Noelle Knox
USA Today
Cynthia McCallum exits a model home in Stafford, Va., with DeeDee Skotzko, a Centex Homes representative, right, and Chris Beach, a Coldwell Banker agent, far left.
STAFFORD, Va. — Chris Beach often works through lunch and seldom leaves the office before 9 p.m. So far this year, he’s taken 2½ 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 in which in the past year home sales have tumbled 30%, prices have fallen 13% 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 require 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% of Realtors nationwide received their real estate license in the past two years, just as the market had peaked and was turning south.
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. (Chart, below.)
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 in Stafford, Va., allowed a USA TODAY reporter to follow around its agents for four days.
During the real estate boom, Stafford County was one of the fastest-growing bedroom communities in the Washington, D.C., area. Working-class families flocked here 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.
That means the typical seller was writing a 6% commission check for $24,230.
The disappearing commission
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.
Many homeowners don’t realize that when they sign a listing agreement to sell, they aren’t actually signing a contract with the agent. Their contract is with the real estate company’s broker, who is legally responsible for the agent.
The broker gets the commission check from the seller, then splits it with the agent, who’s an independent contractor. It’s common for new agents to take home just 50% of their commission. More senior producers might pocket 70%.
On the sale of the median-priced U.S. home of $220,500, if the seller’s broker received a 6% 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 in Stafford. 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,” left the business and took a teaching job at her daughter’s elementary school.
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% 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 cellphone 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% less than in 2004, his best year.
The biggest expenses buyers and sellers never see are the time and money agents spend getting and keeping clients.
On a recent morning, Beach spent three hours preparing a marketing presentation for a potential client who wants to sell his townhouse. The glossy 32-page report compares the owner’s property with a dozen similar townhouses on the market, under contract or recently sold. But as the supply of homes for sales expands, the marketing demands of Beach’s job take longer and longer.
Afterward, he met clients Cynthia and Dennis McCallum, who are selling their home and buying a new-construction one about a quarter-mile away. The contract signing with the builder lasted from 11 a.m. to nearly 3 p.m., with no break for lunch. Beach helped them pick out the best lot, exterior construction materials, even a free sunroom and other features the builder is throwing in to help lure buyers.
At least twice, he will also go with them to the builder’s design center to help the McCallums choose colors, coordinate patterns and select fixtures. These are hours invested in a deal that could still fall apart if the McCallums back out, and even if it goes through, the builder won’t pay him a commission until January when the house is ready.
Trying to impress a potential client, Beach once spent several hundred dollars on aerial photos for a marketing presentation. He didn’t get the listing.
Then there’s the cost of digital photos, video virtual tours, open houses and ad campaigns. Putting a listing on Realtor.com, the No. 1 Internet destination for house hunters, costs $31 to $40 (though agents at this firm receive a discount through their broker). And let’s not forget the time and gas, at $3-plus-a-gallon, to chauffeur buyers around.
Agents Melina Ogershok and Geri Zayas showed one of their buyers 123 properties this spring before she made up her mind.
“The market was just so saturated,” Ogershok says. “There were 1,300 homes for sale between $375,000 and $450,000.”
She and Zayas, who, like many high-volume agents, work as a team, try to inspire client loyalty and recommendations with gifts and tireless service. When a deal closes, the agents often give their buyer a flowering plant, little goodies for the kids and a $50 gift certificate to cover the costs of changing the locks on the house.
They’ve also been known to pay $400 for a home warranty, which protects against certain unexpected repairs. And soon after the buyer moves in, the agents stop by to give them a framed watercolor painting of the new home.
“It’s just another opportunity to say, ‘Hello, we hope you’re happy,’ ” says Ogershok, 50.
To endear themselves to sellers, the women will buy plants to give a homeowner’s property more “curb appeal,” and they’ll help “stage” a home for sale by arranging furniture and adding knickknacks to appeal to buyers.
This pampering level of service, they say, is one of the reasons they’re surviving the downturn in the real estate market. About 80% of their business comes from past clients who are selling or buying another property or referring a friend or relative.
This year, they are working harder but making about 20% less. Last year, the duo had six-figure incomes, “But I’m not sure we will this year,” Ogershok says.
The 60-hour workweek
Nearly 60% of Realtors are women, and many people imagine that the flexible hours make real estate an ideal job for mothers. But that’s hardly true when the market dries up.
“I got clients, and I couldn’t take them and show them houses because I couldn’t get day care” lined up in time, says Lori Gomez, 35, who tried working part time after her son was born. “It’s not like a regular job, and I’m not going to pay for day care in case I get business.” She left the business last year to be a full-time mom.
In fact, 15% of all Realtors worked more than 60 hours a week last year, according to the NAR.
Here’s the payoff: Realtors nationwide who stick with it for six to 15 years earn a median income of $64,600. Those with 16 or more years’ experience bring in a median of $76,200, according to the NAR.
It’s too early to tell how many of the newbie agents can weather this market correction, which is expected to last until late this year, or how many seasoned veterans will decide it’s too much work. Figures are hard to come by because the licenses are usually valid for a couple of years, even if the agent isn’t working in the business.
But in the Stafford area, the local board of Realtors says 61 agents chose not to renew their memberships this year.
And Kevin Breen, the president/owner of Coldwell Banker Elite, says, “We’d thought there would be more.”
