Is this a good idea – or a terrible idea?

By
Services for Real Estate Pros with Marte Cliff Copywriting
https://activerain.com/droplet/5jLQ

A Realty Times article this morning explains why one REALTOR® believes that the change being considered by California is a good one.

Under Assembly Bill 5, the test to determine who is or is not an Independent Contractor would be clarified.

All of the following would have to be true in order for a worker to be considered independent:

“A) free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact.”

“B) performs work outside the usual course of the hiring entity's business.”

“C) customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.” 

It looks to me like real estate agents would no longer be considered Independent Contractors.

A) You may be free from direction for the most part, but agents have always been expected to adhere to the company guidelines.

B) Unless you have a side job, which is not the question here, you are NOT performing work outside the usual course of the brokerage’s business. Your work is the core of its business.

C) As far as I know, agents must hang their license with a broker – or be the broker. (I realize the terminology may be wrong here. Some states call all agents brokers and have another name for the one in charge. But I’ll trust that you know what I mean, no matter how your state is set up.)

The point is, agents aren’t free to operate an independent business, separate from any brokerage. If this is not true in some states, do let me know.

Why the push for change? Because some people believe Independent Contractors are treated “unfairly.”

The reason why many in California are pushing for this change is that Independent saying "No fair!"Contractors (in a wide variety of occupations) have no benefits to fall back on. They have no Worker’s Compensation Insurance and no Unemployment Benefits.They say this is "Not fair!"

Independent Contractors are also required to keep their own books and pay their own Federal, State, and local taxes. That would change. You’d now have withholding taken from every paycheck.

How would your life change if you were no longer an Independent Contractor?

For starters, I’m sure your work habits would depend upon whether you were paid a straight salary, paid by the hour, or were paid a salary plus a commission. How you were paid would also affect how much time and money you were willing to spend on marketing and education.

What if real estate turned into a 9 to 5 job? Where would that leave the home buyers and sellers?

How would this change affect the brokerages?

Their bookkeeping tasks would increase drastically, which might necessitate hiring a full-time bookkeeper.

Their other costs would increase along with it, since they would now be responsible for paying some kind of base salary or wage, plus 50% of your Social Security and Medicare payments, plus unemployment and workers compensation fees.

I would expect that agents would have to meet minimum sales quotas if they wanted to keep their jobs.

No company would want to pay someone who wasn’t producing, so would this move “weed out” all of the low producing agents?

If so, is that a good or bad thing?

Would part-time agents cease to exist?

If you don’t live in California, should you care about this?

Probably. Right now California seems to be the only State considering this change. However, if passed into state law, Assembly Bill 5 could have consequences for workers across the U.S.

We all know about “follow the leader” and “Monkey see, monkey do.”

What’s your opinion?

Is this good for people in some occupations and not in others? If so, which occupations would benefit?

Would it be good for real estate professionals?

 

Child says "no fair" courtesy of Clare Bloomfield @ freedigitalphotos.net

 

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Anonymous
Thomas Phelan

What would this do to the Brokers who owned and operated 100% Offices with File Cabinet Realtors?

Jun 20, 2019 04:43 AM #36
Rainmaker
2,099,646
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

I'm not an agent, but I find it intereseting and you are generating a good discussion.  I agree, it isn't just California agents...once one state does something it does tend to follow throughout the other states eventually.

Jun 20, 2019 06:53 AM #37
Rainer
472,614
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

This proposed law will probably be defeated somewhere in the legislative process, however, as a few Rainers' have alluded, speculating about something or anything yet to occur IMO is simply a waste of energy and time. 

The state of California is being run amok by zealots and the electorate that keeps them in power are either ignorant or ideologues and will probably never see or comprehend how unreasonable their legislators are in reality to their own self being.

When you embrace illegal immigrants and provide them sanctuary, the right to vote and comprehensive welfare paid by state and local taxpayers, the demise of the entire community will by consequences suffer irreparably.

Jun 20, 2019 07:44 AM #38
Rainmaker
448,208
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

I am parked and reading ... I personally don't believe this will happen in Wisconsin ... agree with Sally K. & David L. Hanson 

Jun 20, 2019 07:53 AM #39
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Endre Barath, Jr. I promise never to hold that against you. I do agree that your state's politicians have been going a bit over the deep end.

Sally K. & David L. Hanson Unfortunately, you're right. Politicians are apt to act first and think later - if ever.

Jun 20, 2019 07:56 AM #40
Anonymous
Tom Phelan

Kimo,

I hear you and I give deference to what you say.

Do you live in California? It sounds like a Trump state would serve you better. California is never going to become purple no less red.

As far as your statement, " ... speculating about something or anything yet to occur IMO is simply a waste of energy and time."

Not "Speculating about something or anything yet to occur ..." is exactly how Realtors(r) stood by and watched high-foot trafficked Real Estate Office disappear for remote, cheap rent non foot trafficked Real Estate Offices. Brokers gained cheap rent while Realtors(r) gace up the best Lead producing tool in real estate history.

The same for the selling of once exclusive MLS information to 3rd Party Aggregators like Zillow.

In either case not discussing the possible fallout created the Two Deadliest Mistakes Made In Real Estate.

Jun 20, 2019 07:56 AM #41
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Tom Phelan: Employee business expenses went away as of 2018. Now you can only deduct those expenses if you are the business owner. That makes it much better tax-wise to be an independent contractor/small business person.

It would be interesting to see where NAR is on this. Has anyone heard?

John Wiley I agree - I think a lot of people would leave the business - or be fired for non-production.

Jun 20, 2019 08:01 AM #42
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Sharon Tara This doesn't affect me either - at least not directly. It would over the long run, if agents stopped doing their own marketing. Then they wouldn't need bios, web copy, prospecting letters, etc.

Kimo Jarrett I disagree, because I think it's wise to know what politicians are considering, and to consider the consequences yourself. It may not help to add your 2 cents in letters, etc. but it surely can't hurt for them to know how their decisions affect the people involved.

Meanwhile, I believe you and I are on the same page politically with regard to California.

Jun 20, 2019 08:05 AM #43
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Diana Dahlberg I hope it doesn't happen anywhere. I see the need for some changes - like more education for agents - but I don't think this is the right path.

Jun 20, 2019 08:07 AM #44
Rainmaker
698,735
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

Hi Marte. I have been talking about this for years now. Various state real estate departments, brokerages and agents have to change antiquated rules about the industry. Otherwise, others will change them for you.

It's very simple. It's so simple, that it's almost stupid. Brokerages become either employers OR providers of services like a vendor to independent real estate agents that work in their own business. All licenses are the same. There is no such thing as a broker or a licensed agent. Eliminate the word 'brokerage' and 'brokers' - that the crux of the problem right there - it resemebles, emulates and behaves like an employer-employee relationhip. The prime directive - you have a license to practice real estate - period. Then a practitioner can choose to become an employee of a real estate company that provides real estate services, or work independently in their own registered real estate business. You can have single partners, multiple partners, etc... If you do, you may or may not decide to buy vendor packages of back end services in the business of real estate.

Attorneys, medical practitioners and many liberal professionals work that way.

What we are waiting for to do this is being held back by old school mentalities. However, if we don't change and adapt our own industry models, it will be changed for us by other people not in the industry. Is this what we want?

 

Jun 20, 2019 08:25 AM #45
Rainmaker
298,467
Dennis J. Zisa & Associates, Inc.
Dennis J. Zisa & Associates, Inc. - Camden, NJ
28 years in So. Jersey and the Greater Camden area

I have owned and operated a small independent real estate brokerage and property management firm for the past 29 years. Approximately 2 years into it, I decided to move away from the the traditional business model (agents as independent contractors), in an attempt to reduce liability, maintain better control, and eliminate agent turnover. My agents are assigned substantial responsibilities on the property management side of the business, in addition to listing and selling properties. They are all salaried and receive company paid benefits, including paid sick days, holidays, and a company health plan. In addition to their salary, they earn a "bonus commission" on everything they sell. The company pays all their expenses, marketing and otherwise. Obviously, this is certainly not a business model for everyone, but it is one that has served me well for almost three decades.

Jun 20, 2019 08:43 AM #46
Rainer
364,782
Jana Holmstrup
Jana Holmstrup - CEO - Kings Mortgage Services, Inc. - Visalia, CA

California already utilizes the ABC Test so real estate licensees must fall under a hooded exemption.  This new bill would explicitly exempt them, so I don't believe anything would change for Brokers or their Agents.

My thoughts...

Jun 20, 2019 12:42 PM #47
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Richard Bazinet /MBA, CRS, ABR I expect that the idea of having brokers is having someone with some experience to guide and oversee new agents.

Dennis J. Zisa & Associates, Inc. Thanks for sharing the business model that works for you. Since you pay a salary plus benefits, I'm guessing that you're pretty careful in hiring.

Jun 20, 2019 01:08 PM #48
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Richard Bazinet /MBA, CRS, ABR For that to work I think there would have to be salaries. Right now it would be wonderful if new agents could apprentice to seasoned agents, but there's the question of who gets the commission.

I also can't quite visualize how you could have a real estate business without real estate agents. What would it offer?

Jana Holmstrup If change is needed, I think it should be hashed out among those in the profession before being considered at all.

Jun 20, 2019 01:53 PM #49
Rainmaker
369,863
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

After being a Retail Owner for 35+ years, I got into Real Estate for the FREEDOM! I can "pass the buck" to the Broker when I want to or need to (make them earn their cut), but I still have a WHOLE lot of freedom as to MY work schedule!

Jun 21, 2019 04:01 PM #50
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Travis "the SOLD man" Parker; Associate Broker After reading these comments and thinking about the issue, I've come to the conclusion that both business models should be allowed.

You and I love freedom - but some people need the structure of being told what to do, how to do it, and when to do it. They also need the financial structure of someone else withholding taxes and taking care of business overhead.

Jun 21, 2019 04:56 PM #51
Rainmaker
970,924
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Great post! I prefer to be an independent contractor even though I have no benefits. I’ll create my own benefits!

Jun 22, 2019 08:50 AM #53
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Jan Green And that means just one thing... you believe in personal responsibility. Funny that so many in real estate do, when it's such an unpopular stance these days.

Jun 22, 2019 09:43 AM #54
Rainer
135,282
Robin Wells
RAW Chimney Sweep and Inspections - Penetanguishene, ON
Giving Peace Of Mind One Chimney At A Time

Thanks for post.  There can be pros and cons of an independant contractor.  However if done correctly the pros can far outweigh the cons.

Jul 07, 2019 02:27 PM #55
Rainmaker
1,520,761
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Robin Wells I think so too, but that's because I don't want to go work for a "boss" who tells me what to do.

Jul 07, 2019 11:37 PM #56
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