There are about 5 million homes bought and sold each year in the US, give or take, and most of them are bought and sold with the help of a real estate agent. Buyers almost always hire an agent to help them buy a home because it costs them nothing, and somewhere around 90% of home sellers hire an agent to help them too. So, how much real estate agent effort does it take to buy and sell all these homes?
We know from a 2002 study done by the California Association of Realtors that the average transaction requires about 20 hours of a seller’s agent’s time. (This study was done long before the widespread adoption of Internet home advertising. I would assume that number has gone down since then.) If we assume the same number of hours for the buyer’s agent, we come up with about 40 hours of total real estate agent time to complete the transaction. So, let’s do some math.
There are 5 million homes that change hands each year and each transaction requires about 40 hours of work for a total of 200 million “agent hours” of work. A full time job in the US is considered to be 2,000 hours per year. Let’s assume agents work full time and do nothing but help buyers and sellers. Then we take 200 million agent hours and divide by 2,000 hours per year of work and we come up with 100,000 real estate agents. That is the number of agents it takes working full time to help people buy and sell homes in the US each year. The problem, of course, is that there are over one million real estate agents in the US. What the heck are all these extra agents doing?
The way I see it, either 90% of real estate agents are not helping buyers and sellers or 90% of each agent’s time is spent on something other than help buyers and sellers. That does not make for an overly productive industry.
Now, you might make the argument that it takes more than 20 hours of work to help a buyer or seller. Fine. Let’s assume it takes twice that long: 40 hours for each agent for a total of 80 hours. That still means 80% of real estate agents are not needed. If 80% of the real estate agents left the industry tomorrow, every single home buyer and seller who wanted representation would still get their full allotment. There would be no shortage of agents.
You might argue that agents need time to market themselves to find new customers so they cannot work full time helping clients. That is true. But 90% of their time? And if 80% or 90% of real estate agents left the industry tomorrow, the remaining agents would not have to market themselves at all—buyers and seller would find them. The remaining agents would make more money while spending less time marketing themselves and more time helping clients. Sounds pretty good.
So, will 80% or 90% of real estate agents leave the industry? Not voluntarily, but then again, neither did the buggy whips makers.