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REALTORS with Education Earn More. Really?

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I'm gonna make more money selling real estate! YAY!

Or so says NAR:

More interestingly, however, the Member Profile shows that REALTORS® with a college education earn higher income. It indicates that across all levels of experience, NAR members with at least a bachelor’s degree earn higher gross personal income than those without formal college education. For those REALTORS® with 10 years of experience in real estate or less, having a bachelor’s degree increases their income by at least 18 percent compared with those with the same tenure in the business but without a degree. For members who have been in the industry for 16 to 25 years, the difference jumps to 23 percent. The difference in income is greatest for those who have been in the industry the longest. While the typical agent without a college education earns $47,600, those with a college degree earn 44 percent more or $68,500. Put differently, almost half of REALTORS®, or 48 percent, who hold a bachelor’s degree or higher earn higher income than those without a college degree. Fifty-nine percent of those earning $150,000 or more have at least a bachelor’s degree, while 44 percent of those earning less than $50,000 have a degree.

Interesting. I wonder if this factor has been isolated. Because it doesn’t add up for me that a college degree earned 20 years ago (the 16-25 years experience category) would make that big a difference for a real estate agent. Is the Joe College REALTOR somehow introducing advanced calculus into his home pricing schemes? Or leveraging those four years spent studying the poetry of John Donne into writing copy for houses? Does that degree in sociology or political science somehow translate to improved negotiation skills? I’m not sure I see it.

There can be only three reasons why a college degree would be indicative of such disparity in income.

One, one might surmise that someone who earned a college degree is simply smarter than the non-college grad. Being smarter translates into getting more clients and doing more deals. Since real estate is not exactly quantum physics, I’m not sure on the role of book-smarts on being good at the business. In fact, some of the most successful real estate agents I know would be the first to tell you that they’re not academics; they have street smarts, people smarts, but hardly love delving into math equations for fun.

Two, one could assume that someone who spent four years earning a college degree is more disciplined, less likely to quit, and more focused than the non-college grad. After all, she actually got her degree; her colleague did not. This greater endurance, capacity for commitment, translates into more deals, more income. Maybe.

Or third, it could be that having a college degree means one lives in better communities with higher home prices, and therefore have higher incomes simply due to higher GCI from selling higher priced properties. They’re not any better than a non-degreed REALTOR; they just happen to live and work in higher-price point areas. Considering that most real estate agents enter the business as a second or third career — often as a result of having children — is it really that farfetched to think that the college graduate started out in neighborhoods where other college grads, all earning higher income, tend to live?

So here’s the question: was the college-graduate statistic corrected for average selling price of the area in question? Or compared to other REALTORS working in the same market? Has it been corrected for things like military service (which tends to impart far more discipline than four years at college partying it up every weekend)?

Inquiring minds… uh, well, this one inquiring mind… want(s) to know.

-rsh

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Rob Hahn
Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

10 COMMENTS

  1. Very good points. Also, how many college Realtors are team leaders vs non-college Realtors. Too many times we forget to make the divide between individual agents & large teams.

  2. Rob,

    The only thing that surprises me is that this surprises you, being the educated and uber-intelligent man that I know you to be. 🙂

    First, let me say in response to your “real estate is not exactly quantum physics” remark that the job is not as simple as that comment would suggest. Yes, it is NOT quantum physics. Yes, it CAN be done by anyone with zero education.

    But, to be done REALLY well, the job requires a diverse skill set that touches on law, finance, communications, marketing and psychology. These are things one might pick up at an institution of higher learning. At least that’s where I did.

    I learned very little on these particular topics in high school. And I learned almost none of these things from any broker or brand for which I toiled before I started my own company.

    Second, education has intrinsic benefits that translate into “success” in a myriad of ways.

    Were I to give you just ONE reason why a degree in ANY major would benefit one’s success in ANY endeavor, it would be your “more disciplined, less likely to quit” paragraph above.

    I don’t see how any reasonably objective person would deny the value of the discipline, to use your word, that it takes to complete that process.

    I call that “tenacity,” and studies have shown that “tenacity” is the number one predictor of success in real estate.

    Ergo, I’d call that a fairly direct, tangible and logical reason why having the discipline to get ANY degree would suggest a greater level of success in a job in which tenacity is so important.

    Finally, I’ve written more on the general of topic of education in real estate at http://p1fran.com/tag/education/.

    Thanks for always writing about topics that are of interest to me, Rob.

    Best,
    Michael

    • I am so digging your passion on this. But let’s extend it a bit.

      If it is true that a college degree is indicative of tenacity, a major requirement of success, should we not see a similar increase from people who have advanced degrees? In other words, master’s degree > college degree > high school. So then I’d like to see the NAR stats broken down like that, again, controlling for average sale price.

      Or, alternatively, let’s count the number of deals instead of income. If tenacity and discipline, as reflected in degrees, are what counts, we should see a significant increase in the # of transactions, right?

      We’ve just given the people at NAR a direction for further inquiry 🙂

      • Rob,

        I cannot argue with your logic. The only things I would add would be these:

        * I would predict that the gap between those with “no college degree” and “have college degree” would be GREATER than the gap between “have college degree” and “have master’s degree.” I’m not sure I can articulate this without offending someone, but I say this because I think a reasonable percentage of “high academics” would ONLY end up in real estate if they were miserable failures in their intended lines of work, since virtually no one gets an advanced degree with the intention of selling real estate. “Regular college degree” people – like me, for example – are more likely to stumble into real estate (1) after transitioning out of corporate America more or less on a whim, just to see what self employment might be like, or (2) after losing a job. I see high academics as being far less likely to do this kind of thing or to be fired without a better alternative employment opportunity. Sorry if this makes no sense, and sorrier if this offends anyone!

        * I disagree with your second comment about number of deals, because that metric is impacted too much by THE MARKET in which an agent works. I sold $6M last year – and I had NO INTENTION of selling any real estate, mind you – but I only closed 5 deals. That’s because the market in which I work has (for my market, at least) a high average price point. Also, higher-priced clients tend to take more hand holding, take longer to make decisions, etc., so I think there are just too many “other” variables that impact the NUMBER of sales a good agent will close from market to market.

        This is probably the most poorly written comment I’ve ever left on someone’s blog. Sorry, but I’m too worn out to fix it!

        Best,
        Michael

  3. Ah, the NAR. I’ve long since given up on that organization. Their latest blunder is the launch of HouseLogic, a repository of pre-written articles for the writing-impaired agent on all aspects of home ownership. Just copy and paste. How much easier could it be?

    And it coincides beautifully with Googles launch of “Farmer” the algorithm that punishes those who regurgitate content from others.

    Wow. Way to go NAR.

  4. Well, this post caused me to think a bit (and for that, I thank you). So, I took a look at my client list (defined as having at least one closed transaction in the past five years) and I was amazed to discover that almost fifty percent were directly or indirectly related to people I either attended undergraduate or graduate school with! And that, by the way, was over 30 years ago. So, how about the factor that REALTORS who have a college degree have a more affluent and mobile SOI than those who don’t?

  5. It’s the same problem with all the incentive aimed at college degrees lately. Correlation vs. Causation. It is correlated that the people who decided to complete a college program make more money (in real estate and elsewhere). The college degree doesn’t cause the extra earnings.

    Kids with more books in their homes go to college! Quick someone get me some books to pile up in the inner city!

    This is why all the heavy student loan financing the government is doing is so misguided. We’re financing college degrees. College degrees do not cause greater earnings, as those poor saps coming out of the for-profit/commuter schools with mountains of govt-back student loans are painfully learning. Waiting for that bubble to burst…

  6. A college education may pay for itself but should State law require new licensees to have a college degree?

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