Common statistics say that 87% of real estate agents fail within five years. On the other hand, numbers from the Bureau of Labor Statistics show that the real estate failure rate between 2020 and 2022 was about 43% to 54%. Regardless, that means about half or more of real estate agents who enter the industry fail, which is a very high number of people. To overcome these odds, we’ve examined the nine biggest reasons why real estate agents fail and provided methods to avoid and overcome each challenge.
1. Lack of Training & Mentorship
When starting a new career in any industry, getting the right training is key to success. In real estate, agents in every state are required to take prelicensing classes to become a real estate agent. However, this education generally doesn’t include business-building tips, in-field training, or support, which is one of the biggest components of the real estate failure rate.
As you begin your real estate career, remember that the required coursework is designed to teach you real estate concepts, not to help you build a successful career. If you’re determined to establish a sustainable, profitable, and enjoyable real estate career, it is necessary to find the right training, mentorship, and support to help you work through the inevitable challenges. In fact, research shows that 70% of businesses that receive mentoring survive for over five years, which is significantly better than the average percentage of real estate agents who fail.
How to Overcome This Challenge: Choose the Right Real Estate Brokerage
One of the best ways to incorporate training and mentorship into your real estate career is by finding a real estate brokerage or team built to help new agents grow. All brokerages will claim they have a training program, but their training may not match your learning style or your needs as a new agent. Make sure that you research their specific training programs to ensure that you choose a brokerage that will set you up for success.
Pro tip: Carefully consider each potential real estate brokerage to work for. Start by reading our guide to choosing a real estate brokerage and using our free evaluation rubric.
If there aren’t any brokerages in your area that fit your needs, look for the right support on your own. Consider becoming a Realtor by joining the National Association of Realtors (NAR), which has local associations with regular meetings and a wide variety of professional development courses, articles, and tools. Another option is to hire a real estate coach or find professional development courses designed for building your business. For example, Kaplan Real Estate provides an online Real Estate Accelerator course for new agents that includes live coaching.
2. No Defined Strategy or Real Estate Business Plan
When considering what percent of real estate agents fail, another major factor is how many new agents don’t create a strategy or real estate business plan. Too often, new agents will leap into their careers and go where the clients, properties, and money blows them. While this can be exciting, it will not set you up for long-term success.
Many studies performed over decades of research have shown that businesses that create and implement plans are more likely to become profitable and last longer. Here are just a few statistics that show the impact of creating a business plan:
- 71% of fast-growing companies have business plans
- Entrepreneurs with a plan are 129% more likely to push forward with their business beyond the initial startup phase and grow
- In 2022, over 13,000 real estate businesses closed in less than one year
- Over 40,000 U.S. real estate businesses closed within the first two years of business
How to Overcome This Challenge: Set & Measure Goals
To combat those harrowing statistics, it’s in your best interest to create a business plan. A real estate business plan should outline your mission statement, marketing strategies, and specific and measurable goals to achieve them. Remember to consistently revisit your goals to adapt and re-evaluate when necessary.
Whether you have previous business experience, don’t get overwhelmed by budgets and projections. Use our real estate business plan guide and the free business plan template to set realistic, actionable goals and set yourself up for success.
3. Lack of Marketing & Identifiable Brand
One of the unfortunate reasons that most real estate agents fail is a lack of effective marketing. For some real estate professionals, marketing themselves is an unfamiliar and intimidating concept. However, effective real estate marketing does not have to be complex.
Start by defining the audience you want to reach, what you offer them, and the best ways to reach them. For instance, if a large percentage of your audience is over 60, you can accurately predict that sending direct mail or sponsoring local events will be a more effective strategy than making videos on TikTok.
This simple information is critical to creating a real estate brand that resonates with your audience and helps you consistently generate and nurture leads and clients.
How to Overcome This Challenge: Create a Marketing & Lead Generation Strategy
Marketing is simply the strategy you use to find new leads and clients and build a reputation as an agent that people want to work with. There are many unique real estate marketing ideas, including any strategy you use to connect with potential clients online or offline, such as marketplace advertising, direct mail, pay-per-click leads, social media, websites, and referrals.
The best way to start or build an effective marketing plan is by leveraging tools to increase efficiency. There are a variety of tools for marketing and lead generation, and making the right choice depends on your individual business. Make sure to read our guide to the best real estate marketing companies, which include:
Agents and teams wanting an all-in-one for digital marketing
Professionals wanting online and print marketing automation tools
Agents wanting to hire marketing specialists for a variety of services and tasks
$299 per month
$169 per month
$5, varies by freelancer
4. Failure to Account for Real Estate Expenses
Real estate agents are independent contractors paid through commission splits, not salaried employees. This means you are the CEO of your own business, even if you work under a sponsoring brokerage. It also means that while many brokerages provide free perks for marketing or advertising, you are overall expected to fund your own expenses.
Expenses for real estate agents include costs to become an agent (like prelicensing education and exam fees), continuing education, broker fees, operational expenses (multiple listing service access, memberships, office space), and a wide range of marketing and advertising costs. When you think about how many real estate agents fail their first year, it’s easy to see how these expenses can quickly add up and become unmanageable if agents don’t anticipate them.
How to Overcome This Challenge: Have a Money Cushion & Clear Budget
Before jumping into real estate, research the typical real estate agent salary in your area and the commission splits and expenses. For example, an agent might see a $100,000 commission check, but fail to realize that their take-home pay is closer to $34,000 (34%), and that’s before taxes. In addition, remember that the closing process takes between 30 and 45 days, and paychecks are more sporadic than salaried positions.
Therefore, starting with a cushion of money to fall back on while you get your feet wet can massively increase your realtor success rate. That way, when you’re still learning the processes and waiting for your first paycheck to hit your bank account, you’re not struggling to pay bills.
Consider utilizing a real estate accounting tool to automate and track your expenses. For example, QuickBooks makes it easy to track mileage, organize receipts, and manage cash flow. It can help you understand where your money is going and coming from, and ultimately keep you profitable and successful. Try QuickBooks for free.
5. Treating Real Estate as a Part-time Job
The amount of money you can make as an agent is directly related to your time and commitment. According to Colibri Real Estate, agents who work less than 20 hours per week average an income of $43,889, while agents who work over 40 hours per week have a much higher average of $113,054.
However, with such a high real estate failure rate and the lack of guaranteed income, it’s common for agents to start their careers in addition to another job. In fact, 16% of new agents have a previous career in a related field. Unfortunately, since it’s even more challenging to generate a full-time income in a small number of hours, there’s a low real estate agent success rate for part-time agents.
How to Overcome This Challenge: Determine Your Salary Requirements
While being successful as a part-time real estate agent is possible, you must have realistic expectations and a plan to reach your goals. Without determining a clear income requirement, it can become a vicious cycle for agents who are not making enough money because they cannot devote more time to making more money. Read our guide to being a part-time real estate agent to decide if it’s the right fit for you and create a plan for success.
6. Lack of Client Management & Organization
As soon as you become a real estate agent, you need to have a solid system to organize your contacts and track your communication with each lead. Some of your most valuable leads will be friends, family members, or acquaintances who are already in your sphere of influence. In addition, leads can come from various sources, like websites, referrals, events, or social media, so they will easily fall through the cracks if you don’t intentionally create a plan to track each of them.
In fact, the real estate industry standard to convert leads most effectively is five minutes or less. Plus, persistent follow-ups are an absolute necessity. With these high expectations, it’s easy to see how many real estate agents fail without a system.
How to Overcome This Challenge: Invest in a CRM
Even though this is one of the main reasons why real estate agents fail, there is an easy solution. Many client relationship management (CRM) systems are designed to solve this problem, so find a tool that fits your needs and your budget. CRMs can do anything from lead tracking to lead qualification, email integration and automation to reporting, and much more.
A few of the best real estate CRMs include:
Growing agents and teams wanting an affordable and versatile CRM
Agents wanting a real estate-specific CRM with multi-channel communication tools
New agents wanting the most budget-friendly option to get started
$21.90 per month
$39 per month
$45 per user, per month
If the above CRMs are too much for your current budget, check out our list of 8 Free Real Estate CRM Software 2023.
7. Real Estate Lifestyle Burnout
Unfortunately, burnout is a very common reason why real estate agents leave the industry. Since your income depends on the time you put into your career, many agents work long hours. In fact, 49% of agents say they work 40 or more hours per week, and 53% of experienced agents say they work the same or more hours than they did during their first year.
In addition, the National Association of Realtors (NAR) says it takes clients an average of 10 weeks to find a home. Clients can also be eager and anxious during the homebuying and selling processes, which could mean texts, emails, and calls past “working hours.” For agents to get a continuous flow of clients and money, they hustle day- and year-round.
How to Overcome This Challenge: Set Boundaries
There is a reason the “typical” work week is five days on and two days off—you need the time to decompress. This is a very difficult issue to overcome as time equals money in the real estate industry, but it’s necessary for agents to create boundaries for themselves. Consider the percentage of realtors who fail, and be intentional about scheduling at least one day per week to be “off.”
This doesn’t mean you can’t answer a pressing email, but be selective about your communication. You can also limit your screen time by enacting controls on your cell phone that do not allow access to certain applications during specific hours. Even if you set aside an hour a day to exercise, eat, meditate, and so on, these boundaries can make a huge difference in keeping your mind and body healthy so you can keep on top of your real estate game.
Take advantage of the features of your customer relationship manager (CRM) to automate communication or complete other tasks while you are taking time off. This way you can still maintain contact without sitting in front of your computer all day. LionDesk provides a variety of auto-responders and automated campaigns for text and email to help you communicate with clients and leads, even on your days off.
8. Not Utilizing Your Personal Network
One of the hardest parts of starting your real estate business, or any business, for that matter, is building a client base and getting consistent leads that generate an income. According to Placester, 60% of agents said they prospect for new clients on a daily basis, and 26% devote several hours a day. Although purchasing leads is a viable option, leads can cost anywhere from 5 cents to $120.
However, a majority of agents forget that their most trusted leads come from referrals within their personal network. Reaching out to your network can be intimidating, and many agents fear rejection, embarrassment, or loss of friendships. However, this is also the fastest way to miss loyal clients who will send you referrals.
How to Overcome This Challenge: Plan Your Networking Strategy
Since emotional elements and fears are associated with this obstacle, it’s important to think and plan about the best ways to communicate with your network, both online and in-person. Generally, organic marketing or personal connection is the most efficient way to generate and nurture leads from your sphere of influence. For example, send handwritten notes, send a text or phone call, and engage with others on social media.
In fact, statistics show that 59.4% of the global population is on social media. If you’re not networking and using social media marketing, you automatically miss out on potential clients. If social media isn’t your strength, take advantage of social media management tools like Sprout Social. Sprout Social includes tools that help you create content ideas, maximize and manage engagement, and easily track and understand your progress. You can even try Sprout Social for free for 30 days.
9. Pursuing Every Lead
If you spend a lot of time and money on gathering leads, it’s natural to want to work with everyone who crosses your path. However, not all leads are created equal. The NAR found that the lead conversion rate is about 0.4% to 1.2%, meaning if you get 400 leads, you might be able to convert four people into clients.
There may be a variety of reasons why the lead conversion rate is so low, but it is often not because of the real estate agent. Leads may not be ready to become clients if they have unreasonable expectations about their desired house or finances, dishonesty, rudeness, unethical behavior, or are simply not serious about buying or selling.
How to Overcome This Challenge: Screen Your Clients & Know Your Limits
Instead of spending your resources—including time, money, and energy—on every lead you find, screening your leads is necessary. Research clients on social media before meeting with them, or schedule a phone or video call with your client to talk them through the process and understand their financial situation and qualifications. This will allow you to get to know your clients and feel their sincerity and preparedness before spending valuable resources nurturing them.
If you feel as though the client is not worth pursuing, you can simply stop reaching out to them or fire an existing client. As the owner of your own business, you can refuse your services to whomever you choose as long as it is not done in a non-discriminatory manner. Gently, while maintaining professionalism, explain why you can no longer represent them in the real estate transaction. It may feel like you’re throwing money out of the window, but doing this wisely will actually help you prioritize the right clients and be more profitable.
Real estate is an undeniably challenging career but can also be inspiring and rewarding. While skeptics often reference the real estate failure rate as a reason to avoid this career, knowing all the reasons why real estate agents fail shows that there is nothing impossible to overcome. If you can overcome the challenges by being strategic, using the right tools, and finding the balance between work and play, you can guarantee that your real estate career will continue for the long haul.