Is it Time to Require a College Degree to Become a Licensed Real Estate Agent?
The real estate bubble is behind us and with default rates still rising, the rest of the meltdown is still ahead of us. Purchasing or selling a home in this market has possible grave consequences. Are real estate agents educated enough to assist today’s consumers?
In this blog post, I will address the idea of adding a bachelor’s degree as a minimum barrier to entry for real estate agents. But first it’s important to review professional status. I must know thousands of real estate agents. Many of them are well educated and conduct their business in an honest and ethical manner. Real estate agents are often cited as one of the least trusted professions. But wait, are real estate agents professionals? Let’s take a look at the structural relationship between a professional and his or her client.
Is your barista at Starbucks or the person who bags your groceries a professional? If you answer “yes,” hold on: there’s something inherently different between a barista or a retail salesmen and a doctor, lawyer, engineer or CPA. We can use the word “professional” in many different ways. Your barista can do his job in a professional manner. Anyone can do his or her job in a professional manner, according to his or her own subjective interpretation. This is using the word “professional” as an adjective. When we use the word Professional as a noun, there’s a classic definition that we would refer to.
A Professional:
1. Has specialized knowledge in his or her field. This person knows way more than the average random consumer about his or her area of expertise;
2. Is required to complete a minimum amount of formal, academic education;
3. Is tested for competency;
4. Is licensed;
5. Must maintain that license with mandatory continuing education;
6. Subscribes to a mandatory code of ethics in an industry that is self-regulating. This is different from state or federal government regulatory oversight. The industry itself regulates ethical conduct over and above state and federal law;
7. The self-regulating body enforces their code of ethics with sanctions for violations;
8. Owes fiduciary duties to clients. This means the professional has the highest prescribed duty of loyalty to the client, to put the client’s interests above his or her own interests.
Real estate agents, does your industry hold professional status? Take a look at your state agency laws. Does your state mandate fiduciary duties owed to clients? I have been told by many Realtors in various states that their local association of Realtors does not enforce the Code of Ethics. Nationwide, to elevate the professional status of Realtors, I recommend ditching dual agency completely and self-regulate by enforcing the Realtor Code of Ethics with more integrity. By that I mean across all states and not just in some states.
Is now the time to add a college degree as a minimum requirement?
I have met thousands of Realtors and real estate agents. Many of you already conduct your business as a Professional. However, just because you personally conduct your business in this way doesn’t mean consumers all throughout your market area place real estate agents or Realtors into the same category as a doctor, lawyer, engineer, or CPA. Real estate agents and Realtors: The more you move towards elevating the professional status of your entire group, the more value you will hold in the eyes of your clients, and the more you will be able to charge for your services.
If we look back through history, with any of the classic professions, we see a narrative trajectory of that group’s movement from non-professionals to emerging professionals to professionals. Real estate agents would fall somewhere between emerging pros and professionals based on the above criteria.
Notorious R.O.B. would set the bar much higher than it is now. 1000WattMarc’s dream real estate brokerage would be for all licensees to have, at the very minimum, a bachelor’s degree and a moral compass. I suggest that Marc’s dream brokerage would want to write a much more descriptive and prescriptive code of ethics, one that goes further than the NAR Code, which is a very, very good Code to start from.
When the first no-fault divorce laws started to pass from state to state in the 1970s, we saw a wave of women enter the workforce. Real estate and mortgage lending were a place where a female could start out with no experience and make a living wage, and even more so, could not only rise through the ranks but could start her own company if the glass ceiling wouldn’t break. Leaving the barrier to entry low for the real estate industry had its time and place.
The practice of real estate has become more complex since the 1960s and 1970s. Yet today person can move from selling sheets at Macys to real estate, to selling shoes at Nordstrom, to selling cell phones, and so forth. They did during the bubble run up, and now many have moved back into retail sales.
Some say a college degree is not required to be a good salesperson. But then let’s stop pretending that agents are in the same ranks as professionals with college degrees and let’s stop acting confused when consumers do not respect the practice of real estate and question an agent’s value and fees. Must the real estate agent of 2010 and beyond transform into more than just a salesperson? If the industry as a whole likes things the way they are, perhaps one firm could create market differentiation by making higher education mandatory.
To start with, a Bachelors degree in ANYTHING would be a minimum barrier to entry. As the years move on, curriculum would be developed for the profession of real estate. Required core courses would include all facets of real estate, agency, and contract law, mortgage lending finance, economics, statistics, communications, counseling skills, conflict resolution, negotiation skills, multicultural competence, applied professional ethics, listening skills, business, accounting, taxation, foreclosure statutes, short sales, the unauthorized practice of law, consumer protection and fraud statutes. Agents could take specialized electives in land use, construction and development, property management, commercial real estate, multi-family, and principles of investment.
There would be no required technology classes. Being able to use a computer would be a pre-requisite. There would be no elective classes on social media because the world has enough self-designated experts in this field to assign one to each real estate agent for the next decade.
There would be no required sales courses in this utopian bachelor’s degree curriculum of my dreams. Because selling would not be what graduates do once they’ve passed their licensing exam. Instead, they would need business development skills, marketing, entrepreneurial skills, and education on how to help their clients make informed decisions.
Yes, I am well aware that Bill Gates dropped out of college to start Microsoft. But he and others like him are Outliers. They are not the norm. They are on the far end of the bell curve. We need to take account of the middle. Any industry is judged on its lowest common denominator, not by the best of the best in an industry.
Turnover of real estate salespeople falls in line with retail salespeople. Having a constant stream of new to newer agents means a certain percentage of consumers will always be working with a new/newer agent. This might lead to higher earnings for company owners who earn a higher fee split on those transactions but as a whole, the industry itself suffers from lack of consumer confidence.
At first, mandatory higher ed might not seem like a good idea for our existing real estate business models because broker/owners wouldn’t be able to make all the money off of the cash cow new agents. However, more educated agents from the start may save those broker/owners money in the long run.
Yes there are bad eggs in every profession, even those that require a college degree. The sociopaths are at one end of the bell curve and don’t make up the majority of any one group. Well, except for the loan mod salesmen and coming soon to a market area near you: predatory short sale negotiators.
Requiring higher education is not just a business decision and profits. It is also a moral issue. Professionals take into account more than just what’s good for them personally, they ground their decisions in what’s also good for the entire industry as well as what’s good for their clients.
Already licensed agents would be grandfathered in, of course, which is the only way an idea like this could even begin to get traction.
In closing, if higher standards of education are put into place, then real estate instructors would absolutely have to meet higher standards. But that’s a different blog post for a different day.
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Comment by Robert Watson CRB, ePro on 26 February 2010:
It’s not the agents. If anyone thinks that requiring a salesperson to have a college degree to sell a house is going to make a difference in the real estate business, they are not in sales. College graduates get their real estate license on a regular basis and try to make it in the real estate sales business. Some do and some don’t. What matters is how they are trained, coached and monitored.
Let’s look at two of my real-life examples. Hire #1- Man with 4-year college degree who has been a CPA for the past 16 years. Time in business: 5 weeks. Needs a lot of coaching. Hire #2- Housewife, no college degree, but experience in copier sales 15 years ago. Time in business: 10 weeks. Minimal coaching. Both have access to and are being trained, coached and provided guidance in my office. Hire #1 doing a great job, meticulous to detail, has engaged and is working our system with two buyers. Gets high marks for being very ‘professional’ from his teammates. Hire #2 has opened two sales, gets high accolades from teammates, cooperating brokers and her clients for her ‘professionalism’. Now why in the world would anyone want to inhibit Hire #2 from becoming a real estate salesperson by requiring a college degree?
I have a different view of ‘raising the bar’. Require real estate-licensed owners of real estate companies to follow state guidelines of minimum professional, ethical and production standards; and require them to monitor and report on those standards for each of the licensees in their organization on a quarterly basis. Raise the bar on the brokers, owners and managers in companies and hold them accountable to hold their licensees to higher standards. Let’s raise the bar, but let’s do this in my lifetime. The current dialogue on raising the bar won’t happen in my lifetime and quite frankly, I’d like to be part of the process! (and yes, I put my designations after my name!)
Comment by jillayne on 26 February 2010:
Hi Robert,
Glad you stopped by CE4. In many states, licensing laws do hold brokers accountable to make sure their agents are following state minimum standards of practice.
A state regulatory agency would never regulate ethical conduct. They only regulate law and rules. It’s up to an industry to regulate the ethical conduct of its members.
I do agree with you on that point; the NAR Code, which is quite good, is meaningless unless there are sanctions for violations. Some of your ideas would fit well into new code provisions.
Back to your two examples, yes the salesperson gal w/no degree has 2 transactions on the books while the college grad is still getting coached. Is it possible that sales gal could actually be more of a liability booking two sales within her first 15 weeks?
Is the minimum standard of pre-licensing education all that’s needed today? I’m hearing yes and no. Yes from you, in this particular example, but no from scads of other agents out there who complain about having to deal with new, newer, or part-time agents who have varying degrees of competency at the 15 week mark. Yes, she is good for the brokerage because the firm has made money but is she also, equally good for the industry and also equally good for consumers?
If I’m a homebuyer or homeowner, I think I’d rather go with the nerdy CPA college grad who’s going to be meticulous and analytical.
Perhaps that’s a personal choice but I say the college grad has a better overall chance of being good for the consumer, the firm, and for the industry with his degree.
If all that matters is sales, sales, sales, then we don’t have to even have a dialogue about higher ed. But then we should also not pretend that agents are professionals because SuzyQ former copier sales person in my mind, is and will always be, just a sales person and her value is the same value consumers place on retail salespeople.
Comment by Robert Watson CRB, ePro on 26 February 2010:
Thanks for your insight. Wow, if many states have standards then we do have a big problem! Obviously those aren’t working or we wouldn’t be having this discussion, would we? Let’s also agree to allow for some gray area when it comes to having a typed debate…agreed? Or let’s sit down face-to-face so we can dialogue, understand and start to create what needs to be created for any bar to be raised. In addition to training the NAR COE and many other programs in my office, I still train the old Psychology of Selling program to my agents. You are correct in saying you might prefer a former CPA, but others will prefer Suzy Q’s amiable style. Both get my full oversight and attention. Both have their work reviewed before, during and after the sale. And yes, both of these exceptional individuals are equally good for consumers. Has the brokerage made money on either? No. My investment in them and my company’s investment in me costs a lot more than 2-5 sales in company $. ‘Will’ we make money? Of course, aren’t we all in business to make not only money, but a profit? My office is #1 in the marketplace not because we force consumers to use us, but because they choose to work with us. (…and you didn’t really mean what you said in that last sentence, did you?)
Comment by Jillayne on 27 February 2010:
Hi Robert,
Yes I did mean what I said in that last sentence. Sometimes it is hard to see things from a different perspective if we’re in the middle. I’m trying to help readers (agents) see themselves through a different lense, like turning a kalidescope and seeing a new picture with different facets, colors, and patterns.
What if, at your brokerage you didn’t have to spend all that time hand-holding new agents because they arrived at your firm ready to find clients (v. “make a sale” and yes there is a difference.) There was no Psych of Selling course needed and no ethics class needed because the agent already paid tuition to a college ahead of time and already came ready to go with those fundamentals. Yes there would still be time spent mentoring the new folks, however, a broker/owner/manager’s tasks would be radically different.
Maybe that’s part of the disconnect. Maybe today’s managers do not wish to hire people with college degrees because they don’t have one? Just guessing.
It’s intimidating for a manager to manage people who are better educated. However, time and time again, I hear about the value of experience so perhaps broker/owner/managers without that college degree could rely on their pavement-pounding experience to recruit the hypothetical college grad.
Comment by Jillayne on 27 February 2010:
Here are two examples.
@1000wattmarc sent this one via twitter:
http://www.mandevillelahomes.com/
Marc asks: Would a college grad (Realtor) put himself into a shopping cart and ask: “check us out?”
Jilayne asks: Would a college grad (Realtor) completely mis-state simple economic fundamentals in the tables located on this website? Or choose such a demeaning, stupid domain name? Or use deceptive advertising that’s bordering on violating state consumer protection laws? Come on. This guy is saying that the reader will be able to “buy” a house but this is obviously a rent-to-own transaction.
http://stinkycredit.com/
On this particular person’s Linkedin profile, the highest level of education is high school.
Comment by Robert Watson CRB, ePro on 27 February 2010:
Hi there again Jilayne, now you are talking! My wife collects kaleidoscopes (sp) and I agree that they are fun to look through and see how the light and movement creates different patterns. Then I put it down and look at facts and stats to make real changes. You write wickedly good blog post, hey I am engaged…right? We can only ponder the “what if’s” and “maybe’s” you present. But I would love to see your data that supports your statement in the last paragraph. In my career I have met plenty of managers who are not intimidated to hire and work with people with college degrees. Are all the managers you know really intimidated to manage people who are better educated than themselves? What about the agent who has a PhD in Molecular Biophysics? Are you saying a manager with a high school education or a 4-year college degree would be too intimidated to manage the PhD?
Anyway, looks like we have both beat this horse into the hay…I look forward to meeting you someday as we conquer the real estate world! Raising The Bar one agent at a time!
Comment by Teresa Boardman on 2 March 2010:
I would go further with this but am delighted to see professionalism defined and happy that the definition goes well beyond returning phone calls. Where I add the most value to my clients . . and I will see if I can get one to come over and comment . . is my experience and my ability to give them advice based on that experience and the knowledge of my market.
Comment by Jay Thompson on 2 March 2010:
Like the definition of professionalism, disagree completely that a minimum eduction of a Bachelors degree should be required.
For the record, I have a bachelors. Graduated Summa Cum Laude with a 4.0 GPA. Has that helped me be more “professional” as a real estate broker?
I don’t think so.
Most of my agents have bachelors degrees. Some have MBAs. They are fantastic agents. But so are the ones with no college degree.
The onus to raise the bar falls on the broker. Not the NAR, not the state licensing authorities. The broker. I only hire experienced agents and carefully vet every one of them. I’ve turned down several “top producers” because they didn’t meet MY standards. MY standards, not some standards touted by some trade association.
In a past corporate life I worked in a field that required the “professionals” to be degreed. In the days before I earned my degree, I trained countless engineers, some with PhD’s from very prestigious universities. And some of those had absolutely zero inter-personal skills. Oh, they could do differential calculus in their sleep, but when it came to interacting with peers and subordinates, they were complete buffoons. I wouldn’t buy a sack of potatoes from them, much less a piece of real estate.
If (and it’s a HUGE if) broker’s would hire agents like most companies hire employees, monitor those agents, train them where necessary, and fire them when necessary, the bar would be raised significantly — as would the general perception of agents in the public’s eye.
Sadly, I don’t see it happening. Too many brokers are worried about the short term — hire anyone with a license and a pulse and collect desk fees. They don’t even have to sell anything in many brokerage models for the broker to make money. If they sell something on occasion, great. Sock ‘em with ridiculous splits and move on and hire another.
THAT is what needs to change. Requiring college degrees won’t do anything to fix the broken brokerage model.
“…because SuzyQ former copier sales person in my mind, is and will always be, just a sales person…”
Just a salesperson? They are people too. That seems like a horribly stereotypical attitude, particularly coming from an educator. Some of the “just sales people” are the most honest, caring and professional people I know.
Comment by Jillayne on 2 March 2010:
Hi Jay,
Thanks for stopping by CE4.
“Just a salesperson? They are people too. That seems like a horribly stereotypical attitude, particularly coming from an educator. Some of the “just sales people” are the most honest, caring and professional people I know.”
There’s nothing wrong with being labeled as a salesperson. There are thousands of salespeople all over the U.S. And any salesperson can do their job in a professional manner.
But here’s the dis-connect. The majority of real estate agents and Realtors that I know think of themselves as Professionals with a capital “P.” They categorize themselves alongside doctors, lawyers, engineers, nurses, CPAs, and so forth.
But.
But.
But…the consumer does not categorize agents in that same way. The average, random consumer places agents in the salesperson category.
Again, nothing wrong with being a salesperson.
The question I’m asking is this: Is it time to require a college degree to be an agent?
If the entire industry is happy with the way things are, then let’s not require a college education.
If the industry would like to transform itself, this would be one method and one possible solution.
You outlined another important consideration regarding the way we run a brokerage business.
In the world of the Professions, there are still many different business models, but the duties and responsibilities of the individual to look after his/her client’s best interests are much, much higher.
Comment by Jillayne on 2 March 2010:
Hi Teresa,
I taught a series of classes in late 2009 for a client where we had at least 40, 50 agents in the room on the topic of Generations X and Y. I set up a role play with the group and ask them to justify their value to a Gen X/Y consumer who may believe an agent is not worth their fee. Agents are all over the place in how they answer that question and what it really comes down to is market knowledge along with representation and negotiation skills.
Some clients have already researched their market area and don’t believe they need an agent to help them with this; they only need an agent to write up the deal and see it through to closing.
Will a college degree help aleviate the value proposition challenge? No. Even attorneys and CPAs have competition from do-it-yourself websites and limited service, low cost providers.
I DO believe that that’s where we’re headed though and there are still plenty of attorneys and CPAs who are able to artfully explain their value proposition.
I believe we’re nearing a crossroads where the industry must transform to continue to remain strong and viable.
Comment by David Losh on 3 March 2010:
I will give this post a bit more regard than the rant the Marc guy of 1000 wats had.
Real Estate is a business. We help people who are interested in the business, or are sincere about providing for themselves, or the family.
You are either in the circle or out of it.
Keep the higher education for those who want to sit around. To build a Real Estate takes a different skill set.
Comment by Jay Thompson on 3 March 2010:
“There’s nothing wrong with being labeled as a salesperson.”
Personally, I’m not a fan of labeling anyone.
Comment by Jillayne on 4 March 2010:
Would you be a fan of labeling if the label were a perceived positive one? Just wondering.
doctor, lawyer, Realtor, soccer player, musician, phoenixrealestateguy, a designated broker, business owner, one of Inman’s Most Infuential Bloggers, Summa Cum Laude graduate, poker player…..
yes, I think you would.
So why can’t consumers place labels on us based on their perceived notion of how agents ought be labeled?
Isn’t this what consumers do every day?
Comment by Tim on 4 March 2010:
Jay makes some excellent points. Particularly the one about starting from the Broker. Much of a culture of an office is led by the owner/brokers whom agents look to and learn from.
I think the thing that disturbs me the most about the culture of real estate is that there is little (at least from what I can see) emphasis on business ethics,professionalism and SERVICE. Most of the emphasis is going to pom-pom seminars on how to “sell sell sell” while it should be “service service service” which allows for the natural result of a sale.
I went to an open house in my neighborhood. The broker wanted me to sign a buyer agency agreement on the kitchen table to look for homes. I said, “how about asking me what my name is and what I’m looking for first.” After leaving I pull some records…agent has had a history of problems paying income taxes and has two homes currently IN foreclosure. This person is a managing owner/broker. Credibility folks.
The credibility issue of those in real estate including bad apple escrow folks is a hard perception to break. But the perception is there for a reason.