Rise and Fall of a Real Estate Agent

5

A few days ago I bumped into someone I hadn’t seen for quite some time. Bob (made up name) was a real estate agent I had come to know through networking. I first met him a few years ago just as the Las Vegas real estate market was starting to decline. Bob had been fairly successful and was fond of preaching the virtues of Las Vegas; he had a myriad of reasons why the decline would be very short-lived. While I never gave any credence to his theories, it was quite apparent that he truly believed them.

Interesting Background

Like many real estate agents, Bob jumped on the bandwagon as the market heated up and obtained his license; he had been selling cars for a very busy foreign car dealership. He was a middle of the pack salesman and made approximately $40,000 per year. He told of how real estate salespeople were coming in and buying high-end cars and it got him to thinking. Why couldn’t he do that? By his calculations he could replace his income by selling just one house every few months. To Bob this was a no-brainer.

Bob didn’t know very much about real estate. He certainly didn’t understand investing and was not very good at managing his own money. However, he did have two attributes that served him well – he worked hard and he was very likeable. Bob became an agent at the time that hairdressers, bartenders, landscapers, and the like jumped into the market and fancied themselves “investors.” The “greater fool” theory was in full swing and Bob had no trouble selling those fools real estate.

Bob’s personality and work ethic translated into many sales. In his first full year in the business Bob made more than $200,000 — five times more than he had ever made before. Las Vegas was the land of milk & honey and the real estate boom seemed destined to go on forever. We all know how that worked out.

Reality Bites

As I said earlier, Bob was not very good at managing his money. Rather than use his vastly increased income to get out of debt and prepare for a better tomorrow, he did just the opposite. Through his auto connections he came across a great deal on an almost new Mercedes SL300 convertible. That steal of a deal set him back a cool $85k. Of course, he financed it. Rather than pay off his mortgage he purchased a new house in a high-end golf course community. While his new home set him back a little more than a million dollars, it was virtually risk free because real estate only goes up. It does only go up, right?

When the market started to turn he did one smart thing. He sold his new home at a profit and purchased a less expensive home. Unfortunately it was still too much house for his income. Speaking of income, he went from almost three years of income in excess of six figures to income of zero virtually overnight. While he waited for the recovery he was sure would inevitably come, he maxed out every piece of credit available to him including his home. That hoped for recovery never came, and Bob lost it all.

Back at Square One

Bob finally gave up the real estate ghost when his wife threatened to take their child and leave. He turned in his license and wound up losing his house, car, and just about everything else. Not only did he have nothing to show for the half million dollars he had made in the three years he spent in real estate, his net worth was actually less than it had been when he started. Instead of owning a modest home with some equity, he now lived in an apartment. He has no savings and little in the way of possessions.

He learned a valuable lesson.
All the flash, glitz, and status meant nothing. He discovered that the things that truly made him happy were his wife, daughter, friends and health. He still had those things. So where did I bump into him? He’s selling cars again.

People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made. – Joan Rivers

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5 Comments

  1. Amazing story! So many of the realtors I deal with now were at one time ‘New Homes Sales’ agents and now are sending me their short sales from the same homeowners they sold too in the beginning. Even more crazy is I’m shorting those agents houses as well.

    Its sad but very true, even for investors who were riding the pie in the sky train during that time. Lessons like this actually do have a price tag, as Bob has figured out.

  2. Nice post, Rich! This is more proof of how absolutely imperative it is to watch your pennies, particularly during challenging economic times. That said, it is nice to know that your friend knows what is most important in his life. More people need to realize the importance of friends and family over sheer materialism.

  3. Richard,

    First off, love the graphic in your post!

    Also, I wanted to say that this story hit home a bit for me.

    I spent a few years as a Realtor. I still have my license but I do not actively trade in real estate any longer.

    When I got into the business, there were many people entering the business who were thinking that they could make enormous amounts of money.

    Due to the rising market at the time, many of these people did make a lot more than they were making at the old jobs. Sometimes, 3 or 4 times as more.

    A lot of these people had no idea how to manage their money. They would make a whole bunch of money and then spend it on useless things, namely flashy cars.

    The market that I worked in was quite superficial, as such, each Realtor thought that they had to have a sweet looking ride so that they would be taken seriously by prospective buyers and sellers.

    I witnessed a lot of mismanagement of money.

    Very nice article.

    Best Regards,
    Neil.
    .-= Neil Uttamsingh´s last blog ..2 big fat reasons I don’t want to be a real estate investor anymore =-.

  4. Allen E Douglas on

    Wow ! That was some story !
    Iam a Realtor and Licensed Builder, and I got into Sales when market was declining, so if that was to ever happen to me, I have your story to go by ! I hope Bob gets back in when the Market turns around this year ! Well I just bought a “Corvette” last year but I will continue to manage my money properly ! Thanks.

    Allenedouglas (Realtor / Builder)

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