Dialogue: Selling real estate has very little going for it

By CHRIS SKINNER*

Although selling real estate appears superficially to be the ideal job - glossy, upbeat, lucrative - the reality is rather different for most people.

Consider the facts: Real Estate Institute figures show that, on average, 25,000 homes sell each year in the Auckland region. It takes a workforce of about 5000 salespeople to sell them.

On that basis, the average salesperson would sell five houses a year. If the average Auckland home sells for, say, $300,000, with an agent's commission of 4 per cent, a typical commission would involve $12,000 or thereabouts.

A salesperson generally receives about half the total commission payable, in this case about $6000. The remainder gets gobbled up by the office or agency for which the agent works.

So if you sell five homes a year, you will earn just $30,000 less tax, car running expenses, advertising and printing costs, cellphone charges and so on.

Bear in mind that although you can to some extent work your own hours, in practice this means working seven days a week. You will be involved with open homes on weekends, and Monday to Friday will be spent frantically trying to drum up the business.

Remember, too, that as a new agent you may not manage the average of five homes a year. Chances are you won't make the average in your first year because you don't yet know the business.

You will be finding your feet and, while you are doing so, hungry, more experienced agents will be taking the business away from you.

If 1000 experienced agents manage to sell just 12 homes each a year, half of the total volume of sales - 12,000 homes - has already been accounted for.

That leaves the crumbs. In the dog-eat-dog world of real estate that's all that's left for the rookies. They can fight over them as they might but they will still be crumbs - dry, tasteless and not very nourishing.

So where are the big incomes, you ask? I often see real estate agents driving flash cars and ostensibly living the high life. Where does that fit into the picture?

There are people making money out of the business. Most likely they are the owners of the agency or the franchise.

Many real estate offices are franchised. As an agency owner, your chances are better. You are in a rather more favourable position in the food chain.

After all, if you are taking half of everything the office sells, it is more than possible that you may be living high on the hog yourself while your staff are all quietly starving.

You don't have to pay wages, holiday pay, ACC levies or any other costs an employer normally has. Your staff all work on commission. However, roughly half of everything they produce will go to the office - to you.

The staff even provide their own "company cars" and wear out their own shoes door-knocking.

Your liabilities (as an employer) are largely restricted to providing your salespeople with a desk and a phone extension. Not too onerous a responsibility really.

It's a numbers game. As an agency owner, the more of these worker bees you have buzzing around the office, the sweeter the day will hum for you.

If they fail or leave because they have exhausted their savings, you simply put an advertisement in the Herald and, presto, you have a new bunch of recruits fresh and eager to do battle on the mean streets.

That is why you will always see advertisements for real estate salespeople. Turnover of staff in the industry is rapid because most people can only survive for a limited time without a definite income.

Agencies are constantly hiring new staff. In recognition of this, some of the larger real estate companies have training programmes to groom the constant flow of new recruits.

The programmes look good at face value but under closer scrutiny the single point that emerges is that they nearly all advocate door-knocking (door-to-door selling) as the focal point of their so-called training methods.

One hundred unpaid people out knocking on door is no doubt very good advertising and public relations for a big company and very cost-effective besides. But it's very tiresome, ineffectual and unprofitable for the individuals doing the door-to-door canvassing.

It's much the same with other pyramid structures. The odds favour the top tier.

So you are still thinking of going into real estate? Think carefully before you make the move. Ask what the company that employs you will really do for you. Analyse their methods, their mode of operation. How do they plan to use you to further their own ends?

If nothing will dissuade you, go forth and become a sales legend. Be the best little used house salesperson you can be. Just remember that for every winner in this occupation, there have been 20 or more losers who tried and failed.

It's common knowledge that the so-called winners are frequently not very nice or likeable people. They make it because they possess a singleness of purpose and a ruthless disregard of others which enables them to bulldoze their way to the top.

Real estate agents spend a fair amount of money and effort cultivating an image of professional respectability. This is largely a facade. They are hungry, commission-driven salespeople very like car salesmen, who perhaps have fewer airs and graces. However, for both groups the need to make a dollar sometimes outstrips the requirements of professional integrity.

Living hand-to-mouth on commission will make you lean and mean. It may also blur the lines between right and wrong. It will certainly force you to deal more harshly with others than you did before. Needs must when the devil drives.

You didn't think you were a bully but as your bank balance drops, the need to make that sale and the all-important commission cheque erases all else from your mind.

That's real estate. That's the industry you are thinking of joining. It won't be easy to succeed. It will toughen you up in any event. To really succeed you may need to become very tough indeed.

Will it make you into a better, more rounded individual? Probably not. In fact, it would very likely be more use to society if you remained a nurse, teacher, carpenter or whatever you are doing.

You can be sure of one thing at least: there will always be plenty of vacancies in real estate because only last week yet another disillusioned batch of rookies quit.

* Chris Skinner, a salesman for 25 years, tried his hand at selling real estate in 1998.