Property Grunt

Monday, February 16, 2009



Upon reading reading this article, I wanted to run over to Gold Street, kick open the doors and scream "What the f**k are you doing?"

I mean this is probably the stupidest thing you can do right now.

“I’m coming into this thing like nothing’s going to stop me,” said Kendra Elise Tomas, 27, who started work at Urban Sanctuary, a downtown-focused brokerage firm, late last month.

On Jan. 20, the day Ms. Tomas took her licensing exam, the Dow Jones industrial average dropped 330 points.

Aspiring sales agents convey a can-do-it-ness that combines ambition, hunger and a necessary pinch of delusion. They shrug off ominous reports of double-digit price declines and slowing sales and insist there’s plenty of cash out there.

“They say the business is cyclical,” Kyle Wolhers, a 22-year-old student, said last month after a seminar at the Real Estate Institute that attracted about 75 people. “I can gain experience now, cut my teeth in this kind of market, and when there’s an upswing, I can be an established agent.”

Yes. This business is cyclical and right now we are in the downturn. How long will that downturn last for? 2009? Think again. It might 2010. You are going to be at it for a very long time.

Like many newly licensed agents, Ms. Tomas is coming from a different line of work: she has sold items from her clothing line, Elise MIA Vibe, in boutiques in NoHo and the Village; and also worked as a buyer at H&M. But retailing has slowed considerably, and, encouraged by two friends in the business, she enrolled at the Real Estate Institute, where the basic 75-hour licensing course starts at $395.

Ease of entry was a factor for Ms. Tomas. Sales agents are effectively independent contractors who use a broker’s listings and resources in exchange for a slice of their commissions. Ms. Tomas completed her classes in nine days, sat for the 90-minute multiple choice test, and paid the required $65 fee. (A score of 70 percent merits a pass. In December, about half succeeded.)

She had toured seven buildings by the end of her first day on the job.

“I’m a very self-sufficient person,” she said. “I did my clothing line because it’s my passion, my creativity, how I express myself. I’m doing real estate for money. To fuel my passion, I need money.”

Ms. Tomas made $47,000 a year at H&M; as an agent, she said, “I’m looking to make twice that, if not more.”

Ms. Tomas comes from a sales background. And right now sales sucks ass, particularly in the clothing industry. If she thinks things will be different for her because she will it so, I have to disagree. This is something that is beyond her control.

This is the new reality.

“I see it happen all the time,” Mr. Love continued. “People come in without enough money behind them. They find themselves in a situation where they become highly anxious and it can be a downward spiral. It affects you mentally. Your bills are coming due every 30 days and you’re not making any money.”

Many agents start off in rentals, where commissions are small but volume is high. But most newcomers must surrender at least 50 percent of their earnings to the brokerage firm; top performers can negotiate more favorable splits. Many brokerage firms require new sales agents to share their first 10 deals with a more experienced agent.

Even before they start closing deals, newly licensed agents are usually required to shell out more than $500 for business cards; an annual membership in the Real Estate Board of New York, the industry trade group; and a digital camera — wide-angle lens required.

To make ends meet, Jeffrey Gratton, 48, an agent with Bond, works part-time at a Banana Republic store. For Mr. Gratton, who said he had been a hotel butler and concierge, the retail job alleviates anxieties about living expenses. “If I were worrying about that,” he added, “I would be horribly preoccupied.”

Talk to experienced brokers and you’ll hear a common refrain: even in boom times, 8 out of 10 new agents will be gone in a year.

“Some people are very capable and have the skills and are serious and thoroughly research the career prior to coming in,” Mr. Love said. “And then you have other people — and I would say it’s most of them — who just sort of say, ‘O.K., let me take the course and go into real estate,’ without even considering what that means.”

So we shouldn't even bother right. Save your money and invest in plastics.

Remember that video that I told all of you to watch? There is a way to make money in this environment.

“The market, it makes me nervous a little bit,” said Mr. Badalamenti, 30, a former bartender. “But there are deals getting done. It’s entirely up to you if you can make money. Better to get in while the market’s slow anyway.”

Bartending, he said, was “nice and social,” but he is looking for a more substantial career. He hopes to make $50,000 in his first year as an agent, but has saved up six months of income as a cushion.

Misty Rice, 37, a photographer, was sitting a few feet away. She said she had no intention of becoming an agent; she was hoping the class would help her as an investor. "I’m looking for three great deals this year," she said. “The photography industry is like, ‘Where’s the money there?’ Right now, it does not provide me with the financial income for the lifestyle I want to lead."

We are going into a major transition with this market. It is not just the market itself but there are more forces that exist that seeks to replace the real estate broker. From FSBOs to online no fee services.

One of the cliches that is often heard in the business is to "put blinders on"
which measn to simply to focus on the work at hand. It is a principle that all brokers aspire unfortunately it can lead to one "spinning their wheels" which means going nowhere.

For those of you who go forward in this endeavor, be aware the market conditions, determine what direction to take and pursue it with all your heart. But make the effort to pull back and evaluate to see if you are achieving your benchmarks.

Also learn Mandarin. I am not joking. Once things start to implode , there is going to be an exodus of rich Chinese people coming droves. They are going to need a place to hand their hats.