Why Real Estate Agents Fail?
June 15, 2022
Being a real estate agent is very similar to being a freelancer. It’s a self-directed career which means it’s not cut out for everyone. There are no clear instructions or guidebooks on how to be a successful real estate agent. Part of learning about how to be successful as an agent is learning about why real estate agents fail. Research from the NAR has shown that most real estate agents fail and it’s important to understand why so that you don’t make the same mistakes. Before we answer the question “Why do real estate agents fail?”, we should first look at how many of them fail in the first place.
How Many Real Estate Agents Fail Their First Year?
According to the NAR in 2014, 87% of real estate agents fail within five years in the industry, meaning only 13% of agents become successful in their first five years. There are many reasons that can be looked at for the high failure rate. For example, real estate agents have a low bar of entry. Being a real estate agent is similar to starting a business and most people aren’t prepared to be entrepreneurs. In this blog post, we compile the 10 main reasons that real estate agents fail and how to avoid the same mistakes.
Why Do Real Estate Agents Fail?
1. Don’t Have a Strong Business Plan
Creating goals and objectives is an essential part of any business. Since being a real estate agent means that you are self-employed, it’s up to you to outline your goals and measure the progress you are making toward them. Many agents don’t create solid goals starting out and they find themselves being too ambitious or not ambitious enough. As a result, they don’t make the progress they want or need to in order to be successful. A business plan typically includes:
- Your target client
- How you will generate leads
- The benefits and purpose of your service
- The local market you are working in
- Your local competition
- Analyzing your financial needs
- Financial goals
- How you will track your performance
The U.S. Small Business Administration has a page dedicated to outlining business plans with visual examples.
2. Not Encouraging Referrals
Word of mouth continues to be one of the most effective and efficient ways to get new leads. A referral from a friend or family member is worth its weight in gold because it comes with a pre-existing level of trust. Although even if you surpass your client’s expectations, there is no guarantee that they will refer you to others. This is why it’s important to build strong relationships with clients so that asking for a referral is a natural part of the relationship.
For example, clients will be more receptive to requests for referrals at the most exciting moments of the real estate transaction, like after a negotiating breakthrough or closing.
Following up with clients through email is also a great way to keep in contact with them after the real estate transaction has ended. When you have built lasting trust with your clients, they are more likely to refer you to their friends and family.
3. Choosing The Wrong Brokerage or Area
The neighborhood and brokerage that you choose to work within both have a major impact on your success as a real estate agent. Making the wrong choices can make being a real estate agent twice as hard and often leads to agents quitting the industry altogether.
When choosing a brokerage, it’s important to consider how much experience the broker has, how many resources the company offers, and how much they will charge you in fees. It’s also important to consider the company’s reputation and how the real estate broker communicates with each agent. Company culture and how you resonate with it is almost just as important as the commission split when choosing a brokerage.
For choosing a neighborhood, too much competition or too little can both lead to problems. If there are too many real estate professionals working in one area, it can be difficult to get noticed. On the other hand, if there are not enough people looking to buy or sell in the area, it can be difficult to make a commission.
The best way to choose an area is to find a healthy market that isn’t overly saturated with agents and make an effort to understand the needs of the people who live there. Most people want to work with real estate professionals when buying or selling a house, it’s simply a matter of getting your name in front of them.
4. Not Focusing On Lead Generation
A successful real estate agent needs leads to do business. Leads are what turn into clients, and without them, agents cannot make a commission. Most real estate agents starting out don’t know all of the ways of generating leads that are available. They also don’t know which method of lead generation will work best for their target market. Sometimes, agents will focus on one method that isn’t working well instead of trying to mix things up. Other times, agents can use too many methods of lead generation that ends up eating their yearly budget.
The first question agents should ask themselves is how they plan to generate leads. In-person networking, a website, following-up with past clients, and buying leads through ads or other means, are all viable options for generating leads. Ultimately, building a reputation in the local area where you want to work is the best way to get leads.
Read More: 7 Real Estate Agent Tips For Beginners
5. Have The Wrong Expectations
If you watch HGTV or know an agent that doesn’t have to work long hours in order to make good money, then you may have the misconception that being a real estate agent is an easy pathway to wealth. However, HGTV is not reality, and agents who do not have to work as hard for clients these days have put in years of hard effort to get there. Becoming an agent may have a high rate of failure but some of that is weeding out the ones who are not cut out for the job. It’s not easy; it requires self motivation, and sometimes longer hours than you would do at a 9-5.
6. Not Managing Their Budget
A real estate agent’s budget should be managed in such a way that allows for marketing, advertising, lead generation, and other business-related costs. Many new agents make the mistake of not balancing their budget between their marketing efforts and the costs of running their business. This often leads to agents not having enough money to market themselves properly or pay for the costs associated with their business. It’s also important to review your budget every year along with the ROI of each lead generation method so that unnecessary money isn’t being spent.
7. Not Saving For Rough Times
The real estate market fluctuates regularly and real estate agents probably won’t have a consistent income throughout the year. Going months without having a new client can be daunting and discouraging. However, if an agent has saved up enough money to last them 6 months, they’ll be able to weather the storm and continue working towards their goals. To save up an emergency fund for 6 months, add up all of your current monthly bills and multiply them by 6. That is how much money you should have saved up in case of a dry spell.
8. Being Difficult
As a real estate agent, you are in the business of helping people. If you are a difficult person to be around, then it’s going to be hard to get a lot of clients. Buying or selling a house is a huge decision and most people want to work with someone who is easy to communicate with and who they feel comfortable to be around. Trust is a very important factor when working with an agent and if you can’t build trust with your potential clients, then they are going to go elsewhere.
Standout as a Real Estate Agent By Becoming a Negotiator
Not sure how to standout from the rest of real estate agents? With so many real estate agents active in the US and so many of them failing to meet the expectations of their clients, it can be difficult to stand out as a real estate agent who is good at their job. The industry is saturated with real estate agents and many of them are simply not cut out for the job.
NRPs or Negotiator Recognized Partners is a program for real estate agents to distinguish themselves from the run of the mill real estate professionals. The Negotiators brand is associated with only agents who have proven themselves to go above and beyond for their clients while providing the highest quality of service. NRPs also get access to branding and marketing templates, educational events, and can be featured in The Negotiators TV show that highlights the value of working with Negotiators.
Nominate yourself or an agent you know for the Negotiator Recognized Partner program here.