Real Estate News & Commentary

The 3 Biggest Drawbacks of Being a Real Estate Agent in This Day and Age

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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Despite the title, being a real estate agent is great for many people, I’m not denying that. Real estate in general is a great industry to be in, and I’m glad as hell I pursued this career path. I’ve been working with many agents and other people in real estate, and I’ve learned a few things along the way. It changed my life and it can change yours, too.

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Over the past five years, I have done over 400 deals, and that experience has brought me into contact with mortgage brokers, title companies, lenders, insurance providers, and other real estate agents, leading me to a draw a few conclusions. Basically, there are three drawbacks to being a real estate agent in this day and age: first, agents are gaining a stigma akin to a used car salesman; secondly, they have to split commission with a broker who does little or no work; and thirdly, many agents who have no leads themselves blame their brokers for their problems. Let’s take a look at each of these problems in a little more detail.

Problem #1: The Stigma

We’ve all heard jokes about real estate agents at dinner parties and social events. They appear to have become part of the fabric of societal stereotyping: the greedy, unethical real estate agent now sits comfortably alongside that dodgy, lying used car salesman, both trying to sell you a subpar product for an over-inflated price in order to line his own pockets.

The real estate agent, however, unlike the used car salesman, is not only ripping off the buyer but the seller, too. He’ll deceive the buyer by not disclosing certain details about the property, exaggerating the school system in the area or lying about the number of offers already on the table. But he’s not doing this for the benefit of the seller, either. People now see the real estate agent as working hard to close the sale because he wants to claim his commission, regardless of whether he is getting the seller the money their property is worth.


Related: How to Be a Rockstar Real Estate Agent: 9 Tips for Standout Success

But where has this stereotype come from? In terms of a real estate agent’s lying reputation, it’s no secret that when selling anything, it makes more sense to point out the good aspects and ignore the negatives. The reason this is seen as such a treacherous tactic for a real estate agent and not, say, a cell phone company pushing an iPhone on you when other brands offer more features, is because there’s simply so much more money involved in property.

As for the latter point, some of you may be wondering how on earth a real estate agent could possibly rip off the person for whom they helped sell a house. Well, think of it this way: A real estate agent typically charges 6% commission on each property. If he’s selling a house for $250,000, that’ll give him a tidy $15,000 of his own once the sale is complete. But say the bid comes in at $240,000. That leaves his commission at $14,400. If the lower offer were to be accepted, the home owner would be down $10,000, but the real estate agent would only have lost out on $600, a negligible sum in the long run, meaning he has little incentive to hold out for a higher offer.

Thanks to these two perceived tactics of real estate agents, dishonesty and greed, the profession has become the butt of jokes, the reputations of even the hardest working agent damaged from the seemingly never-ending stream of accusations. This is most definitely a problem!

Problem #2: Working With Brokers

In case any of you are confused about the difference between a real estate agent and a broker, I’ll quickly define the terms now. A real estate agent has taken classes and passed a state licensing exam, giving them permission to operate within that state. A real estate broker has become a real estate agent and then done a few more classes and taken another exam — the broker exam. The difference that one extra exam makes when it comes to work is that the real estate broker holds a license allowing them to work independently, whereas real estate agents must work under a broker.

So basically, one cannot be a real estate agent without being in the employ of a real estate broker. Real estate agents are utterly dependent on them, and they know this. This is why they get away with taking a significant cut of every real estate agent’s commission to keep for their own, often whilst they sit in their corner office and watch everyone else work, enjoying their floor to ceiling windows and that obnoxiously large potted plant. OK, perhaps I’m tarnishing every broker out there with the same blackened brush. There are good, hard-working, brokerages out there, my own company included. But in my experience, there are also many in the market today who are not earning their commission, but rather stealing it from hard working underlings.

Related: How I Finally Realized as a Real Estate Agent That the Money Isn’t in Selling Houses — It’s in Buying Them

“How do they get away with it?” I hear you cry. Well, it’s because current licensing rules mean that real estate agents need a broker. And with the real estate arena becoming an ever more popular career path, brokerages are being handed more and more power. With qualified agents competing for limited positions within agencies, many brokerages are now even requesting bachelor degrees to secure work. In today’s volatile job market, new real estate agents are not in a position to put up a fight when their broker takes half of their commission made on a sale they had no input in — not if they want to keep earning something, at least.

And this is what really irks me and others in the business. Perhaps we could forgo them the fact that they take a cut if they actually contributed in any way to the closing of a deal. But in many cases, a broker has not even lifted a finger to assist their agents on their sales. They may throw a few leads out here and there, but the majority of the legwork is done by the real estate agents themselves. They earned that commission; they should be allowed to keep it. All of it. The fact that they don’t is a problem!

Problem #3: The “Lazy” Reputation

Possibly in contradiction to the minor rant about real estate brokerages you just read, I’m now going to complain about real estate agents who complain about real estate brokers. Confused? Yeah, me too.

Basically, despite all that talk about brokers not pulling their weight, at the end of the day, it is the individual real estate agent’s responsibility to find leads for their properties. And some real estate agents, when they have no leads, blame their broker. Now, in some cases, they may be entitled to do so. Brokers are expected to provide certain training and support, so if a new real estate agent doesn’t receive this, perhaps I can understand their complaints.

But it’s also up to the individual agent to build their own reputation in the local housing market. Some people have chosen to enter this line of work because they think every house will be a million-dollar listing, which will just land them easy money, but this business is so much more than that. It is the lazy attitude of a select group that is leading to our overall lazy reputation (and perhaps our used car salesman reputation, too). And that’s the final problem.


A Lazy Conclusion

Perhaps the overarching theme of this post has been laziness, whether that is the laziness of a broker who is willing to let their agents do all the work while still reaping in loads of cash, or the lazy agents themselves who work only to put money in their own pockets and not for the benefit of their clients.

Laziness should not be tolerated in any workplace, and that goes for real estate too. A good broker should do the following for their agents:

  • Provide training
  • Provide support
  • Offer leads where appropriate
  • Help agents with branding and advertising themselves
  • Oversee transactions

And in return, agents should do the following:

  • Go door to door to drum up business — how else are people going to know who you are?
  • Hand out flyers
  • Give out business cards
  • Go to relevant Business Network International events and meet people
  • Help out in the local community — show them you’re a nice person!
  • Oh, and sell houses

Basically, it’s all about getting your name out there and becoming known to the local community. This doesn’t happen overnight and cannot be done by a real estate broker. It must be the agent themselves pounding the pavement. It takes years of hard work and commitment to establish a client base and a book of business. And yes, it’s a competitive market. Yes, there are lots of other young, eager real estate agents looking to make their fortune.

But don’t do what many of them will do and sit back on your laurels expecting your (hopefully) experienced broker to drop listings and reams of potential buyers on your desk. Get out there yourself. Find your own clients, establish your own reputation, and maybe, one day, you’ll be heading your own real estate brokerage. Just don’t be lazy when you achieve that goal, OK?

Real estate agents: Do you agree with this assessment? Why or why not?

Let me know your thoughts with a comment!

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Mona Lisa Harrison Realtor from Greenville, SC
    Replied over 3 years ago
    I thought this was going to be an article about why investors may NOT want to hold a RE license. I agree that agents generally don’t have the best rep. But just like in any profession, there’s good, bad and ugly. I’ve been an agent for 10 years. I’ve worked for large national brokerages and small ones. I am presently at a brokerage that allows me to pay them $200 a month and keep 100% of my commission. I don’t depend on them for anything except keeping me and the paperwork legal. This also provides me with great flexibility when working with my clients. The comment about an agent making 6% is misleading. The seller’s agent only gets half of that usually and that 6% can be negotiated. There is no “set” commission percentage. The buyer’s agent gets a percentage too. A seller or buyer can “fire” their agent anytime they are not doing their job. And that is what you should do if you are not getting the service you need. I tell my clients they can fire me anytime they feel I am not doing my job. Overpricing, underselling, and other tactics used to presumably “get to the closing” will end your career quickly. With so much information available online to consumers, it doesn’t take much research for consumers to determine values, check out agents, or find a new one.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 3 years ago
    Thanks for your comment Mona Lisa, I actually own a 100% commission brokerage that only charges agents $199 per month and we also offer a kick A$$ referral program so I very much understand the concept. Not sure why you got stuck on the 6% and are calling it misleading as that is usually the industry average and a ton of brokers enforce a 6% minimum percentage fee. Most clients don’t know what a good or bad agent should be doing and thus don’t understand the games that some of them play. And to my point about the STIGMA surrounding many real estate agents. This is just my opinion off course. Thanks again and much success.
    Douglas Larson Rental Property Investor from Salt Lake City, UT
    Replied over 3 years ago
    Good insights!… As an investor for 17 years, in 3 different states, I have seen the good, the bad and the ugly. I am not an agent and have never held a license. That means I have a lot of freedom, and less liability, but I do rely on agents and brokers to facilitate many buy and sell transactions. The good ones will always gain loyalty and word-of-mouth business. The bad ones will find themselves in trouble with clients, other agents or with their licensing boards. Hard work, ethics, market knowledge and good organization are all keys to success for agents and brokers… and investors!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 3 years ago
    Thanks Douglas and 100% agreed Loyalty, Honesty, No Greed and Respect are a few things to look for in a good agent. Much success
    Chris Soignier Real Estate Broker from North Richland Hills, TX
    Replied over 3 years ago
    As a REALTOR®, I can’t control the perception of my occupation. I can only be the best, most honest, and ethical agent I can be, and build/protect my individual reputation. Your stated problem #2 is very out of touch IMO. Brokerages are VERY competitive in trying to attract agents, esp. the more productive ones. To retain talent, they have to offer perceived value for their fees, or their agents will walk. Switching costs are low, and I’ve never heard of a brokerage that requires degrees or takes anywhere near 1/2 of commissions. My broker does a lot of work and incurs a lot of liability for a max 20% of commissions, and can go to less than 0% depending on volume. I’ve never heard of a broker requiring a degree, and my MBA isn’t worth anything in terms of employability in this line of work.
    Engelo Rumora Specialist from Toledo, OH
    Replied over 3 years ago
    Thanks for your comment Chris, I am sad to say that your situation is very unique and that most brokers offer NOTHING (Value) but take away EVERYTHING (Commission). I’ve been listening to agents talk about the above mantra for over 4 years now and that is why I decided to buy my own brokerage and hopefully do my part in making a change to that stigma. Much success
    Jonathan Sammarco Investor from Boston, MA
    Replied over 3 years ago
    Realtors absolutely kill me
    Engelo Rumora Specialist from Toledo, OH
    Replied over 3 years ago
    lol Not all mate but many killed me also hehe Especially back home in Australia. Have a great day