Let's take a look at some statistics that are hard to believe but true. Over a period of 10 years, 1988 - 1998, observations were made on the real estate industry and the results were staggering.

1. There is an average 1st year failure rate of 86%. That works out to 30 agents remaining in the industry for every 200 who try.

2. Only 7% will renew their license.

3. 76% of the industry is earning less than $30,000 per year.

We all know that the failure rate is high, and as brokers we can share in the blame. Some brokers are unwilling to establish some sort of minimum standards of a new hire. The result is the swinging door. Look at the waste of resources for hiring 200 agents and only be able retain 30 of them.

Assign a value or actual cost of hiring a new agent. In my experience that could easily be $5,000. That figure would include my time for recruiting, interviewing and training a new agent. Then there is the desk cost, training, loss of quality leads and mistakes. So if I recruited and hired 10 new agents in a year my cost would be $50,000 for a yield of just 1.4 agents.

Let's look deeper into the agents that leave the business, perhaps there is something there that would help us in our recruiting efforts. Something like 30% of the failure rate is the recruit themselves, they were not prepared either emotionally or financially to survive on straight commission. Look at the start up costs today. The agent will pay for memberships, key deposits, computer programs, education, business cards and printing. That is a heavy load for anyone and they have to maintain their lifestyle at home.

I am not saying not to recruit rookie agents. But I am saying you need to be more selective when hiring a rookie agent. Based on my management experience, I am of the opinion that one experienced and productive agent will close 6 - 8 transaction for every one transaction by a rookie agent. Plus that, the $5,000 in cost is reduced by about 80%.

Timing will have a lot to do with your success in recruiting rookie agents. The cost of training a new agent is very high, even higher when you add the attrition to the matrix. So do some research and find out what kind of formal training programs are scheduled for your area in a given year. Programs like GRI and private programs that focus on both practical application and education.

If you were to pay for an agent to complete the GRI, it is a fraction of the cost for having your own in-house trainer. You are probably not a trainer. You probably know how to do everything it takes to become successful, but do you have the skills to convey that to another person. There are very few trainers out there that can actually "train". Another benefit is that you could pay GRI and call it consideration in return for a minimum number of years without penalty.

This is great for retention.

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Published: October 6, 1999

Use of this article without permission is a violation of federal copyright laws.

"Cec" Daniels, GRI is one of the nation's leading authorities and speakers on risk management, brokerage management, agency and real estate contracts. He has authored and maintains all the curriculum for the Arizona REALTOR Institute GRI Program on Agency and Contract Law. His expertise is supported with over thirty years of experience, and in 1996 was named Educator of the Year by the National Association of REALTORS®. Cec lives in Peoria, Arizona and invites you to email him at Cec@CecDaniels.com.