PHOTO: Real estate agent. FILE
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Are There Too Many Unproductive Agents in America?
The Issue of Unproductive Loan Officers and Real Estate Agents
There are over a million unproductive agents in America, and most LOs aren’t productive enough to justify their costs. Loan officers and real estate agents often spend time complaining about their peers, and it’s not without reason.
The Problem with an Abundance of Inexperienced Agents
Top producers in both fields will attest that the biggest challenge facing their industries is the presence of numerous inexperienced and inefficient agents who simply shouldn’t be in the business. These individuals not only waste time and make mistakes but also drive up acquisition costs, negatively impacting consumers and industry professionals.
Statistics Reflecting the Oversupply
The latest statistics from the National Association of Realtors indicate a decrease in the percentage of agents with fewer than two years of experience, which suggests that a significant number of new LOs and real estate agents are leaving the market. However, despite the decline, the mortgage LO workforce and the number of Realtors remain high compared to the volume of transactions.
The Need for a Reduction in Agents and LOs
There are compelling arguments suggesting that the housing industry should shed a considerable number of agents and LOs. The industry’s current size doesn’t align with the reduced origination volume, resulting in market inefficiencies and high costs.
The Productivity Divide
Examining the productivity of LOs and real estate agents reveals a significant disparity. The top percentage of agents accounts for a substantial majority of sales, while many LOs still focus on less productive Realtors. This inefficiency, combined with the pursuit of non-existent leads, contributes to the high cost of mortgage origination.
The Burden of Dead Weight
The housing industry continues to bear the weight of unproductive agents and LOs, impacting overall sales. The need for successful mortgage businesses to work with individuals actively selling real estate is emphasized, as listings become increasingly valuable.
Economic Inefficiencies and the Reputation of the Industry
The oversupply of agents creates economic inefficiencies, hampers full-time agents’ income, frustrates consumers and experienced agents, and reinforces high commission rates. Part-time agents, in particular, contribute to these issues, generating little income and causing harm to the industry.
Addressing the Problem for a Healthier Housing Industry
In order to foster a healthier housing industry, there should be a disincentive for part-time agents and a reconsideration of high compensation for average or below-average LOs. By discouraging part-time agents and allocating resources more effectively, the industry can improve overall productivity and financial outcomes.
The Quirk of “Marginal Agents”
The CFA study revealed an interesting pattern among “marginal agents” who were equally likely to work deals in both the highest and lowest sales categories in different markets.
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