Lately I’ve observed a lot of shuffling of personnel in the real estate industry and its related fields (lenders, mortgage brokers, title and escrow officers, new homes sales reps, etc.) Many offices are downsizing and cutting staff, while others are shutting their doors completely. Where do these out-of-work agents, mortgage brokers, and escrow officers go? Some try to find new positions with other offices and brokerages within their fields of experience. For example, our Reno office has more than doubled the number of agents hanging their licenses with Chase International this year; with the majority of these agents coming from other brokerages.
Others walk away from the industry completely and look for work elsewhere (see Market Realities Drive Practitioners to New Specialties). And still others try their hand at a new role within the RE industry. For example, an unemployed mortgage broker or escrow officer decides to obtain her real estate license and enter the exciting field of real estate sales.
I have heard that the membership of the RSAR (Reno Sparks Association of Realtors) has added close to 300 new agents to its roster this year. One may ask why anyone would willingly enter the field of real estate sales in a market such as the one we are now experiencing. Are these new agents simply displaced professionals from related fields? And, if so, is that necessarily a cause for concern?
In the bigger picture, it probably makes more sense for someone who has some familiarity with the Reno real estate field to enter it than, say, a former IT guy from Chicago. But is the supposed increase in the numbers of agents good for the market? Before I went down that path, I wanted to verify that our ranks were indeed swelling.
To answer that I went to the Nevada Real Estate Division, the licensing authority for all real estate agents in the state. According to the latest statistics from the NRED the state has 28,115 Active, licensed real estate brokers, broker-salespersons, and salespersons. Another 6,790 licensed real estate brokers, broker-salespersons, and salespersons have their licenses placed in “Inactive” status. [Note: see definitions of Active and Inactive below.]
Drilling down to focus on Washoe County, we find 3,176 Active licensees and 1,134 Inactive licensees. Looking back at the only available historical data from the site, I found the following:
| Washoe County Licensees | Active | Inactive |
| April 10, 2007 | 3,166 | 1,304 |
| June 8, 2007 | 3,221 | 1,237 |
| August 31, 2007 | 3,229 | 1,137 |
| October 17, 2007 | 3,176 | 1,134 |
So, Washoe County has been averaging about 3,200 active agents this year with no overall downward or upward change in membership. So, although our roster may not be growing, there seems to be some froth in the ranks. Unfortunately, I have only anecdotal evidence at the moment to support this notion. I wish I could have found historical data for the number of real estate agents in the area. If anyone knows a source for that data, please comment. I’d like to perform an analysis over a longer time period.
[Note: To see a breakdown by all Nevada counties click here.]
[Note: If an agent has a current license in good standing (non suspended or un-revoked) she may voluntarily submit an application to have her license placed in Inactive status. During this time the State Real Estate Division keeps the license, and the licensee may not transact any real estate business. Another application process is required to re-activate a licensee’s inactive license.]
NVMojo
I know where some of those Reno area mortgage lenders are …in therapy. Talked to a therapist last week who said he’s had an increase of former mortgage lenders, etc. who are dealing with depression and are talking about how they falsified home loan apps, etc.
Must be a tough row to hoe when someone knows they were part of the financial debacle that has impacted wallets worldwide.
Dave Blockhus
Guy,
Google “Alliance Title.” Once an up and coming title company with huge expansion plans….Last Friday it closed all of its offices. There’s a lot of reshuffling going on.
Lindie
The more interesting question is: how many of those 3,000 plus active licensed people are actually working full time selling, or trying to sell, real estate?
It simply cannot be the case that all 3,000 are really still in the business, because if they are, most of them must be starving to death. 3,000 plus licensees dividing up about 230 sales a month? There is no way 3,000 people can make a living dividing up 230 sales or so every month.
Josh in SW
I’m not so sure it is as bad as they say. I would venture that only a fraction of the 3000 are full time real estate agents. Over the past twenty years I have met many agents that seem to do real estate on the “side”.
That said, here’s a look at the numbers.
AVG Home sales price 300K
Average Commission at 6% = $18K
Times x 230 homes = 4.14MM per month
Times x 12 months = shy of 50MM annual
Now divided by 3000 agents, that is only 16,500 per year, but if only 1000 are full time active – as in actively marketing and working the market, then the number goes up to 50K per agent.
I’m sure there is a range based on the prowess and dedication of agents, but compared to many professions, there is still money on the table. Maybe it requires actual work, opposed to the heady days of 2003-2005 but still it beats many a desk job.
I’ve worked my share of jobs, but after running these numbers I still think there is plenty of opportunity north of the 100K range for the hard working agent (which many aren’t IMHO).
P.S. I am not in the biz, so if this is way off base forgive my ignorance 🙂
Josh
GuyJohnson
NVMojo,
An interesting bit of info. Thanks for sharing. In today’s post I list those businesses that are actually benefiting from this market/climate. Perhaps I should add therapists to the list.
Dave, Thanks for the comment.
Lindie,
Yes, that is indeed an interesting question. The NAR reports that the average REALTOR®’s commission income amounts to only $23,000 per year. How do Reno-Sparks REALTORS®’ incomes compare? Let’s do the numbers (I’ll use October’s data because that’s the month where I have the most complete data available):
According to recent Washoe County Assessor’s data, October’s sales consisted of 386 resales county-wide. That’s 772 transaction sides (one Buyer’s agent and one Listing agent). There were also 235 new home sales recorded for the same period. However, we can’t assume that all of these new home sales involved an agent. In fact, I’m guessing half would be a generous estimate. So, for this example, let’s add another 118 buy-side transactions. That’s gives us 890 transaction sides for the month of October. As we saw in my post, the NRED reported 3,176 Active agents for October. That’s .28 transaction sides per agent for October. For this example, let’s simply multiply that number by twelve to get an annual estimate. We now have 3.36 transaction sides per Washoe County agent for 2007. For the sake of discussion, let’s use a 3 percent commission for each of those transactions. Last week I posted the median sales price for October was $287,000. That would amount to $8,610 commission per sale per side, or an annual gross income to the broker of $28,953. I say “to the broker” because, as you know, the broker receives the commission, and then divides it with the agent according to a pre-arranged “split”. This split can vary greatly depending on the brokerage and a variety of factors (i.e. experience of the agent, the agent’s production volume, office expenses, etc.) Let’s just say I have heard splits ranging from 50-50 to 90-10, and everything in between. Again, for the purpose of this example, let’s choose a commission split in the middle of the range, say 70%. That gives us an annual income of $20,267 per Washoe County agent.
You hypothesize “most of them must be starving to death”. I can’t speak to that but the U.S. Census Bureau’s poverty threshold for 2006 was an income of $20,614 for a four-person household.
Note: I’ll include this analysis in today’s post. So, if a thread develops it may appear in today’s post rather than with this thread. Thanks for the question.
Josh, Thanks for your analysis. I had already completed mine prior to seeing your post. And, as you allude to, the 80-20 rule applies to RE, as well. 20% of the agents perform 80% of the transactions.
NVMojo
That might not be a bad idea, Guy, adding the therapists to the list, that is.
I got the overall impression from the therapist I spoke to that this surge of folks are limited to the mortgage lending industry. Part of me thinks it is a bad deal but then I don’t know. I was once asked at work to do something illegal – as in cover-up some “racketeering” behavior that was being done by a CEO.
I walked out the door and never looked back instead of staying, turning my head the other way while keeping a large paycheck.
So, I suppose if people loaned out mortgages fraudulently, it might be a good thing that they are somewhat depressed and feeling remorse today. Having a conscience is a good thing. Listening to it at the time it is working, is better.
Peace on Earth.
Tony Bauer
For an investment opportunity that is supposed to be better than investing in the stock market and other options, it’s sad that real estate investing is getting such a bad rep.