How does the real estate industry get away with this? (commissions, fees)

[FrozenAngel]

Originally Posted by Chuckity

You know what I find funny?

If you were to ask real estate agents to tell you their worst horror story, it would most likely involve a buyer or a seller. Or a title company. Or a loan officer.

What you wouldn't find is a slew of complaints about other agents - either in your own office or from other brokerage companies.

So either, A. you were never a real estate agent or a Realtor (do you even know the difference?) or B. you were an agent who never had a single listing and/or a deal go through.

Ok ... real estate 101.

a real estate agent is someone licensed who can sell houses.
a Realtor is really a trade mark! It is a person who is licensed to sell houses and is a member who pays dues to use the trade mark and that which allows himself to be a part of MLS. How's that smarty pants!!!

Come on, give me something harder to answer! An yes, I have sold 2 houses when I was a realtor. One commercial property and a summer cottage. I am now on my way to sell my 3rd house. Geezzz, what did I do to deserve all this third degree.

All I was hoping to do with this tread was find someone who might know the history of how the R.E industry was allowed such a tax break!!!

[Chuckity]

Originally Posted by FrozenAngel

Ok ... real estate 101.

a real estate agent is someone licensed who can sell houses.
a Realtor is really a trade mark! It is a person who is licensed to sell houses and is a member who pays dues to use the trade mark and that which allows himself to be a part of MLS. How's that smarty pants!!!

Come on, give me something harder to answer! An yes, I have sold 2 houses when I was a realtor. One commercial property and a summer cottage. I am now on my way to sell my 3rd house. Geezzz, what did I do to deserve all this third degree.

All I was hoping to do with this tread was find someone who might know the history of how the R.E industry was allowed such a tax break!!!

Google is a wonderous thing, isn't it?

[FrozenAngel]

Originally Posted by Chuckity

Google is a wonderous thing, isn't it?

Should I give you my 800# and you can qiz me on the phone?

Nite

[Rakin]

Personally for me being an independent contractor works perfect. I've always been self employed and would not want to be an employee of any company. I'm my own boss, can do mostly as a please and can work as hard or as little as I desire.

In my RE career I've always figured it's similar to owning my own franchise. Just like owning a McDonald's where I benefit from Name recognition, marketing and brand loyalty.

I am independent, an entrepreneur and being a contractor is perfect for me.

[In the Pines]

Originally Posted by brandon hoffman

time to stop bickering on all these threads. I heard an interesting quote one time. Don't argue with a fool because they will drag you down to their level and beat you with their experience.

lol

[le roi]

FrozenAngel, I was following you until post 11. I believe SilverFall answered your question by posting:

From the IRS web site...
The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.


So, this appears to be "How the real estate industry gets away with it." They follow the IRS's rules. If you dispute what Silverfall claims the IRS rules are, perhaps you should look them up to confirm? It is hard for an observer to know for certain, if no one has linked to a source.

[MsFancyPants]

Well, I agree that Silverfall answered A PART of the question. However, what about the offices who require floor time and phone hours? Aren't they "controlling or directing" your time? And what about when the broker refuses to let you take a listing for reduced commission? Aren't they "controlling or directing" the outcome of your bottom line? What about NOT allowing you to work for several brokers? One of the prongs of the independent contractor status is that you NOT work for one employer specifically.

While I don't think it's a conspiracy or something evil, I do think that under closer scrutiny, real estate agents fail the independent contractor status test on a few levels.

[MikeJaquish]

Originally Posted by FrozenAngel

Here is my biggest beef with the real estate industry and how I feel it's corruption got started.

I am a business owner and if I want to hire sub-contractors who I therefore don't have to pay their taxes, health insurance, or benefits ... basically I just want to hire them and give them a 1099 less head aches, less work, less cost to me ..... easy! In order for me to do this legally, I can't hire them full time and I must be able to prove that they work for other companies. That is the IRS requirements.

How the hell do real estate companies get away with being able to hire real estate agents FULL TIME, make it so they CAN'T work for any other company and force them to supply everything they need to be a realtor at their own expense and yet able to declare them as SUB-CONTRACTORS!!!? It defies everything the IRS says a company must have to comply with the IRS sub-contractor requirements. Brokerage companies get the chance to earn more income then the rest of us business owners because they don't have to comply with the rules that the rest of us business owners have to follow. How on earth did the real estate industry manage to pull off such a luxury that the rest of us don't have? I can't think of any other profit organization that is exempted form this ... can you? So please forgive me when I choke to hear that real estate companies have SO MUCH OVERHEAD! and that's why they NEED such high commission percentages.

It is easily explained to one who seeks truth.

I can hang my license in other offices.
That is why you see brokers licensed in multiple states.
They often hang multiple licenses in multiple offices, with multiple brokers.
Now, I have to disclose that to the broker in my current office. One reason for that is transparency in operations, which I think is a good thing.
And if I want to work with another local broker, my broker needs to know and agree, so as to avoid entanglement in local transactions for which she may be responsible. I agree with that requirement.
And, if I satisfy the IRS's other 19 parameters, they will likely overlook that requirement.

Clearly in agreement with my firm, I am an independent contractor associated with a local independently-owned office that is a franchise of a large national firm.
It is a relationship I sought aggressively.

I was NEVER "hired" by the firm. Never. Misuse of the term is an obvious symptom of misunderstanding a basic fundamental of the business.
The receptionist and other support staff to the broker were "hired."

We chose mutually that I could associate with them, and the broker agreed to supervise my business interactions.
I agreed to operate within Federal and State laws, and within the ethical bounds of NAR, NCAR, RRAR, and within the policies of the firm regarding my business deportment.

I receive no wage.
I get no "tax break." I pay taxes on my earnings.
15+% of my earnings are confiscated by the SS and Medicare.

No one tells me when to come or go.
No one schedules me for anything without my complicit agreement. Unless I mess up and get called on the carpet... I avoid that.
Training that is available is optional.
Adherence to professional standards and keeping current on my office bill are the benchmarks in maintaining my association with the firm.
On the flip side, they need to keep me happy too. Mutual agreement there.
They can send me down the road today. I can tell them to pound sand and go down the road today. We both have that choice.

No one tells me what business tools to use.
I provide my own business needs as I desire to.
That includes signs, computers, cell phone, printers and printed matter, website, IDX solution, and various etceteras.
I pay for my own CE, with my choice of providers and topics.

The association with the firm allows me access to copying equipment, on a meter, so I pay for my copies.
It allows me conference space to meet clients. In Class A office environment which I could not afford on my own.
I pay E&O insurance each month, in a situation similar to a group insurance plan.
I pay rent for a very nice cubicle workspace, with full offices available at increased rent should I want one. I also maintain a workspace at home.
All of those items, except the home workspace and others that I haven't listed, come to me at very affordable prices because my association allows for the firm and the national company to negotiate great value in volume purchases.

While I can engage independent service providers of my choice for various functions, I am allowed and encouraged to hire staff employees. That would be on my nickel, to support my business needs.

I have none of the following common benefits of a wage slave:
No paid insurance tying me down to one place.
No paid holidays.
No workers' compensation.
No paid vacations.
No mandatory punitive employee morale team building waterboarding when I don't have enough time to get my work done.

This is not a "job" that I was hired into. I don't want it to ever be a "job."
But it also is definitely no place for the weak of heart, for people with a propensity for making poor ethical and personal choices, folks who need a small payday every Friday rather than the opportunity to prosper, or who crave the security of blending into MegaCorp like Wally in Dilbert.

Most certainly, I am an independent contractor within the 20 parameters espoused by the IRS, and I don't forsee desiring to work under any other arrangement.

[TexasHorseLady]

Mike, I tried to rep you for that most excellent post, but apparently I've repped you too recently to do that. (I always rep the post, not the poster, so I lose track of who I've repped recently.)

Huzzah! nonetheless.

[FrozenAngel]

Originally Posted by MikeJaquish

It is easily explained to one who seeks truth.

I can hang my license in other offices.
That is why you see brokers licensed in multiple states.
They often hang multiple licenses in multiple offices, with multiple employers.
Now, I have to disclose that to the broker in my current office. One reason for that is transparency in operations, which I think is a good thing.
And if I want to work with another local broker, my broker needs to know and agree, so as to avoid entanglement in local transactions for which she may be responsible. I agree with that requirement.
And, if I satisfy the IRS's other 19 parameters, they will likely overlook that requirement.

Clearly in agreement with my firm, I am an independent contractor associated with a local independently-owned office that is a franchise of a large national firm.
It is a relationship I sought aggressively.

I was NEVER "hired" by the firm. Never. Misuse of the term is an obvious symptom of misunderstanding a basic fundamental of the business.
The receptionist and other support staff to the broker were "hired."

We chose mutually that I could associate with them, and the broker agreed to supervise my business interactions.
I agreed to operate within Federal and State laws, and within the ethical bounds of NAR, NCAR, RRAR, and within the policies of the firm regarding my business deportment.

I receive no wage.
I get no "tax break." I pay taxes on my earnings.
15+% of my earnings are confiscated by the SS and Medicare.

No one tells me when to come or go.
No one schedules me for anything without my complicit agreement. Unless I mess up and get called on the carpet... I avoid that.
Training that is available is optional.
Adherence to professional standards and keeping current on my office bill are the benchmarks in maintaining my association with the firm.
On the flip side, they need to keep me happy too. Mutual agreement there.
They can send me down the road today. I can tell them to pound sand and go down the road today. We both have that choice.

No one tells me what business tools to use.
I provide my own business needs as I desire to.
That includes signs, computers, cell phone, printers and printed matter, website, IDX solution, and various etceteras.
I pay for my own CE, with my choice of providers and topics.

The association with the firm allows me access to copying equipment, on a meter, so I pay for my copies.
It allows me conference space to meet clients. In Class A office environment which I could not afford on my own.
I pay E&O insurance each month, in a situation similar to a group insurance plan.
I pay rent for a very nice cubicle workspace, with full offices available at increased rent should I want one. I also maintain a workspace at home.
All of those items, except the home workspace and others that I haven't listed, come to me at very affordable prices because my association allows for the firm and the national company to negotiate great value in volume purchases.

While I can engage independent service providers of my choice for various functions, I am allowed and encouraged to hire staff employees. That would be on my nickel, to support my business needs.

I have none of the following common benefits of a wage slave:
No paid insurance tying me down to one place.
No paid holidays.
No workers' compensation.
No paid vacations.
No mandatory punitive employee morale team building waterboarding when I don't have enough time to get my work done.

This is not a "job" that I was hired into. I don't want it to ever be a "job."
But it also is definitely no place for the weak of heart, for people with a propensity for making poor ethical and personal choices, folks who need a small payday every Friday rather than the opportunity to prosper, or who crave the security of blending into MegaCorp like Wally in Dilbert.

Most certainly, I am an independent contractor within the 20 parameters espoused by the IRS, and I don't forsee desiring to work under any other arrangement.

Yes, and if you did all of the above for my company, I COULD NOT JUST GIVE YOU A 1099!!!! You would have to GO ON THE BOOKS!!!! Again, why?.