Class Struggle : Enrollment Is Down at Real Estate Schools, but a New Breed of Student Is Coming Up
The slowdown in home sales is having a major impact on California’s real estate training industry, which had reached record size, buoyed by the region’s long-vibrant realty market. Now, especially in coastal areas and urban centers where home sales have slowed the most, a shakeout is under way among the 151 institutions or private schools accredited to teach pre-licensing real estate courses.
School owners say enrollment is down between 10% and 45%, forcing many to close satellite campuses, lay off instructors and trim course schedules.
A large number have also closed out their 1990 books with losses, the first unprofitable year for many owners since 1982, the low point of the last housing recession, when California home sales slumped to 234,269.
Although enrollment may be off, real estate schools are far from empty. Instead, the student population is changing; they are seeing new business from established real estate professionals, as well as those from allied fields.
“We’re getting a more serious candidate, more real-estate career oriented,” said Darrell Gibson, recruitment director for Century 21’s regional Woodland Hills office, which runs its own school.
When the real estate market is weak, along with the rest of the economy, schools see an increase in students planning a career move because the recession has made their present occupation look less solid, Gibson said.
Instead of the opportunists who enrolled in real estate classes during the boom, when sales were easy, today’s students are optimists, preparing themselves for a career change as well as positioning themselves to catch the market as it rebounds.
“The market isn’t going to be bad all the time,” said Gloria Amodeo, 36, a Northridge housewife and a student at Miller School of Real Estate in Granada Hills. “In the meantime, I’ll do some work. By the time real estate is picking up, I’ll have a name.”
Jose Perez, 60, of Pacoima, who repaired buidings for the Los Angeles Department of Airports, must find a new vocation for health reasons. He is studying real estate, but has set his sights on becoming an appraiser. “I have a lot of experience in construction,” he said. “It might be good leverage.”
Raquel Saldovar, a 30-year-old Northridge mother, said she began studying real estate when the youngest of her three children started going to school. “This is a good time to learn, because it’s slow and you’re not rushing to get into the business. I don’t like to rush things.”
The fortunes of real estate trainers are tied closely to the state’s real estate market, which peaked at 562,571 home sales in 1988 and is expected to have fallen to 470,000 last year.
Much of the industry’s business comes from first-time students who enroll in “Real Estate Principles,” a college-level, pre-licensing course required by the state Department of Real Estate.
Fees for the class, which is often combined with exam preparation lessons, can range from $79 for correspondence courses, such as that offered by Chamberlin Real Estate of Campbell, to $420 for 12 lessons and live instruction at Anthony Schools, the state’s largest with 31 sites.
Luckily for many school owners, a portion of their business is growing.
Sales agents with ambition and time on their hands are taking the next step and studying to become brokers, the bosses who hire agents. Agents are required to affiliate with a broker, who takes a percentage of each sales commission made by their agents.
Most schools are seeing an enrollment surge in classes for prospective brokers, who must pass eight classes and take another state exam.
“We have more people enrolled in the broker program every month,” said Robert Miller, owner of the Miller School. To capitalize on the trend that began in August, his firm has reduced tuition to broker candidates. Fees for eight classes and exam preparation were cut to $480 from $800.
Typical is Juan Martinez, 34, of Sylmar. “Now’s a good time to get my goal,” said Martinez, who became a sales agent in 1986 and wants to be in business for himself.
He began studying for his broker’s license at an Anthony office in Van Nuys last year because “it’s not too fast-paced. When you’re too busy, you miss out on business.”
Schools are also seeing an upswing in students from the mortgage-banking and brokerage industries, also in a slowdown, as well as some from appraisal companies.
Mortgage bankers are required to be affiliated with a licensed real estate broker, and their loan officers, who meet the public, are required to be licensed sales agents, according to Tom Poole, a DRE deputy commissioner. Loan representatives of state or federally chartered thrifts and banks are exempt, he said.
Lourdes Felix, 32, who works for EMV Appraisal of Panorama City, is an example of this trend. Her boss recommended that she take “Principles” and obtain her sales license to increase her mobility within the industry. “In this time when the market is soft, it’s the best time to study,” said Felix.
Even though there are more real-estate trainers than ever, the industry is likely to suffer less during the current recession than in the early 1980s because of laws that took effect in 1986.
To renew licenses, agents and brokers are now required to take one continuing-education course every four years. Previously, real estate sales applicants were only required to pass the state exam to get a license. Now, besides “Principles,” new licensees must pass two college-level courses within 18 months to retain their license.
As a consequence, most schools expanded their curriculum to appeal to a larger pool of potential students.
“We have more to rely on now,” said William A. McAlwee, president of San Leandro-based Anthony, which nevertheless has closed two schools, cut schedules and expects its first unprofitable year since 1982.
And some school owners expect even the continuing-education portion of their business to soften as agents and brokers leave their professions.
Michael Wurmbrand, administrator of American Schools in Rolling Hills, recalled a recent tearful conversation with a broker. The woman was in danger of losing her license because she couldn’t afford a $60 continuing-education course fee.
“She must have been in a pinch,” said Wurmbrand, whose seven-site correspondence school has seen its sharpest enrollment decline in Los Angeles, while offices in Sacramento and Fresno have remained stable.
“More people are letting their licenses lapse and going back to their previous profession because the market is so slow,” said Mark Chamberlin, owner of a correspondence school of the same name.
These are “people who have been in the business less than five years and don’t have any referral business,” he said. “They’re still doing cold calling.”
In the year ending last June 30, the DRE accredited a record 151 institutions to teach pre-licensing courses. That compares with 37 in 1981 and 113 in 1989, said Thomas L. Mabrey, DRE managing deputy commissioner for education.
“We’ve heard from many of these schools that market conditions have dramatically cut back on the number of students enrolling,” Mabrey said. “A lot of these schools are one-person operations, correspondence classes, that may go out of business.”
Despite the downturn in business, most school owners say they aren’t planning any unusual recruiting efforts. Their most effective marketing tool remains an array of lists bought from the DRE and used for direct-mail advertising.
One list, issued monthly, includes the names of some of the 366,000 currently licensed agents and brokers in California whose licenses expire that month.
Another list has names of those applying for licensing exams. That list ran to a record 4,328 names in the week ending June 28; 3,254 were would-be agents, 874 were wanna-be brokers.
No list since July has exceeded 1,500 names, and it reached a low of 525 names in the week ending Jan. 11--506 applying for agent exams and 19 for the broker test.
Competition for students is fierce, coming from private schools, community colleges and Cal State University campuses as well as some real estate firms, such as Century 21, that run their own schools.
Other companies, Jon Douglas in Los Angeles and Tarbell Realtors of Santa Ana, for example, offer classes but contract out for instruction with established schools such as Lumbleau Real Estate, the state’s oldest, founded in 1938.
Broker-affiliated training can be cheaper, but often has strings. Students accepted by Tarbell, which charges $195 for its classes, sign contracts and agree to work for the firm for a specified time after obtaining their license.
“It’s not a money maker,” said Denise Tucci, Tarbell’s vice president of career development. “We do it for the recruiting pool. Hopefully, we’re getting the pick of the crop.”
