Everyone has that one acquaintance from school or the military who is now living a high life as an agent.
Success in real estate has become so commonplace that bragging about monthly awards and daily closings on social media has become almost comical.
And who could forget the ubiquitous photos of a fancy watch superimposed on a car’s steering wheel with a tired text like “You can’t miss out on this brand!”
No magic formulas exist for achieving success. It is the end result of planning, effort, and lessons learned from setbacks.
However, here is the reality.
Contrary to popular belief, real estate agent work is not all sunshine and roses. Most real estate agents have a tough time making a living in the industry. In case you are thinking about a career in real estate (or you simply believe that all agents make too much money), I have decided to write today about the difficulties of working as a property agent in Singapore.
First, not all agents are making enough money to buy the round of happy hour drinks for everyone in the bar!
It’s not hard to come across stories of agents who make six or seven figures per year (or even per month). However, the reality is that there are many more people in similar situations that you simply don’t hear about.
The truth is that most agents are not making those kinds of astronomical salaries.
Let’s conduct some quick calculations.
Residential sales reached $76.4 billion in 2021 (and this was an excellent year). If you take out the en-bloc transactions for the year, you’re left with $75,2 billion.
Since the commission on newly released homes is larger than on resale ones, it would be more realistic to break down sales figures accordingly.
I will estimate a 2.5% commission on new launches and a 1% commission on resale sales.
If we use that figure, then the total amount of commissions is $1.147 billion.
That may seem like a lot of money at first, but let’s break it down by the number of salespeople to get a better idea.
As of January 2022, CEA reported a total of 30,399 agents. When you divide $1.147 billion by the number of agents, you end up with an annual pay of $37,731.
Now it does not sound as impressive as it seems!
Okay, but we also know that not all agents are active, so that could not be entirely true. A recent piece in BT speculated that the actual number of active agents may be as low as 9%.
But let’s be charitable and apply the 80/20 rule; for the purposes of this discussion, I’ll assume that only 20% of agents are actually doing anything.
When you divide $1.147 billion by 6,080 agents, the average annual salary comes out to $188,000. Now it sounds not too bad for a start but let’s not forget that this figure is the gross number. You will still have to factor in the business costs involved.
Yes, it’s enticing, but it’s not enough to purchase a fancy sports car and a collection of APs and Rolexes.
Keep in mind that the highest incomes will greatly bias the results, thus the true number is likely to be far lower.
ERA Realty Network said that the typical gross monthly commission received by their top 300 property agents in 2015 was $11,686, so our estimate of $188,000 is extremely optimistic.
(Let’s also not forget that 10% will be taken off to pay the property agency).
It’s a lonely business
One of those careers where you get out of it what you put in is that of a real estate agent. While some agents may be able to coast on their previous experience, the competitive nature of the sector often means that they work alone.
Of course, there are teams with leaders who make an effort to build team spirit, but they are the exception rather than the rule.
There are more reports of agents going after each other’s necks and fighting for clients.
A friendly agent may try to undercut a bargain with a client behind your back, so don’t be surprised if this happens. (just speaking from experience)
Because when it comes to financial matters, no rules apply. (we are different)
No more office hours
Those who strive to be their own boss face constant scrutiny and judgment. You are your own boss now, setting your own hours and deciding what you want to do in life. Right?
Wrong.
You’ll need to put in long hours, seven days a week, if you really want to see any progress.
Since you are the agent’s public face, growing your business is challenging. Your clients have engaged you because they believe you are best suited to represent them; you cannot get away with using an assistant.
Paperwork, team meetings, marketing efforts, prospecting, and negotiating proposals may pile up quickly over the week. Viewings and client showings take place after business hours.
Weekends? You can’t survive without them, and that’s when an agent is most in need. Because this is when your customers have the most spare time, you should schedule your appointments accordingly. Managing viewing slots from different locations may prove to be a challenge but if you have partners, this can be resolved easily.
The same is true with public holidays; there are almost none. As much as you’d like to set your own schedule, accommodating your clients’ needs at all times is simply not feasible.
In and of itself, answering phone calls, emails, and WhatsApp messages is a full-time job. Clients want prompt responses, but you can’t exactly hand that responsibility off to a chatbot. It’s nice to eat with loved ones on occasion, but it’s hard to enjoy yourself when you’re hooked to your phone between meals.
That’s why it’s a good idea for anyone interested in working independently and setting their own schedule to become a real estate agent.
However, if you approach it like a part-time job, then it is going to be…. part-time, no time then once upon a time, and you will be compensated as much as your commitment.
Fixed income vs Annual turnover Income.
This is a crucial but often overlooked consideration. Real estate is a lot like running a business, but many agents fail to see it that way. And what is the leading cause of business failure?
Shortage of funds. (82% of the time, money is the primary motivation).
To make more than a respectable living as an agent, capital is required, unlike in many other professions. To get new customers in the modern business world, you need to spend a lot of money on marketing unless you already have a sizable network built up from past jobs.
Flyers, Facebook/Instagram/TikTok/Google/YouTube ads (which are increasingly uncontrollably costly due to demand), classifieds (if you sell landed properties), advertising on property portal websites, the production and distribution of promotional videos, and social media campaigns are only some of the potential expenses.
It’s not uncommon for real estate agents to spend well over $10,000 monthly on advertising, which, like any business, may quickly spiral out of control if proper budgeting precautions aren’t taken.
It’s also important to factor in ongoing expenses like cell phone payments, gas, and transportation costs.
There are, of course, further examples (such as insurance and healthcare), but I’ll try to keep this quick and I think you’ll get the gist.
But the true issue is that your income is unstable. The fact that agents’ income is highly unpredictable is often overlooked.
It’s possible to feel on top of the world after closing two or three agreements in a single month and then to go months without a single deal.
Things beyond your control, such as the December 2021 cooling measures, may have doomed some agents in the first quarter of 2022. This can be very difficult if you have a mortgage, student loan payments, and auto payments to make. That’s why it’s important for an agent to exercise caution and not count on making hay every day.
For resale houses, for instance, the fee may not be paid until three to six months after the sale. This can range from six months to a year for brand-new product releases. Sometimes it takes as long as a year.
How would you feel if you had to wait a whole year to receive your paycheck? Managing one’s own life and finances is impossible.
Not everything that you do is valued and appreciated.
Some might say it’s a two-way street at this stage, but rookie agents might be astonished at how easily clients can ditch them.
Even if you’ve spent months doing all in your power to inform and protect your customer, you may still lose them to a competing agent who’s willing to give them a cut of the commissions.
Many individuals now don’t seem to appreciate the effort that went into touring them around on weekends for months, running the figures, and analyzing the data. Even if you do everything by the book and put forth a lot of work, consumers will often choose to save money if given the option.
The amount of time spent on each house hunt is often overlooked.
Some agents, I’ve heard, work with their clients for as long as two years while they seek a house.
Even if you don’t spend every weekend on showings and consultations, the commission you get at the end of the year may not be worth the time and effort you put in.
Imagine putting a lot of time and effort into a project, only to have the client back out right before they make a final commitment to buy.
While real estate agents certainly share some of the blame for the terrible reputation they’ve earned, it’s situations like these that may transform even the most ethical among them into self-serving opportunists. What would you do if three consecutive clients, despite your best efforts, decided to unfairly terminate your services at the end of the project?
Conclusion
The real estate industry is not a good fit for people who prefer to take things easy.
It can be a lucrative profession for those who are prepared to put in the required time, effort, and perseverance. As the saying goes, being On Time On Target and not Own Time Own Target
Just know what you’re getting into and plan accordingly.
To understand more about what the career brings, get in touch with us at the following email or simply just WhatsApp us.
