Sunday, February 15th, 2009 at 5:26 AM
RE License Fees Double
The California DRE announced that they are doubling the cost of getting a real estate license.
A salesperson license went from $120 to $245, and a broker’s license will now cost you $300, instead of $165.
Are you renewing late? Oh boy, the late fee went from $180 to $367 for a salesperson’s license, and from $248 to $450 for a broker.
The change is probably due to the state budget, but it appears the realtor population is dwindling.
Here are the number of license tests taken in December:
| Type of Test | 2004 | 2005 | 2006 | 2007 | 2008 | Broker | 1,628 | 2,277 | 1,636 | 1,148 | 595 |
| Salesperson | 11,440 | 13,212 | 8,941 | 1,315 | 1,085 |
| Totals | 13,068 | 15,489 | 10,577 | 2,463 | 1,680 |
An 89% drop in license tests between Decmeber 2005 and 2008!
The total licensee population has finally started to decline too, although when you’ve seen where we’ve been, you can’t help but think that we have a ways to go:
| Month | # of licensees |
| Dec ‘95 | 329,254 |
| Dec ‘96 | 313,776 |
| Dec ‘97 | 300,751 |
| Dec ‘98 | 295,433 |
| Dec ‘99 | 303,289 |
| Dec ‘00 | 309,126 |
| Dec ‘01 | 315,282 |
| Dec ‘02 | 355,940 |
| Dec ‘03 | 367,779 |
| Dec ‘04 | 418,044 |
| Dec ‘05 | 476,244 |
| Dec ‘06 | 521,330 |
| Dec ‘07 | 548,959 |
| Dec ‘08 | 532,531 |
Posted on Sunday, February 15th, 2009 at 5:26 AM in Realtor Training | 36 Comments » | 
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Hopefully some of the more competent ones are the ones renewing…and only the REALLY committed ones are starting.
The renewal numbers are the ones to see. At these fees, more will think hard about their token efforts in this line of work, I’d think.
shoppingaround | February 15th, 2009 at 6:06 amJim,
You seem like the first real estate agent we used many years ago. A real professional.
Sad to say, those we have come across since then are anything but professional. In fact, professional and real estate agent have nothing in common in reality. Too many “ex” something or others working in the field. Too few policies, and the policies themselves are ALL in favor of the broker/agent.
I suspect the quality broker/agents regret how the buying and selling of homes has evolved.
John Doxey | February 15th, 2009 at 6:12 amshopping,
I added the total counts of licensees – the population has dropped 16,428 in the last year, but that might just be due to fewer new agents coming in. Because the renewal period is four years, we probably won’t see a big drop-off for a while.
But the last local SDAR count I saw was steady, perhaps partially due to a reduction in local dues and fees. Did many agents say, “I’ll hang in for one more year”?
Jim the Realtor | February 15th, 2009 at 6:42 amHello John!
I often say, “This would be a great business if it weren’t for the other agents”!
In spite of the mentoring programs that most big franchises offer, the quality of help that agents provide today is suspect.
The searching for homes used to be our main service provided, but now the internet allows consumers to do all their own searching.
What’s left for an agent to offer?
1. Precise valuations
2. Getting an offer accepted
3. Handling problems
I think we’re seeing around 50% of pending deals fall out of escrow these days. Though this list is only three items, they are all critical to getting a house sold.
For those who think this list looks somwhat trival, and say “just hire a discount agent”, I’m fine with that. They tend to be new in the business – someone needs to help them get their chops up. Consumers will appreciate the difficulties of buying and selling real estate in this environment once they’re actually in the game – and your agent’s ability to assist you is very hard to determine ahead of time.
The folks at Ahmen News have been running a month-long discussion about the future of real estate commissions, and of course, agents has been up in arms. The obvious answer to me is to have all real estate companies offer all pay plans (hourly, flat-fee, rebates, and commission-only) and move the consumer’s focus to which agent is the best person for the job.
Jim the Realtor | February 15th, 2009 at 7:09 amI had a Real Estate Agent actually knock on my door a few days ago. She was going door to door.
3clicks from da Beach | February 15th, 2009 at 7:54 amTony reminded me to direct people to sign the petition over at http://www.angryrenter.com
I left this comment for the politicians:
1. Spend NO MONEY on bailouts, and let the market correct naturally.
2. If you insist on being ignorant, at least spend the money where it will help – namely buying down the interest rate on purchases only, and at least those waiting prudently can benefit too, if they find a house worth buying.
3. If you insist on helping those saddled with resetting ARMs, lock them in at the teaser rate. That is what the borrowers signed up for, they didn’t read the part about resets/recasts.
I’d prefer NO BAILOUTS!
Jim the Realtor | February 15th, 2009 at 8:00 amJim,
I’m curious to see how many license tests were taken in 2001-2003. Does it peak (bubble) in 2005?
LC Jim | February 15th, 2009 at 8:32 amI hate to say this because we’re talking about a fee imposed by government, but it sounds to me as if the realtor license fees need to be a lot higher than they are now. Any idea how high they’d need to be to drive realtor licenses back down to pre-bubble numbers?
GeneK | February 15th, 2009 at 10:12 amI’d like to see annual fees like this:
Salesperson – $5,000
Broker – $10,000
LC Jim – I added the licensee stats back to 1995 – what a difference!
Jim the Realtor | February 15th, 2009 at 10:27 amI can’t imagine why so few people are getting into the industry now… Maybe they should do something like the state Bar used to do. The dues went WAY up every year you practiced for the first few years. A 10,000 license fee is one thing for an established professional, but its a real barrier to entry for newbies. Competition aspects aside, you don’t want to discourage honest newbies with high fews.
Former RB Resident | February 15th, 2009 at 11:11 amI’m cool with that – I have met a couple of newbies lately that were impressive, so let’s give them a chance.
It would be nice if the fees were performance-driven – for every complaint your dues went up.
I still want to see a transparent sales history on each agent, and a website dedicated to clients being able to remark on their agent’s performance – just like on ebay.
Jim the Realtor | February 15th, 2009 at 11:18 amJim,
You’re dead on about the fees. If you’re new in the business as a salesman, you’d better impress a broker for them to spend 5k on you. If you want to set up your own shop, the risk is $10k (still not that much, but enough to drive out the inexperienced fly-by-nighters.) Real Estate Agent should be a profession, not a hobby.
I still can’t get over how unregulated the industry is. Right now the financial industry is taking A TON of heat for the economic meltdown (as, of course, they absolutely should,) but I don’t see that much heat on the Real Estate industry. How is the FBI not banging down Jenae’s door?!
Commissions on retails Stocks and Bonds are around 1% and constantly under scrutiny. But it’s acceptable to pay 3% in the real estate industry? Where’s the cry-out for regulation here? Obviously the RE business cannot be trusted with the ordinary mom & pop weekend shops. If RE commissions were regulated down to 1-1.5%, and the annual fees for agents were raised, a lot of hacks would be washed out and the RE business would grow some professionalism. Good realtors like Jim would thrive even more despite reduced commissions.
The success rate for new stockbrokers/financial advisors is about 10%. This hardly means retail financial services are always pure and act with integrity, but when you’re getting advice on how to invest $500k there’s an expectation of professionalism. Not every chump who passes the series 7 (which is a difficult test) can stay in the business. You have to be good to make a living on 1% commission. On the flipside, I basically expect every RE agent I come across to be a compete set of clown-shoes. What’s the success rate for new RE agents?
The Blur | February 15th, 2009 at 11:24 amI basically expect every RE agent I come across to be a compete set of clown-shoes.
LOL
I’m not so sure about the hacks being washed out with lower commissions – they are the ones that are driving commissions that way. They don’t have much to offer, so they are happy to get anything they can.
The reason I don’t like discounted commissions is because the client ends up being a full-service client in almost every case. There isn’t any in-between when it comes to fiduciary duty, I’m going to give you everything I got, regardless of fee amount.
If there was a concerted effort by the powers that be to regulate commissions, and/or to drive them lower, I’d revolt.
But the revolution would be against the other agents – I’d try to take all their business.
I’m working on the model now……
Jim the Realtor | February 15th, 2009 at 11:28 amWhat constitutes a “discount” commission these days?
For a long time 6% was the standard.
When we sold my first house in 1997 my realtor charged us 5% because we were using him to shop our next home.
When we moved out of SV in 2001 the same realtor charged us 5% and told us that that was the current going rate.
When we moved to SD County in 2007 our realtor up north charged 5%.
I have no idea what the commission rate was on our current home, but whatever it started out as, both realtors took a cut on that to bridge the gap between our top bid and the seller’s bottom line price.
So what’s “standard” and “discount” in 2009?
GeneK | February 15th, 2009 at 11:50 amRE: “I’d like to see annual fees like this:
Salesperson – $5,000
Broker – $10,000
LC Jim – I added the licensee stats back to 1995 – what a difference!”
What an insight into you. – Drive out those who can’t afford a high entrance fee?
How about making the educational requirements and continuing training/education worthwhile and more than just a worthless endeavor to raise fees? – That might start the process to make it a profession rather than the used car lot business it is. – But NAR would never encourage a higher standard that might exclude members from joining.
Jon | February 15th, 2009 at 11:56 amJim,
As a salesperson myself, I’m all for getting fairly compensated for the service I provide. And I have to admit selling a house is a lot more work than selling a car, furniture, mutual fund, or just about anything else an individual commonly buys.
“The reason I don’t like discounted commissions is because the client ends up being a full-service client in almost every case.” I think this is more of a function of your desire to be good at what you do than the client being more or less demanding. If the hacks were held to the same standards you hold yourself to, many would be washed out and the commissions would be deserved. If people didn’t want to pay commissions, they could buy on their own; similar to an investor buying through e-trade as opposed to Merrill Lynch.
There should also be more accountability. When a stockbroker misrepresents a security, the client can file a complaint and/or sue for damages. Every little complaint, LEGITIMATE OR NOT, goes on the broker’s permanent public record for every potential investor to see. Could you imagine what Jenae’s would look like?
No matter how you look at it, 3% is a large commission. And I can’t believe there’s not more regulation and scrutiny regarding such fat paychecks for such high incompetence and fraud. Yes, I can see why you’re so frustrated with your counterparts, but you’ve clearly separated yourself.
The Blur | February 15th, 2009 at 12:18 pm“What an insight into you. – Drive out those who can’t afford a high entrance fee?”
Completely unfair. Sell a cookie-cutter home in La Costa, and your commissions are at least $15k. You’re telling me a RE company can’t pay $5k for a competent agent they believe will succeed? And yes, education and CE requirements should be tougher.
“NAR would never encourage a higher standard that might exclude members from joining.”
This is exactly the problem: it’s not exclusive enough.
The Blur | February 15th, 2009 at 12:32 pmHey Blur…
GameAgent | February 15th, 2009 at 2:53 pmGood salespeople can sell anything. Since the commish is so good in RE maybe you should give it a shot.
The reason I don’t like discounted commissions is because the client ends up being a full-service client in almost every case.
And why is that? Not to blow smoke up your butt, but I guess it’s because you’re a professional and when you take on a client you assume a certain set of responsibilities. Not to assume them would be something short of professional.
Blissful Ignoramus | February 15th, 2009 at 5:12 pmHow about making the educational requirements and continuing training/education worthwhile and more than just a worthless endeavor to raise fees?
The point is that entrants should make an upfront investment. Education could represent that (and indeed may cost much more), but there is nothing like putting your money where your mouth is.
A lot of people entered the business in the mid 2000s for the same reasons people got themselves into bad real estate investments: they saw it as a get rich quick scheme. Requiring a more significant buy-in is one way to keep the flakes out.
Of course, they might figure out a way to finance the fees using non-conventional loan products…
Blissful Ignoramus | February 15th, 2009 at 5:16 pmRE commissions are my biggest pet peeve (next to wasteful govt spending – which means I gots me a lot to be pissed about!).
Jim, I’d love to hear your thoughts on the following:
- The absolute cost. $50-$60K to sell a $1 mil home?? That’s two BMW M-series before tax. How long does it take the typical seller of such a home to clear that much $? A fraction of the time agents spend to buy/sell it!
- I’ve never understood why a home’s value should impact the cost of selling it. If homes go way up or down, or a buyer selects the more expensive (or cheaper) of a series of homes, why should an agent be impacted by that? Talk about fiduciary interest conflict.
- The real crippler in my view is the commission split. How are you, as a seller, supposed to trust that other buyering agents will show and be impartial about your house if the commission is 4% total? Or 3%? Or 0% if you are FSBO? Result = sellers talk big about going discount, but chicken out and reinforce the 5-6%.
- I’d like to see the whole practice banned. You hire agents like lawyers. Hourly, retainer, a la carte, or whatever. Both sides hire — and pay for — their own.
Hmmmph.
Aztec | February 15th, 2009 at 5:28 pmB.I. – thanks for the support, and I agree about how requiring more education is futile. The education is a JOKE.
There are hundreds of on-line schools that offer multiple choice tests to pass, then give you a warm-up class with answers to the real estate exam learned from sending in their own plants a few times per year. Think they’ll be happy to offer additional courses? You bet, and agents won’t learn a thing except how to pass an on-line course qucik and easy.
It would take a test similar to the Series 7 to change it, and CAR would fight that tooth and nail.
Aztec, I have to leave for now, but I’ll take on your hot buttons a little later – you’ve mentioned the primary agitators!
Jim the Realtor | February 15th, 2009 at 5:39 pmGreat news, so only competent, dedicated professionals like Jim will remain when all the other quick buck grifters are shaken out of the system…you know these type of people…they were tech recruiters during the dot com bubble, then moved on to real estate when it got hot, now they are hustling something or another to get by right now until the next “thing” emerges.
Pete | February 15th, 2009 at 6:01 pmHow about they (DRE) start at the start. When the salesperson’s exam is basic enough that most people can pass with 10-15 hours studing a subject they had never approached before, it’s going to lead to problems. Like Jim said there are on line courses that teach the test, not how to practice RE. Maybe something like the BAR with essay questions??
Just a Broker | February 15th, 2009 at 7:03 pmOK Aztec!
Realtors are like attorneys, just a lot cheaper. Lawyers who take contingency cases get 33%, we get 5%.
Why do these types of payment structures exist? Because the end result is so hard to predict in the beginning.
Would you take the same pay today to do your job if you got paid at the very end, if at all? There needs to be an incentive for agents to work for months for free, and only getting paid if they can get clients to the finish line.
You’re right about sellers talking big about going discount. They might be willing to hire a lower commission guy, but balk at hourly pay or flat fees paid upfront. Sellers don’t want the burden of risk, so for the agent to take all of it, we deserve a bounty.
I shrug off the argument about buyer’s agents having incentive to get their clients to pay more. The incentive is so tiny it never goes through my mind, and I doubt many other agents too.
Example, what is the additional benefit to an agent for getting their buyer to pay $810,000, instead of $800,000 when the commission is three percent? $300.
When the commission on $800,000 is $24,000, I doubt that the extra $300 compels an agent to push that much harder – they’ll take the $24K. The more interesting question is whether the $24,000 gets in the way of the agent doing what is best for the client. If your agent does plenty of business, then they don’t hang on every deal as life-or-death. Working with an agent who needs the deal/money like they need air to breathe is where trouble begins.
Jim the Realtor | February 16th, 2009 at 6:04 am“Working with an agent who needs the deal/money like they need air to breathe is where trouble begins.”
So what percentage of agents would you say are not in that position these days vs during the bubble?
GeneK | February 16th, 2009 at 7:12 amWhoa, I messed up my response above. Take Two!
Thanks for the reply, Jim. I inserted some comments…
Realtors are like attorneys, just a lot cheaper. Lawyers who take contingency cases get 33%, we get 5%.
– I only mention the structure, not the absolute comp. You know, though, some lawyers work pretty darn hard to make $250K per year, and have to chase a lot of ambulances to earn that
Why do these types of payment structures exist? Because the end result is so hard to predict in the beginning. Would you take the same pay today to do your job if you got paid at the very end, if at all?
– As a wall streeter in CA, I do exactly that. Guess how this year is lookin’? :-O>>
There needs to be an incentive for agents to work for months for free, and only getting paid if they can get clients to the finish line.
–I see that argument for the buy-side. But the sell-side is much more likely to result in a sale (nearly always). I always argue that a selling agent should get much less than the buy side… it’s the buyer that brings the value.>>
You’re right about sellers talking big about going discount. They might be willing to hire a lower commission guy, but balk at hourly pay or flat fees paid upfront. Sellers don’t want the burden of risk, so for the agent to take all of it, we deserve a bounty.
–I get that. But the bounty is too high when the price of a home exceeds ~$500K. Why should someone’s fee double over 4 years just because the house doubled in value?>>
I shrug off the argument about buyer’s agents having incentive to get their clients to pay more. The incentive is so tiny it never goes through my mind, and I doubt many other agents too. Example, what is the additional benefit to an agent for getting their buyer to pay $810,000, instead of $800,000 when the commission is three percent? $300.
Aztec | February 16th, 2009 at 7:58 am– Agreed. I’m thinking more about how if a client says they want to spend $600-$800K, the agent will show them stuff at $825K. And won’t show anything to their client that’s a 4% total commission.
Thanks Aztec!
People want to jump up and down about 5% this and 6% that, but a proper investigation needs to look at it as two commissions.
1. I agree, the buyer brings the value (money), and their agent has the duty to explore all of the best fits with them. Sellers who want to try and exploit theat system can offer a higher commission (Countrywide is offering 3.5% to buyer’s agents on all of the REOs we’re doing). But the bounty is high enough at 2.5% that I don’t think you’re going to lose many, if any agents offering that rate to them.
2. The seller side is the commission under attack. Pure and simple, if the listing agent can justify being worth 2.5% or 3%, then he deserves the business. Not many can.
Jim the Realtor | February 16th, 2009 at 9:57 am“I’m thinking more about how if a client says they want to spend $600-$800K, the agent will show them stuff at $825K.”
We didn’t mind being shown properties priced above our max, as long as the agent had some idea how he/she was going to get the seller to come down into our range.
GeneK | February 16th, 2009 at 10:35 amNo doubt, Gene. What I mean there is that the agent will show one at $600K (possibly the worst one at that price), and all the rest are $800K or more.
Aztec | February 16th, 2009 at 11:07 am“This $800k house is very nice. What is your plan to get the seller to agree to lower the price to $600k?” That usually puts an end to that sort of thing pretty quick.
GeneK | February 16th, 2009 at 12:41 pmAll this chit chat about how lowly realtors are. Maybe next time you want to sell or buy a home you interview the agent and ask questions and hire somebody that you know is competent and trustworthy. I also agree with higher educational requirements, more continuing education, and more professional development. There are a lot of flaky realtors out there.
BigWaveDave | February 16th, 2009 at 2:47 pmA house in my neighborhood recently sold for $2.25 million. If the seller paid 6% (which is likely since I know other neighbors that have bought/sold with this particular agent), the commission would be $135,000. I think that is absolutely nuts.
On the other hand, I think Jim is nuts to work so hard on those POS REOs and only get a few thousand for his trouble.
Commission based on the value of the property just doesn’t make sense, as it does not reflect at all the amount of work necessary to successfully complete the transaction.
justme | February 16th, 2009 at 4:02 pmI like the menu pricing idea. Buyers and sellers pay for what they are getting, either as a flat rate, or as an hourly fee. Not sure why more agents/brokers aren’t offering this option.
CA renter | February 16th, 2009 at 6:07 pmIf it’s going to be other than commission-only, there will be money paid upfront, right? I’ve tried it a few times, and people are very reluctant to agree to paying in advance. The road is uncertain, and they’re afraid to risk a big bill.
But there is one other hurdle.
The companies sprouting up everywhere doing loan mods? They, and any other real estate brokerage who receives pay in advance, has to get written permission from the California DRE.
The DRE reviews your program and fees, and only once they approve can you legally collect up front. That’s not CAR, it’s the government entity insisting on full examination. I can’t blame them, but it sounds like a hassle to me.
Jim the Realtor | February 16th, 2009 at 6:15 pmThanks for the response, Jim. Sounds like the DRE is trying to protect people from scammers, and I don’t know how to work around that.
Personally, I’d rather pay as services are rendered. Not sure why people wouldn’t be willing to do that as long as the fees aren’t too high.
CA renter | February 17th, 2009 at 1:02 am