‘TRULY A PART-TIME INDUSTRY’
Glut of real estate agents leaves many working only as a side gig
Without really trying, Micah Price sold three houses last year as a part-time real estate agent. It was easy enough — people he already knew asked him to list their properties.
He doesn’t rely on the income from being a real estate agent, but he’s able to earn commissions because he maintains an active license. It’s mostly a side gig, though, something he does for family and friends.
“In real estate, people work with people they know, like and trust,” said Mr. Price, 41, who also owns Cross Fit Artifact in Center Township, Beaver County.
Trying to make a living earning commissions as a real estate agent has never been more difficult, largely because of the glut of licensed real estate agents that piled into the industry after the pandemic. Nearly half — 49% — of real estate agents made zero sales or just one sale in a 12-month period between late 2022 and late 2023, according to a recent study by the Consumer Federation of America.
Locally, the West Penn Multi-List currently has 8,280 licensed real estate agents listed as members. That compares to 25,948 transactions in the 17 counties in 2023 — roughly three homes per agent.
“Those who are licensed and trying to sell properties are in much worse shape than anyone imagined. This is truly a part-time industry,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America, a Washington, D.C.-based nonprofit organization. “Most agents are working sporadically and holding another job, often full time.
“There is no other financial services industry or profession where parttime, marginal workers are so ubiquitous.”
‘No skin off the broker’s nose’
The Consumer Federation of America has in recent months released a series of studies highlighting the historic overabundance of real estate agents and the negative ripple effects it causes for consumers and the real estate
industry.
The cost of having too many agents include what the CFA called widespread agent incompetence and pressure on the industry to maintain an artificially high 5% to 6% commission standard. The real estate industry is currently under fire for its longstanding tradition of charging sellers a 6% commission, which is split between the buyer and seller agents. Several lawsuits that have been filed by sellers against major brokers could reshape how agent commissions are paid, which also will impact agents’ compensation.
With 1.5 million real estate agents competing for 5 million to 6 million home sales each year, the imbalance virtually guarantees that most agents cannot support themselves from sales commissions alone.
Despite the agent glut, the CFA found that most major real estate brokerages continue to advertise for sales positions — for reasons that primarily benefit the brokers.
Newly recruited agents bring with them new clients, often personal contacts like friends and family members. Also, all agents — whether they make a sale or not — pay a monthly fee to the broker ranging from $50 to $400, which helps the broker cover overhead expenses.
And since most agents are independent contractors, not employees, brokerage firms have limited liability for the conduct of their agents, which diminishes the incentive to adequately train, mentor and oversee new agents, the CFA reported.
“It’s no skin off the broker’s nose,” Mr. Brobeck said. “If the agents don’t make a sale, at least they’re paying the monthly fees.”
‘A very difficult business’
The region’s largest real estate broker — O’Harabased Howard Hanna Real Estate Services — is also one of the nation’s largest with 15,000 agents under its umbrella across 13 states.
Dennis Cestra, head of Howard Hanna Real Estate’s Pennsylvania division, said he doesn’t know what percentage of the broker’s agents are part time, only that the average sales rate companywide is 9.6 units per agent per year.
“That’s across the board whether they’re full time or part time. That’s pretty strong nationally,” Mr. Cestra said. “We always look for people that want to be full time. You’re going to be in a business that’s 100% commission-based and some people can’t just leave behind whatever previous job they had before.”
He said Howard Hanna has a dedicated training staff in-person and on demand.
“That is so important,” Mr. Cestra said. “Just throwing someone into this business with no training, no support, no guidance, it’s a very difficult business to make it in. We invest a lot of money in our training. There are some other companies that don’t even have an office to go to or a broker to talk to. If the agent runs into an issue, that makes it pretty tough.”
Like all brokers, Howard Hanna collects a monthly fee from its agents. Mr. Cestra declined to reveal agent fees.
According to the CFA, there is a direct correlation between the monthly fees an agent pays the broker and the commission cut the agent receives from sales.
For example, Berkshire Hath away typically charges its agents a monthly fee of $109 for the use of a desk and the firm’s technology, while the agent receives a 60% cut of the commission. On the other hand, ReMax typically charges agents a monthly fee of $400, but the agent keeps 95% of the commission, according to the CFA.
The fees help brokers cover the cost of running the offices and keeping technology up to date. But many agents feel they are too high, according to online comments the CFA compiled from websites such as Reddit and Agent Advice.
“The fees are excessive — there’s a franchise fee, office fee, printing fee, etc.” “I really don’t like the coaching fee … Brokers already get a cut (that’s fair) and we pay $75 a month (that’s fair) but then they take more $$ out for ‘coaching.’ There really is no coaching.”
According to the CFA, the most frequent complaint about fees is that despite payments, companies don’t always provide promising leads or adequate support for new agents.
‘A pretty tough year in real estate’
Mr. Cestra said Howard Hanna seeks to hire people who are passionate about real estate, have a goal to be full time and can at least hit the benchmark 9.6 units a year.
“Because then they’re making a living in this business,” he said. “The value proposition of the real estate brokerage has to be heavily reliant on training and agent development. It can’t just be, ‘we’ll pay you the most — come here.’ ”
Mr. Price, a Coldwell Banker agent, transitioned to real estate full time in 2020 after his employer at that time, Levin Furniture, started having financial troubles and he saw the writing on the wall.
“I created a little database of Levin Furniture customers I had worked with over four years of being a top seller,” Mr. Price said. “I took that and started working nonchalantly towards myreal estate license.”
He made a go of it working full time for almost a year, selling about a halfdozen houses. But it wasn’t enough to support a wife and four children.
“I’m good at sales and I’m good with people,” he said. “Then I realized that if I could make it on my own, what else can I do? I said to mywife ‘Let’s open a gym.’ ”
He opened Cross Fit Artifact in July 2021, but stays ready for real estate deals when they come along.
According to the CFA in most states, a real estate license can be secured in six to 10 weeks at a median expense of $600. Mary Grace Ferraro, 57, was among the masses of aspiring agents studying for a real estate license during the pandemic. And she’s one of the few that makes a living solely from commissions.
After earning her license in September 2020, she sold 18 houses her first full year in 2022. Last year, Ms. Ferraro had 26 sales.
“I was very surprised at how well I did given that 2023 was a pretty tough year in real estate,” said Ms. Ferraro, who works from Berkshire Hathaway’s Fox Chapel office.
She had previously worked in the hotel industry doing group room sales. The pandemic forced her to reinvent herself.
“Because this is a second career for me, I took nothing for granted, and I worked really hard to get it,” she said. “I’m a little bit older, and I appreciate it more and I wanted it more.”