Too Many Real Estate Agents for Too Few Homes Sales (SFA Report)

Written by Posted On Monday, 10 July 2023 10:22


Today the Consumer Federation of America (CFA) is releasing a new report – “A Surfeit of Real Estate Agents: Industry and Consumer Impacts” – that uses industry sources to document the costs to industry and to consumers of too many residential real estate agents.  More than 1.5 million residential agents (including brokers) compete for home sales usually totaling 5 to 6 million annually. 

Those costs include: 

  • economic inefficiencies including an inordinate time spent by agents finding clients,
  • relatively low incomes of many full-time agents,
  • frustration by these agents and by many consumers who must deal with inexperienced agents,
  • reinforcement of relatively high and uniform commission rates, and
  • damage to the reputation of the industry.

“A large majority of practicing real estate agents have recently received their license or work part-time,” said Stephen Brobeck, a senior fellow at CFA.  “These agents usually charge the same commission rates as experienced, full-time agents yet in general offer worse service and deprive experienced agents of needed clients.”

In examining home sales in three cities – Jacksonville (FL), Minneapolis (MN), and Albuquerque (NM) – the study found that marginal agents (with five or fewer sales a year) received an estimated 25-30 percent of commission income.  According to data collected by the industry from Realtors in 2021:

  • the median net income of all sales agents was $25,000,
  • the median net income of sales agents with less than two years experience was $7,800, and,
  • the median net income of all brokers and associate brokers was $57,100.

The report documents complaints by many experienced, full-time agents of the incompetence and/or inattention of other agents that also harm consumers.  And it emphasizes that because of the “surfeit of agents,” real estate agents and brokers feel financial and/or peer pressure to keep commission rates relatively high. 

“Without 5-6 percent rates, even fewer agents would survive financially in today’s marketplace,” said CFA’s Brobeck.  “Ironically, relatively high rates attract new entrants into the industry, increasing competition for clients and reducing individual income for all.”

The report raises the question of whether the industry should make greater efforts to ensure the competence and commitment of new agents.  Such efforts could include more stringent entry requirements and required mentoring of new agents.  A future CFA report will address in depth these two issues.

To help ensure selection of a competent, conscientious agent, CFA recommends not only consulting friends and family but also reviewing information about agents on Zillow and  CFA’s Brobeck said: “Look especially for information on recent sales experience and customer comments that are detailed and positive.”

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Consumer Federation of America

The Consumer Federation of America (CFA) is an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, more than 250 of these groups participate in the federation and govern it through their representatives on the organization’s Board of Directors.

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