The Bureau of Labor Statistics shows that the real estate failure rate is between 43% and 54%. However, common statistics state that 87% of real estate agents fail within five years. 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, I’ve examined the 10 biggest reasons why real estate agents fail and provided methods to avoid and overcome each challenge.
1. Lack of Training & Mentorship
Getting the right training is key to success when starting a new career in any industry. In real estate, agents in every state are required to take prelicensing classes to become agents. However, this education generally doesn’t include business-building tips, in-field training, or continuing 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 career, you must 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. Another recent survey revealed that 34% of participants felt a lack of mentorship hindered their career growth.
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.
The CE Shop’s professional development programs (Source: The CE Shop)
If no brokerages in your area fit your needs, look for the right support yourself. Considerbecoming a Realtorby joining theNational 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 hiring a real estate coach or finding professional development courses to build your business. For example, The CE Shop provides an online Real Estate Success Builder package for agents looking to further develop their skills.
2. No Defined Strategy or Real Estate Business Plan
Another major factor in determining the percentage of real estate agents who fail is the number of new agents who don’t create a strategy or real estate business plan. Too often, new agents leap into their careers and go where the clients, properties, and money blow them. While this can be exciting, it will not set them 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:
- Only25% of businesses last more than 15 years, and a solid and realistic business plan is the key.
- Business plans can help companiesgrow 30% faster.
- Companies that are poorly aligned with strategyreport weaker financial results than their peers.
- In 2023, over18,000 real estate businesses closed in less than one year.
- Around30,000 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, creating a business plan is in your best interest. A real estate business plan should outline your mission statement, real estate marketing strategies, goals, and specific and measurable goals to achieve them. Remember to consistently revisit your goals to adapt and reevaluate when necessary.
Business plan template from Fit Small Business
Whether you have previous business experience or not, 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 why 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.
When new agents enter the real estate market, they are often short on funds while waiting for their businesses to take off. Because of this, they overlook the importance of spending money on marketing materials to establish their brand identity. Materials like headshots, business cards, logos, branded websites and landing pages, flyers, social media advertising, and more can get expensive. However, they are necessary when agents try to stand out in a crowded market.
Without these materials and a strong brand presence, you will struggle to attract clients and build a successful business. Therefore, prioritizing a brand identity and investing in marketing materials will ensure long-term success in the industry.
How to Overcome This Challenge: Create a Marketing Strategy
Marketing is the strategy real estate agents use to find new leads and clients and build a reputation as an agent people want to work with. In 2022, U.S. real estate agents and managers ramped up their advertising spend to over $768 million, a noticeable increase from the $655 million spent the previous year. Although new agents might not be able to dedicate as much of their funds, it is necessary to allocate a portion of their income toward their marketing strategy.
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. Leveraging tools to increase efficiency is the best way to start or build an effective marketing plan. Various marketing tools exist, and choosing the right option depends on your business.
Elevate your marketing and lead generation strategy with Real Geeks’ IDX websites (Source: Real Geeks)
Read how our experts feel about this real estate marketing company by checking out our article Real Geeks Review: Is It Right for Your Real Estate Business?
4. Shortage of Qualified Leads
Another reason why real estate agents fail in the industry stems from a shortage of qualified leads. The lifeblood of any real estate career is a consistent flow of potential clients interested and financially ready to buy or sell properties. Without a steady stream of qualified leads, agents find themselves spending disproportionate amounts of time chasing down prospects with low conversion potential rather than focusing on closing deals.
This challenge is exacerbated by fierce competition and changing market dynamics, where the ability to generate and nurture high-quality leads can significantly impact an agent’s success. Consequently, agents lacking effective lead generation and management strategies often struggle to sustain their business, highlighting the critical role of acquiring the right leads in real estate.
How to Overcome This Challenge: Consistently Generate Leads for Your Pipeline
Overcoming the challenge of a shortage of qualified leads hinges on having a robust pipeline filled with potential clients. While reaching out to your sphere of influence is an effective strategy, you should also diversify your lead generation tactics. This includes organic methods like networking, social media engagement, content marketing, and purchasing leads from reputable sources.
Buy guaranteed leads from Market Leader (Source: Market Leader)
Buying leads can provide a quick influx of potential clients, particularly when starting out or during slow periods. However, vetting these sources is crucial to guarantee high-quality and relevant leads. Also, implementing a systematic follow-up process to nurture leads can significantly increase conversion rates. Market Leader is one of the best places to buy real estate leads. The platform provides 40-plus exclusive leads monthly, ensuring leads are not sold twice and eliminating competition among agents for the same lead.
5. 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 chief executive officer (CEO) of your own business, even if you work under a sponsoring brokerage. While many brokerages provide free marketing or advertising perks, you are expected to fund most of 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%) after expenses, and that’s before taxes. In addition, remember that the closing process takes an average of 50 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, you won’t struggle to pay bills while learning the processes and waiting for your first paycheck to hit your bank account. Additionally, it’s important to budget your money and stick to it to maximize your resources and set yourself up for long-term success.
6. 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 annual income of $54,766, while agents who work over 40 hours per week have a much higher average of $190,419.
However, with such a high real estate failure rate and the lack of guaranteed income, it’s common for agents to start their careers while also working at another job. Unfortunately, since generating a full-time income in a small number of hours is even more challenging, 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. A common reason why real estate agents fail is the lack of clear salary requirements. This may lead to a vicious cycle for agents not making enough money due to insufficient time dedicated to their real estate activities.
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.
7. Lack of Client Management & Organization
As soon as you become a real estate agent, you must 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 for converting leads most effectively is five minutes or less. Persistent follow-up with your clients is also an absolute necessity as timely communication builds trust, keeps you top of mind, and ensures you remain competitive in a fast-paced market. 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, which is to invest in client relationship management (CRM) software. Many CRMs are designed to solve this problem by centralizing all client information in one accessible platform. They offer features such as contact management, task tracking, and communication tools to streamline client interactions. So, find a tool that fits your needs and your budget.
Pipedrive offers visual pipelines to see where leads are in your funnel. (Source: Pipedrive)
Pipedrive is considered one of the best real estate CRM software available. It is an affordable yet adaptable solution ideal for growing agents and teams. For as low as $12.50 per month, you can benefit from a visual sales-focused, drag-and-drop pipeline that makes lead tracking efficient and easy. You can also customize cycles, set reminders, and receive detailed reports to help you stay on top of your CRM efforts.
Read how our experts feel about Pipedrive by checking out our article .
8. 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, NAR reports that most Realtors worked 20 to 59 hours per week. Additionally, it takes clients an average of 10 weeks to find a home.
Licensed As | |||
|---|---|---|---|
Hours Worked per Week | All Realtors | Broker/Broker Associate | Sales Agent |
Less Than 20 Hours | 19% | 14% | 22% |
20 to 39 Hours | 39% | 35% | 41% |
40 to 59 Hours | 34% | 40% | 30% |
60 Hours or More | 8% | 10% | 7% |
Clients can also be eager and anxious during the homebuying and selling processes, which could mean texts, emails, and calls past “working hours.” Agents must hustle day and year-round to get a continuous flow of clients and money.
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 agents must 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. Limit your screen time by enacting controls on your mobile device 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.
9. 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 income. According to Placester, 60% of agents said they prospect for new clients on a daily basis, and 26% devote several hours a day.
However, a majority of agents forget that their most trusted leads come from referrals within their personal network. In fact, 82% of all real estate transactions result from repeat and referral business. Moreover, the three most common ways foreign real estate leads found agents were referrals, personal contacts, or repeat business—creating 62% of all foreign leads.
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 this obstacle is associated with emotional elements and fears, 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, you can send handwritten notes, send a text or phone call, and engage with others on social media.
Additionally, attending networking events and community gatherings can provide valuable opportunities to meet new people and prospective clients, fostering relationships that can lead to future business opportunities.
10. Pursuing Every Lead
If you spend a lot of time and money 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 about0.4% to 1.2%, directly impacting the success rate of Realtors. This means if you get 400 leads, you might be able to convert four people into clients.
There are several 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 for various reasons, such as unrealistic expectations regarding their dream home or financial situation, displaying dishonesty or rudeness, engaging in unethical behavior, or not being genuinely interested in 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 them to discuss 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 the client is not worth pursuing, you can stop contacting them or fire an existing client. As the business owner, you have the right to refuse service to anyone as long as it’s not discriminatory. 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 will help you prioritize the right clients and be more profitable.
Frequently Added Questions (FAQs)
Common statistics say that 87% of real estate agents fail within five years. On the other hand, numbers from the Bureau of Labor Statistics[1] show that the real estate failure rate between 2020 and 2022 was about 43% to 54%. This implies that at least 50% of new real estate agents fail to succeed in the industry—a relatively high rate of failure.
Many real estate agents quit due to the high competition and the challenge of building a steady client base in a market that depends heavily on networking and personal connections. Additionally, income inconsistency, especially in the early stages of their career, where it takes time to close deals and receive commissions, can lead to financial stress. This combination of factors makes it difficult for many to sustain their career in real estate long term.
Realtors often struggle most with having a concrete lead generation strategy, which poses a significant barrier to success in finding clients. Without a well-defined approach to generating and nurturing leads, realtors may find it challenging to consistently attract and retain clients, impacting their ability to close deals and navigate the competitive real estate market.
Source:
[1]https://www.bls.gov/bdm/bdmage.htm#rental
Bottom Line
Real estate is an undeniably challenging career, but it can be inspiring and rewarding as well. 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 nothing is 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.
