There are many other businesses that use bonuses in combination with a salary. And real estate should be one of them. By changing the compensation, you change the model.
No longer will it be in the brokerage firms’ best interest to hire mass quantities of agents. Instead, the firms will need to pay the agents. If the agents are employees, then the firms will be more interested in making sure that each agent does a good job. There will be training, there will be supervision, there will be direction, and there will be oversight.
The liability will be lifted from the individual agent and placed on the firms. The firms will be responsible and, as such, will implement adequate controls to protect the consumer from careless or negligent agents. The firm will be interested in reducing their costs. The idea of competition will be shifted from the individual agent to the firms. And the competition between firms will lead to a reduction in costs to the buyers and sellers.
Sure, not all agents work for large firms. And these agents should be allowed to continue to work at individual or small firms if they choose to do so. I’m not trying to remove the entrepreneur from real estate. What I am trying to remove is the abuses of the large firms on the gullibility of potential agents. Yes, these small firms and individual agents will have to compete against the big guys. But they won’t be competing against the continued influx of new and inexperienced agents. There are always people in any service industry who decide to go out and do it on their own. That will continue to be a part of real estate.
How do we implement these changes? First, we need to change the IRS stance on real estate sales being an independent contractor position. How do we change this? I think if the IRS would take a good look at some of the larger firms, they might find that real estate agents really aren’t as independent as they have been lead to believe.
Certain firms already require their agent’s to pay a certain amount of advertising every month. Certain firms have taken away the “independent contractors” ability to market him or herself by requiring the use of firm websites, phone numbers and e-mails. This certainly seems to be outside of the definition of an independent contractor. According to the IRS, to be defined as an independent contractor’s, the payer, in this case the brokerage firm, has “the right to control or direct only the result of the work … not the means and methods of accomplishing the results.” An employee is someone who “performs services for you”. “If you can control what will be done and how it will be done”, then the person is an employee.
The second step is to change the laws and legislation. Why is the liability allowed to ride on the real estate agent who (1) probably doesn’t have any money, (2) may or may not have known they were making a mistake and (3) may already have left the business? Why isn’t the firm taking the hit? Sure, they may be included in the litigation, but the little guy is getting hurt here, and I’m not talking about the homeowner. I’m talking about the guy who got recruited, was promised big bucks by the broker/manager and got seduced by the green being flashed in front of his eyes.
But none of this will happen until someone steps in to protect the consumer. Cause in this business, the consumer certainly does not know enough to protect himself.
®2007 by Judy Kane
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