Chris Beach often works through lunch and seldom leaves the office before 9 p.m. So far this year, he’s taken more than two days off from work. And he hesitates now to take vacations, because he fears losing business: potential home buyers or sellers.
“My wife went out and bought two dogs because I’m never home,” says Beach, whose hands-free cellular earpiece seems permanently attached to his head.
This is the life of a real estate agent in a market where in the past year home sales have tumbled 30 percent, prices have fallen 13 percent and there’s a one-year supply of homes for sale.
In many markets across the country, the glamour of the go-go days — when investors bought homes sight-unseen and lenders didn’t need down payments – are gone. In those areas now, the job of an agent is one of chasing leads, marketing like hell and chauffeuring hesitant buyers to open house after open house.
“Since the first of the year here, I’ve shown more homes than all of last year, and worked more hours on a regular basis,” says Beach, 39, one of the top-producing agents at Coldwell Banker Elite.
For many of today’s agents, this is the first housing downturn they’ve ever seen, and it’s become a belt-tightening test of their staying power. Nearly 25 percent of Realtors nationwide received their real estate license in the past two years, just as the market had peaked and was turning south.
Money Blind
Plenty of them were like Trish Hiles, who didn’t “like sales per se,” but, tempted by the image of agents earning easy money, got her license in the summer of 2005. The market was so sizzling-hot, she recalls, that a developer told her she would “be turning people away.”
Not exactly. Realtors with two years’ experience or less earned a median income of just $15,300 last year, according to the National Association of Realtors. After taxes, association fees and marketing costs, they pocketed a mere $9,400.
The burnout rate for new agents has always been high. But what about when sales and prices are falling? How does a skidding housing market alter the life of a Realtor? To help answer this question, Coldwell Banker Elite allowed a reporter to follow around its agents for four days.
During the real estate boom, Coldwell Banker Elite’s market was a fast-growing bedroom community. Working-class families came in search of more affordable homes, and the local housing market exploded as developers bulldozed miles of trees to make way for sprawling neighborhoods and strip malls. The median home price here more than doubled from $172,000 at the end 2001 to a peak of $403,840 in May 2006, according to Metropolitan Regional Information Systems.
And that means the typical seller was writing a 6 percent commission check for $24,230.
The reality, though, is that most new agents don’t see a check anywhere near that big in their first few years because, whether the market is hot or cold, the agent’s broker takes the first slice of the commission — in exchange for providing office support, some training and leads and brand recognition. And the newer the agent, the bigger the broker’s slice.
On the sale on the median-priced U.S. home of $220,500, if the seller’s broker received a 6 percent commission ($13,230), half would go to the buyer’s broker. The sales agent might get as little as $3,308.
Out of that, the agent must pay the cost of marketing the home. And when home sales drop, marketing consumes more time and more money.
Hiles, 43, recalls spending two days in her kitchen making soups, salads, cookies and other dishes for an open house for other agents. She printed the menu on posters and delivered them to rival real estate firms.
With a growing glut of homes for sale, she felt she had to do something to tempt local real estate agents to come see her client’s $735,000 home. On the day of the open house for the agents, she raffled off $5 lottery tickets every half hour; she didn’t have enough money for bigger prizes as other agents did.
Still, Hiles spent five months marketing and showing the home before it sold in spring 2006. She got two more listings. Yet they just sat on the market.
“Sellers get mad at you because this has been an incredible market for years. … They want someone to blame it on, and you’ve done everything but stand on your head” to market the property.
After a year, Hiles said, “I can’t do this,” and left the business and took a teaching job at her daughter’s elementary school.
Expenses Mount
Hiles and other rookie agents often fail to anticipate the personal expenses that pile up for independent contractors. The biggest is often health care: 93 percent of agents must find their own health insurance elsewhere, usually through a working spouse.
Beach, who’s diabetic, spends more than $1,000 a month on health care for himself, his wife and teenage son. Other expenses include his cell phone at $277 a month (he makes or takes over 100 calls a day) and a high-speed laser-jet color printer.
Last year, Beach had to write off $65,000 in business expenses on his taxes, but he still managed to clear six figures. This year, with the extra effort, he hopes to do the same, but will still be making about 20 percent less than in 2004, his best year.
