John Cooper, 27, is having a tough few years in real estate. The Roseville, Calif, agent came into the business shortly before the top of the market then saw his sales drop off in 2006. Next, he lost his house. Payments on his adjustable rate mortgage jumped from $1,300 a month to $2,000. Cooper, who owed more than the home was worth, let the house go into foreclosure.
Recently, Cooper has gotten busy again, but all of listing are so-called short sales [i.e., the sales price is less than the mortgage owed,] which involve more work and can take double or triple the time to complete than a typical house purchase. "Investors stay away from short sales," says Cooper. "It takes too much time."
Realtors around the country have for the past few years been dealing with the double blow of sinking home prices and falling transactions. That has not only led to lower pay checks and a drop in the number of real estate agents nationwide, but also a rise in foreclosures among realtors themselves. (Read "Four Steps to Ending the Foreclosure Crisis".)
Still, while a growing number of agents are dealing with the loss of their homes, others are optimistic that the end of the end of the real estate bust may be near. Sales are up as much as 30% in many of the hardest hit markets, such as Los Angeles, Miami and Phoenix, in the past few months. "October was our best month in a year in a half," says John Huebner, a real estate broker in Orlando, who manages three Century 21 offices. "And this is the time of year when sales are traditionally slowing."
Real estate agents came together this past weekend to lick their collective wounds and get a bit of communal support. The National Association of Realtors was holding its annual conference, hopefully entitled "Destination: Success." Lionel Richie performed and recently unretired bicyclist Lance Armstrong gave a motivational talk. Despite the optimistic theme and the headline guests, attendance was down 20% from a year ago to 20,000 real estate agents. In all, NAR president Charles McMillan says the number of working real estate agents has dropped about 10% nationwide to 1.24 million, from a peek of 1.37 million two years ago.
Worse, real estate professionals from around the country say they have seen a growing trend of agents, like so many other homeowners, in housing distress. Ray Caddell, a broker in Charlottesville, Virginia, says he was recently asked to do an appraisal on a distressed property by a bank. When he looked up the address he found out that the homeowner who was behind on his mortgage was a fellow agent. He says his local association of real estate agents is looking into raising a fund to help brokers in need. "It's tough out there in the real estate world," says Caddell. "We are trying to figure out what we can do to help our fellow agents."
While foreclosures continue to grow nationwide, there are no official numbers of how many of those foreclosures are on homes owned by real estate professionals. Darren Duarte, a spokesperson for the Neighborhood Assistance Corporation of American, which provides free mortgage counseling, says his organization has helped numerous real estate agents who are struggling to keep their homes.
Tara Ebbert, 38, a real estate agent in Roseville, Calif., was forced to put her house on the market earlier this year. It has yet to sell, but she figures she will lose most or all of the $75,000 she put down on the house when she bought it a few years ago. "It is what it is," says Ebbert. "It's a part of life and I am not going to dwell on it."
Realtors typically don't get paid a base guaranteed salary. Generally, they are paid a percentage of the commission they bring in for their firm when a home sale is completed. That means when there are no sales, real estate agents typically don't collect a paycheck.
Huebner of Orlando says he has had a number of agents in the past year who have lost their houses to foreclosure. Many, too, have just decided to leave the business. In the past two years, the ranks of agents in his offices have shrunk to 130 from a high of 170. The slower market of the past two years has also forced him to cut costs. He closed one of his four offices and eliminated most his print advertising. In order to survive, Huebner says many of remaining brokers have changed what they do. They have gotten out of the residential sales businesses, and into commercial real estate or helping people find rentals. "It's harder to make a sale than it was," says Huebner. "But people have to live somewhere."
Cooper's own experience with foreclosure may be making him a better real estate agent. He now specializes in selling homes where the buyer owes more than the house is worth. He has closed 18 sales so far this year, and believes he will complete another 4 transactions in the next month. "I'm the busiest I have ever been," says Cooper.
He rents now, but hopes he will soon have enough money to buy a house again. He is even thinking about using his 401(k) retirement account to buy investment properties. "This probably the greatest time ever to buy a house," says Cooper. Let's hope so.