing it, or b) keep doing it and go out of business.
I think we need to worry less about how many agents there are, and more about how we can best serve our customer base. Excellence, like cream, rises to the top.
Al Lorenz
November 15, 2010 at 1:06 pm
Call me old fashioned, but how about just letting the market work it out?
Ruthmarie Hicks
November 19, 2010 at 1:29 am
The exams are too easy to pass and making it harder to become a REALTOR would get a lot of the excess out of the market. This wouldn’t be hard to do – my dogs could probably pass the exam in NYS as it sits now. There are way too many get-rich-quick types that are polluting the arena. They not only suck up deals from their sphere that would be done better by a hard-working agent with no ethical issues – but the ethically challenged along with the dummy factor are contributing to our poor collective reputation. You can let “the market settle this” but then you consign the industry to a fresh new crop of idiots and charlatans year after year. So the “problem agents” will never be truly cleared out.
I’ll give you an example of the sort of agent that needs to go. I blog at a Mom & Pop coffee shop about once a week. One day I ran into an agent that I had met at an open house and she sat down with me. She was obviously down on her luck and I was trying to give her ideas to help her get on-line. When it came time to pay for the coffee – she picked a fight with the barista. Telling the kid the he was ripping her off etc. It’s high end – but anyone with common sense knows that organic coffee blended and roasted on site is no $0.50 cup of joe. She finally paid up and bitterly complained about the price of the coffee. A minute later the barista came to the table and said that someone had stolen from the tip jar. Yup! She had lifted the money she gave him out of the tip jar….A huge row ensued…I left when the other barista started dialing the police….
Ok…have I made my point?