If you are reading this, it is likely you are thinking about making a full-time career change to real estate, or perhaps, looking at real estate as a source of additional income. A common question involves whether there is enough business for every agent to make money. We will definitely answer this important question in detail. (Hint: The answer is, “there sure is!”)
The demand for competent real estate agents has always been high; these last couple of years, at record levels. While employment in other fields declined during the pandemic, real estate saw a boom fueled, in part, by historically low mortgage interest rates. As a result, more buyers realized that purchasing a home was well within their financial reach.
According to a recent membership report of the National Association of REALTORS® (NAR), there are approximately 1.5 million association members. Other statistics indicate that there may be double that number of total licensed real estate agents. There do not appear to be any reliable numbers indicating what percent of licensees actively pursue real estate as a career. It is believed, however, that a significant number of licensees may have only a few transactions per year or be inactive.
Let’s take a look at how much business is available. Depending on which statistics you use, between 6.12 million and 6.9 million housing units were sold in 2021. If every agent worked the exact same number of hours, and applied themselves equally, there would be less than five available transactions per year for each agent. For a serious-minded new agent, the competition is less than they think. As we just read, not every licensee works the same number of hours or applies themselves equally. By personal choice, many agents only invest a little time in real estate listing and sales activities. This leaves a significant volume of available business for highly motivated, active, full-time agents.
We’ve all heard or read that in most sales-oriented professions, 90% of the income is realized by 10% of the salespersons. Based on statistics developed by NAR, there is some truth to this. Our experience with thousands of new real estate agents spanning several decades of running a real estate school tells us that any new real estate agent (like you) has the potential to join that 10% by simply treating their business seriously.
The COVID-19 pandemic was unlike anything we experienced in our lifetimes. Many businesses were shut down, offices closed, and employers had to lay people off. People working in retail, restaurant, and other service industries were hit the hardest. Fortunately, real estate was deemed an essential business which allowed agents to continue working. At the same time, the demand for housing was at an all-time high due, in part, to record-low mortgage interest rates and the migration of employees to home offices.
The real estate market has always been essential to the health of the U.S. economy. One article from a respected news source referred to the housing market as, “The undeniable bright spot In the pandemic economy.” Even during times when the economy cooled down, home prices have always rebounded when viewed on a long-term basis. During a slower economy, many agents suspend their activities which leaves even more opportunity for those agents who remain committed to their real estate businesses.
The Bureau of Labor Statistics projects a 4% growth for real estate agent jobs over the next decade. Even though many people got licensed in the last year, there are still plenty of opportunities for new licensees. Also in Michigan, there are fewer real estate salespeople per capita than a lot of other states like Texas, California, and Florida. That means that there is even more room for growth compared to other states.
If you are thinking about getting your real estate license you may be asking, “How much do real estate agents make?” Most real estate salespeople work as independent contractors who receive a portion of the total commission earned by their respective brokers under whom they are licensed. The total commission amount brokers charge clients for their services is a matter of independent business judgment and can vary from company to company.
When a home is listed and sold through a broker, the broker typically shares a percent of the total commission with the salesperson who is involved. This percent also varies from one broker to the next. So, it makes sense for new agents to interview several brokers before selecting one to work for. Most brokers have established commission schedules they use with their affiliated licensees. The more transactions the salesperson brings into the company, the higher the percent of total commission the salesperson may receive. This is an excellent incentive-based program for new and existing agents.
According to the Bureau of Labor Statistics, the average real estate agent's salary is $61,480 nationwide, and the average Michigan real estate agent’s salary is $65,330. However, that number can vary based on the years of experience and how much effort the agent puts into their business. The top 10 percentile of agents make over $100,000/year.
It’s also interesting to note that agents who stay committed to the business, get rewarded with increasing profit potential. According to one study, over 70% of all 6-figure income earners have been in the business for 6 years or more. Committed agents also benefit from business that comes from repeat customers and clients as well as referrals from past customers and clients. As an added bonus, these business sources often come to the agent rather than the agent having to reach out for it.
For the new agent who is just starting out, he or she is able to kick-start their business by building lead sources from people they already know such as family, friends, and social media contacts (sometimes referred to as a Sphere of Influence). Other sources of leads can be generated from past customers and clients they worked with on previous jobs. Geographic farming is another great source for new agents. It involves focused marketing in a local neighborhood, often the one in which the agent lives. This list of potential sources of business should be good news to new agents who are often surprised at how many people they already know.
As with any business, real estate is not for everyone. But, it can be a great career choice for self-starters and motivated individuals looking to run their own business and have unlimited earning potential. If you are ready to jump in and start your career as a real estate agent in Michigan, make sure to read our article Getting Your Real Estate License In Michigan to learn about all of the requirements and how to get started.
Taking a Real Estate Pre-Licensing Course is one of the first steps in getting your license. NCI Associates offers online self-paced, webinar, and in-person classes to fit your schedule. Learn from our experienced instructors and start your career one step ahead of the competition. NCI is the intelligent choice for real estate education in Michigan.
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