One of the most embarrassing problems that the real estate industry faces is the high failure rate of its new practitioners. According to studies performed by the National Association of REALTORS®, new Realtors drop out at a rate of 86% per year. Only 7% renew their licenses. The reason? Overall, the 76% of the industry earns less than $30,000 per year. Those on a fifty-percent split could earn more flipping burgers.

There are a lot of reasons new agents fail, from high personal start-up costs to the emotional and financial lack of preparedness to survive on commissions only. When an agent washes out, it costs both the agent and the broker a lot of money. So should the broker do more to protect his/her investment?

According to Cec Daniels, an Arizona broker and real estate educator, 30 agents remain for every 200 who try. He blames the lack of high standards in the industry for "the swinging door."

"We all know that the failure rate is high, and as brokers we can share in the blame," says Daniels. He recommends assigning a cost of hiring a new agent based on the recruiting, interviewing, and training of new agents. He also recommends including the costs of desk space, and the mistakes the agent might make. "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."

Broker Vikki Morvant agrees that risk can be lowered in the recruitment phase. "If you spot someone who has potential, but no capital. . . you may decide this is a business opportunity to bankroll that person's career."

But, Morvant points out, other professionals bankroll their own success. Why shouldn't Realtors be willing to? "Look at a dentist (or doctor, engineer, attorney, or any other professional (to which we like to compare ourselves.) S/he is not allowed to "practice" on your teeth, unless s/he has learned dentistry. On top of the education debt, the dentist gets a business loan in order to hire a receptionist, hygienist, and technician, and get every piece of the latest technical tools necessary to do the job right.

Morvant believes Realtors should be willing to do the same. "If new Realtors had a business plan, and a background that suggested a chance of success, a banker would be willing to grant a business loan," suggests Morvant. "But how many new agents approach it as a business, instead of a hobby or a daydream? Would you risk your capital on someone who is deciding to "give real estate a try?"

She believes the solution lies in internships. "An assistant costs me tremendous money to train," she explains. "If I train an assistant, it is with the intent that the assistant will become a valuable investment on which I receive a return, during many years of our continued association."

"I do not pay an intern for the privilege of me training him/her. Gradually, they turn into a showing agent, and get a split of commissions. The split gets better as they get better. The split gets really good to encourage them to stay with the team," she says.

Both Morvant and Daniels see new agent training as a potential trouble spot, too. Daniels suggests seeing that new hires enroll in certification and designation programs to receive better training and to save the broker costs. "The cost of training a new agent is very high, even higher when you add the attrition to the matrix," he says. "If you were to pay for an agent to complete the GRI, it is a fraction of the cost for taking your time or having your own in-house trainer. Another benefit is that you could pay GRI and call it consideration in return for a minimum number of years without penalty."

Morvant sums it up. "I think the public and the industry would be better served if new Realtors had to meet a higher commitment of education and business investment."

Published: September 18, 2001

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.