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I think this is a non-starter. First I see no evidence that there is a move to do away with the indy-contractors (IC). Every now and then the IRS circulates the rules that define what an IC is under the tax code and people go nuts. Many businesses work with IC at some level.
If a person uses an office as a main place of business and the owner of the office directs his actions, determines how much time (hours) he must work in the office, etc. -- there may be a problem with his IC status. It's more about tax collection in the manner of withholding vs. 1099s and workers comp. than anything else.
Yes, most Realtors like being an IC. Many do form a small LLC for liability -- it's not that big of a deal.
I think if IC goes away most folks would leave the business. Not that they would want to, but my guess would be that most firms would keep the top couple of producers, and release the rest. That is if any of the top producers would even want to stay in the business, because those people's income would likely take a big hit. I know our top person in the office would probably retire before becoming an employee, she puts up with a lot of nonsense knowing she is making good money because of it, if she wasn't she would be done with it. Yeah most people don't make the huge money, but hey when you have a great year, you take home the money, no worry that the boss isn't just going to pocket it.
I know I would be far less interested in the business if I know my income could be lower or capped and if I had to do "regular" hours as a employee. Not that I love the hours I do now, but it still "my choice". This job has far too much stress for someone making far less money to be worth it.
Real Estate would lose the entrepreneurial spirit that it has today. Most other industries don't have that anymore, and that is a shame. Its one of the few professions left that just about anybody can enter. No college degree required. We have people in my office with education ranging from barely finishing high school to MD's and PHD's. Most people seem to enter the business after doing something else first. I did.
It would be far harder to enter the business, and that wouldn't be a good thing. Some of the people who would be the best realtors would be blocked from entering. If anything, more industries should adopt OUR business model.
Silverfall, I don't know any agents who are eager to be employees - in fact, most of them are in the business at least in part because they are NOT employees, but running their own businesses, and they like that aspect of the business.
Your mileage clearly varies, but I'd be interested in a poll of agents as to how interested most of them are in being employees versus the current set-up.
Well not any of the successful ones, but I bet you the 80% that fail would be happy to be employees...because that is why they fail, they have an employee mentality, not a business owner mentality.
Well not any of the successful ones, but I bet you the 80% that fail would be happy to be employees...because that is why they fail, they have an employee mentality, not a business owner mentality.
and these agents would be the ones no firm would want or be able to keep.
There would be no way any company would be able to keep all their present agents if they were employees. They would downsize (100 agent office becomes 10 agent office) and keep only the ones that sell on a regular basis. Most agents don't, so sales wouldn't fall much for many companies, so there would be even less incentive to keep extra agents. RE would be like most other industries where entry would be very limited and new opportunity few.
IC isn't a perfect system by any means but it gives more people a chance at trying for success that most places would never allow.
If I had cost my company big money the first two years of me being a realtor, I wouldn't be one today. Due to the fact it didn't, it wasn't any skin off their teeth to let me continue to try to figure it out. Most unsuccessful agents don't give themselves enough time to learn the business. Those agents would be the ones the real estate business would lose by being like employee based companies.
The business would be radically different with employees instead of entrepreneurs.
Is IC endangered?
The new healthcare law could be a threat to it, but since little is known of how it treats IC's it hard to tell. Since the writers of the bill are hardly known for their high regard to small business owners it could be completely unworkable to the present way we do business. It won't look good to see thousands of agents being released nation wide at the same time, so maybe when NAR tells politicians that, they would back off from the stupider things.
and these agents would be the ones no firm would want or be able to keep.
I disagree because you are thinking like a business owner and not an employee. The brokerage owners could drive the business rather than the agents...like you would expect in an employee relationship.
I have met many good agents, but horrible personal marketers in real estate. I have many top producers who are incredible marketers but crappy agents. Selling a lot doesn't mean you are a good agent, unfortunately. Then there are those that sell a lot who are great agents. Those folks would be sought after by many companies. As it should be because they have that combination of skills.
So a company could have a focus. Hire the top producers who drive traffic to the company...which is the easiest for the brokerage owners, OR they can hire the good agents that are horrible at personal marketing and drive the traffic for them. Either model could work. The second being the harder one as a business owner.
My hubby has been in sales for 20 years as an employee. He has always had a low salary with bonuses. I think that is the model that would ensure in real estate because the harder you work, the more bonus money you could get, which is typically what drives top producers. That aspect would still exist.
And yes, I agree that there would be fewer agents, but I don't see that as a negative at all.
All of the employees would have to be "on call" - can you imagine you get a call on Sat. to show a house - "sorry not on the clock, call back Monday at 8am." This wouldn't work for buyers, sellers would be furious and too many buyers can't afford to take that much time off of work to go look at homes in the 9-5 sense and the ones that are looking at vacation property most likely can only spend a day or 2 so now in order to find something the employer is now paying overtime for the entire weekend or holiday - if they don't buy - too bad just a "cost of doing business" - every single transaction with an "eleventh hour hick-up" oh just clock out deal with it later - hmm, but what about the contract? I don't know it's dinner time and corporate has a stop for 30 days on overtime, gotta run, hope it works, talk to you tomorrow. Now the bank requests the most recent pay-stub right before closing and look here - are you still full time Mr. Jones? shows you only averaged 28 hrs last few weeks - thats not good - sorry doesn't matter if you took time off to view homes, meet with bankers ins. co. etc..
I'm not saying the change couldn't be made, but the restructuring would be major and the likelihood of agents becoming less flexible would be 100%. Even more so than agents making sure this doesn't happen, I would think our clients would have far more to loose so they to would benefit from stopping such a thing - I think the restructuring would end up making RE practice, more like law practice with retainers for high end buyers, more sub-employees, up-front cost structures win or loose, bonus's I suppose for top producers, all while the clients now have to work around the agents schedule not vice-verse. Shoot sellers would probably even have to pay to list a house - can you imagine the overhaul of the system -
After 20 years, I kind of already have a basic schedule. Mornings are reserved for phone calls, emails and paperwork. Afternoons for appointments. Weekends are for showings and relos.
All of the employees would have to be "on call" - can you imagine you get a call on Sat. to show a house - "sorry not on the clock, call back Monday at 8am." This wouldn't work for buyers, sellers would be furious and too many buyers can't afford to take that much time off of work to go look at homes in the 9-5 sense and the ones that are looking at vacation property most likely can only spend a day or 2 so now in order to find something the employer is now paying overtime for the entire weekend or holiday - if they don't buy - too bad just a "cost of doing business" - every single transaction with an "eleventh hour hick-up" oh just clock out deal with it later - hmm, but what about the contract? I don't know it's dinner time and corporate has a stop for 30 days on overtime, gotta run, hope it works, talk to you tomorrow. Now the bank requests the most recent pay-stub right before closing and look here - are you still full time Mr. Jones? shows you only averaged 28 hrs last few weeks - thats not good - sorry doesn't matter if you took time off to view homes, meet with bankers ins. co. etc..
I'm not saying the change couldn't be made, but the restructuring would be major and the likelihood of agents becoming less flexible would be 100%. Even more so than agents making sure this doesn't happen, I would think our clients would have far more to loose so they to would benefit from stopping such a thing - I think the restructuring would end up making RE practice, more like law practice with retainers for high end buyers, more sub-employees, up-front cost structures win or loose, bonus's I suppose for top producers, all while the clients now have to work around the agents schedule not vice-verse. Shoot sellers would probably even have to pay to list a house - can you imagine the overhaul of the system -
We would all be exempt employees. That is the category for professionals who don't have standard hours and aren't subject to overtime laws. This is how most sales people are classified who get a salary plus a bonus.
We would all be exempt employees. That is the category for professionals who don't have standard hours and aren't subject to overtime laws. This is how most sales people are classified who get a salary plus a bonus.
Which in my state would mean a minimum salary of close to 24k for that status. I understand the exempt thing thats why I am saying you would be "on call" and not in the sense we are on call now, we would have a boss to answer to, and fewer agents to pick up the slack on the occasional crazy weekend - and the "boss" or company that couldn't afford the 24k base salary due to the massive spikes and dips that occur in our industry would create more hourly employees tending to more of the menial activities. I frequently deal with licensed assistants that are on hourly -
uhhh I struggle to get thru to the primary agent and the assistants are off the clock at five - I think this would become more of a constant problem than an occasional one if the industry was forced into this change - the sellers may end up having to be more hands on with fewer buyers agents available to show their home during spikes -- I just don't see the good outweighing the bad, especially if it wasn't an optional business model, but a required one - then it would trickle to independent contractors that have people working under someone elses roof in tons of industries - by-by to millions of small business contractors and hello to an increase of large corporate businesses with enough liquid/capital to sustain the ups and downs. I sure hope it don't happen - can't see laws limiting a persons options to operate a legitimate business being good. Sorry for the rant...
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