Newcomers not only ones responsible for real estate woes

By Melissa Wirkus

The slow housing market is a reflection of many of the problems within the real estate industry itself. Many industry insiders have blamed the newcomers to the real estate world for all of the problems within the industry.

During the real estate “boom” of the past five years, many people saw how much money that real estate agents were making and decided to jump on the bandwagon. No, it seems that the market is saturated with agents who do not have a client in sight.

Although the flood of newcomers has had some effect on the market and industry, the newbies can not be blamed for all of the dilemmas that plague the housing world.

A September 12, 2006 article by Marcie Geffner of Inman News, “What to do about real estate newbies,” discusses some solutions for common problems within the business.

The author claims that it is not just the new people’s fault, but pretty much everyone involved is to blame for all of the problems. She says that a variety of people associated with this business are to blame, not just the newcomers specifically.

“It's altogether too easy to blame real estate's excessive number of newbies for a variety of ills in the industry that include intense competition, downward pressure on commissions (a boon to sellers, though not brokers) and unethical behavior. But the newbies themselves, as a group, aren't at fault for these conditions. Rather, the responsibility lies at the feet of state lawmakers, real estate brokers, trade associations, licensing schools and, admittedly, the media.”

Geffner says the first step in fixing things is for state licensing officials to toughen up their rules and regulations for who they license. Raising the bar on the standards to obtain a license to sell real estate would help the market greatly.

“Critics may scoff at higher barriers to entry as contrary to the benefits of competition and free-market dynamics, and in most instances, they would be right to do so; however, the peculiar circumstances of the real estate industry suggest that higher barriers are warranted and, indeed, necessary to protect the public and the industry itself from this over-abundance of ill-prepared and inexperienced salespeople.”

These higher standards will only help both industry insiders and consumers because the agents will be the most knowledgeable and educated about real estate transactions.

“The downward trend in home sales this year may force many newbies and veterans alike to exit the business, but the cycle is bound to repeat itself, and the next up market undoubtedly will entice yet another flood of newcomers into a marketplace that's already intensely competitive and over-supplied with such services. That's another reason why higher barriers make sense.”

The media plays a big role in this equation, because everyone watches the news or reads newspapers and magazines and is heavily influenced by what they read or see. The media needs to educate the general public on the true costs and tribulations of joining the industry.

Finally licensing schools and brokers need to consider the impact of a ton of newbies on the industry itself. Yes, of course more applicants is great for licensing schools because they gain a profit from each candidate, but they could charge a higher price to weed out candidates who are not that serious.

“Trade associations need to acknowledge the conflict of interest between what's good for their members, i.e., not so many newbies, and what's good for the association, i.e., as many dues-paying members as possible. Associations are in a good position to educate and inform the public (and the media) about the true prospects for success in real estate, the high rate of turnover in many brokerage companies, the actual incomes that most Realtors earn and the fact that newbies must make a substantial investment to get started in the business.”

In the end, no one specifically can be blamed for real estate’s many troubles right now, we can only try to work together to make things better again.

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