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2014So a few weeks back I was flying back homeand had 75 minutes to spare so I did a Facebook Q&A. Maybe a hundred people or so jumped on and started to ask me questions. About a third of them surprisingly were brand new agents. And I thought I'd do a video just for youbrand new agents, veterans who may be starting over and anyone in a slump.I'm going to give you a little more extreme of an answer with the intention that I get you very quickly out of the slump and into success.
While the real estate agent failure rate may seem shocking to some, it’s the stark reality of the industry. However, this doesn’t mean you should give up before you get started. Below, we’ll dive into five reasons why 87% of real estate agents fail and provide some useful tips on how to succeed as a real estate agent. But here are some highlights:
According to the National Association of Realtors (NAR) failure is defined as as those who get a real estate license and then leave the industry within the first five years. According to them, 75% of real estate agents fail within the first year, and 87% fail within five years.
Some common mistakes that agents make include, inadequate prospecting, not marketing properties in ways that lead to fast sales, and not following up with clients. But let’s dive deeper into this.
Is Real Estate Hard?
Being a real estate agent can be hard, but really it depends on your view of what’s difficult. While the physical demands aren’t too much and can be rewarding, the real challenge is staying disciplined in your work ethic, and adapting to new trends. Many new agents find this hard. According to the NAR, as of July 2023, more than 60,000 real estate agents quit in the first half of the year. Why? They could have been trying something new or are worried about where real estate is headed. The future of real estate agents may be a balance between technology and human expertise. Agents who can adapt to this new landscape are likely to thrive in the years to come.
Some trends in the real estate industry include:
- Online lead generation
- AI and Machine Learning
- Social Media
- VR and virtual tours
- Tech-Savvy Homes
Why Do Real Estate Agents Fail?
If you’re considering a career in real estate, consider if you’re ready for its rewarding but challenging nature. We’ll talk about the common challenges agents face and why some leave the industry. After gaining these valuable insights and understanding potential pitfalls, you can adjust your approach your real estate business plan to avoid similar setbacks and achieve success in real estate.
Here are some of the top reasons why real estate agents fail:
1. Inadequate Funds
In order to start any business, you’re going to need capital. However, many realtors start their real estate journey with very little saved up. Without enough money saved, you can find yourself gasping for air under a pile of expenses. Then, before you know it, you’re forced to close your business without seeing any signs of success.
To prevent this from happening, it’s recommended to have at least six months of expenses saved up. This way, you can continue to pay for necessary expenses like food and housing before your first commission paycheck comes in. Once you begin to make enough money to cover your expenses, you’ll be able to transition to full-time real estate earning GCI.
2. Limited Knowledge of Lead Generation
Finding leads is crucial to running a successful real estate business. Buying a new home is a major life event and purchase, which means it can take a while for a client to sign the deed. However, with a strong list of leads, you’ll have more contacts to reach out to and offer your realtor services. If you want to close deals, you need to know the different ways you can generate leads, such as using online lead generation tools, hosting physical or virtual open houses.
3. Failing to Follow Up With Clients
Once you close a deal with a client, the work doesn’t stop there. One of the reasons why real estate agents fail is that they don’t take the time to follow up with clients once a transaction is complete. To become a successful realtor, it’s crucial to stay in contact with your clients. Doing so will build a sense of trust in your relationship, which will encourage them to refer friends, family, and coworkers to you or use you again for your services should they look to move or buy a home in the future.
4. Poor Marketing
Marketing is the crux of any successful business, especially real estate. Through marketing, you’re able to spread your brand name, target your desired audience, and grow your business. However, a reason why real estate agents fail is that they have poor marketing efforts. Whether they’re not using social media marketing to its full potential, are producing inadequate marketing campaigns, or have an outdated website, there are many marketing efforts that can go awry.
As a realtor, take the time to market your business correctly. This means using marketing tools like CRM software for lead generation, social media management tools for growing your brand name, and email marketing campaigns for keeping your clients and leads informed.
5. Missing a Business Plan
Without a business plan in place, you won’t have a path that can lead you in the direction you’re trying to go. 87% of real estate agents fail because they’re missing a business plan that outlines the steps they need to take in order to reach their goals.
To prevent this, use a business plan template, such as one offered by the U.S. Small Business Administration. In your plan, outline your executive summary, conduct a market analysis, detail your marketing efforts, and more. If you ever find yourself stuck, you can revisit and review your business plan to get back on track and make any necessary changes to keep moving forward.
How to Succeed As a Real Estate Agent
Now that you know why 87% of real estate agents fail, it’s time to look at how you can beat these odds and grow a successful business. Below, you’ll find tips that can help you perfect your craft and become a leader in the real estate industry.
1. Get Your Finances in Order
As you know, one of the top reasons why real estate agents fail is because they run out of money. To be a successful real estate agent, having a firm grasp on your financial situation is a must.
With that said, you need to understand your internal motive in order to act. What are your expectations? What do you need to produce vs. your goals? Oftentimes, the gap between what we need and our goals creates a lot of unhealthy tension for people. So, I say, determine what you absolutely need financially and cover that, then set some goals.
For example, what is your monthly cost to run your household? Rent, mortgage payment, kids, dogs, food, dry cleaning, everything you spend money on – get that number. Let’s say it’s $24,000 a year. Then, what about your work? Let’s say it’s $8,000 a year, bringing you up to a total of $32,000 a year needed to survive. Next, how much outside monthly income do you have? Include spousal income, rental unit income, and other revenue streams.
Once calculated, subtract this number from your total. However, for now, let’s say this is $0. Also, let’s say your average real estate commission check is $8,000. Well, you might be saying, “Gosh, I only need to sell one house every four months to survive and sustain my business.” Feel good about it. So know exactly what your costs are and then set your goals on top of that.
2. Create a Morning Routine
First, it’s important to start your day by waking up on the right side of the bed. Creating a morning routine is a great way to set the tone for the day to ensure it’s going to go smoothly. Implement these steps into your morning routine, and you’re sure to see positive results in no time:
- Repeat affirmations: Every day, write this affirmation 30 times: “I earn X amount of dollars or more.” Your reticular activating system will locate and focus on whatever you think about the most, and you will begin to see it everywhere.
- Create a daily action checklist: These are things that you know you have to do that day that would make you money. Prospect for leads, set appointments, take listings, get offers, close deals!
- Listen to something motivational or something that makes you feel good: It’s not Howard Stern, not Constant Negative News, and not Fox Fair and Balance. None of that stuff. Get your mindset right. Watch some videos that will get you fired up!
3. Focus on Lead Generation
Once you’ve started your day on the right foot, it’s time to get to business. In order to grow your real estate business, you need to focus on generating leads. Failing to focus on leads is one of the many reasons why real estate agents fail. Below are some real estate lead generation ideas that can help you find new potential clients:
- Role-play: Practice your scripts 15 to 20 minutes a day, so when you speak with real clients, you know what to say, how to say it, and ultimately get you more business.
- Call every new Expired Listing, FSBO, and Make Me Move property: Don’t be afraid to screw up. Make every mistake. You’re brand new, who cares? You’ll learn the mistakes that agents make when they list these properties when they’re not really clear to the seller what it takes to get it sold. Or find out if sellers are motivated at all.
- Call/contact five people that you know and say. “Would you like a free home valuation?”: Who do you know that’s thinking about buying or selling? All the important questions you can ask to your existing database for lead generation.
- Lead follow-up: Follow up on all your generated leads and ensure no leads slip through the cracks.
4. Be the Knowledge Broker
Lastly, if you don’t want to join the 87% of real estate agents that fail, it’s essential you become an expert in the field. This means learning how to find a real estate mentor who can teach you the ropes, attending conferences and networking events to gain first-hand knowledge, and taking time to stay up to date on industry trends.
In addition to these tips, implement these habits into your daily routine, and you’ll become the knowledge broker you dream of being before you know it:
- Read Keeping Current Matters every day: Be up-to-date with the latest real estate analytics and trends of the market so you can speak powerfully to customers about why now is the best time to buy and sell.
- Study the daily hot sheets: There’s nothing more important than knowing every day what’s listed, what’s sold, what’s canceled, what’s expired, and what’s closed. What were the numbers? What were the prices? Know the market inside and out.
- Host open houses every weekend: You do all of this for nine months as a brand new agent, a rebounding agent, or a fading winner, and you will become a rising star. What do we know will happen? You will talk to a lot of people. You’re going to have some upsets. You’re going to have some tremendous wins. You’re going to create a lot of momentum, and you’re going to be that 13% that succeeds in real estate!
Wrapping Up: Why Do Most Realtors Fail?
Being a successful real estate agent is easier said than done. After all, there’s a reason 87% of real estate agents fail. However, knowing the mistakes these realtors make, such as failing to follow up with clients or not having adequate funding, can help you prepare and grow a successful real estate business.
At Tom Ferry, we can help you become the best real estate agent you can be. Whether you’re wondering how to build your brand as a real estate agent or are interested in a real estate agent coaching program, we have the tools and expertise to help you succeed.
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