Real estate professionals are continuously looking for fresh and innovative ways to succeed in their industry, which is always evolving. Among some options is becoming an independent contractor, a trend that has gained popularity in recent years. Out of 1.5 million members nationally, 87% of REALTORS in the US are self-employed, according to the National Association of REALTORS®. Thus, what motivates a real estate broker to select self-employment? Let's take a look!
Recognising a Real Estate Agent's Function
It is important to understand the responsibilities of a real estate agent before diving into the reason behind their decision to operate as independent contractors. Real estate brokers are accountable for the same duties whether they work for an organisation or on their own:
- They arbitrate conflicts between buyers and sellers on the terms of settlement and the value of real estate.
- Together with the necessary documentation, like purchase contracts and selling agreements, they assemble listings of real estate properties.
- They employ listing services, open houses, and advertisements to promote homes on behalf of their customers.
The way an individual interacts with their employer or the real estate brokerage company they work with distinguishes them primarily as employees versus independent.
Understanding the Role of an Independent Contractor
An independent contractor in the real estate context is a licensed agent who works under a broker but retains significant control over their business operations. This includes determining their work schedules, managing their accounting systems, and conducting other business-related activities. The independent contractor status is typically outlined in a written agreement between the agent and the broker.
Control over their Work Schedule
An independent contractor's independence in terms of scheduling is one of their distinguishing characteristics in the real estate industry. It follows from this that students are free to decide where, when, and how to do their work. Because it allows individuals to manage many duties and maintain a balance between their personal and professional lives, this level of autonomy attracts people who are entering the real estate sector.
Commercial Activities
Real estate agents are in charge of running their businesses as independent contractors. This covers everything, from keeping tabs on their cash to promoting their services. Although they function under the protection of a brokerage, the agents are allowed to manage their firm in a manner that suits their unique tactics and objectives.
Employees vs Independent Contractors
In the real estate sector, it's necessary to understand the differences between independent contractors and employees first. The main difference is the extent of the company's influence over its workforce. An independent contractor is more likely to have greater freedom to finish their task as they see fit than an employee, who is often subject to corporate management.
Relationships with Employees
Employers must adhere to specific labour rules on behalf of their staff. The employer is required to follow regulations regarding record-keeping, working hours, overtime, and minimum wage. Workers' compensation insurance may also be necessary in several states.
Relationship with Independent Contractor
A real estate agent who works as an independent contractor has autonomy over their work schedules, accounting procedures, and other business-related tasks. The terms of the connection between the contractor and the company should be outlined in a formal agreement.
The Allure of Independent Contractor Work
Both authority and adaptability
Agents in real estate have a lot of freedom and control over their business when they work as independent contractors. Their personal work schedules, marketing tactics, and the properties they choose to deal with are all up to them. This kind of autonomy appeals greatly to many real estate professionals.
Financial Benefits
Becoming an independent contractor has significant financial benefits as well. In the US, the average income for a self-employed real estate agent is $106,280, as per the Real Estate Express. One of the primary drivers of an agent's decision to go independent is the potential for higher income.
Developing Your Own Brand
An independent contractor in real estate has the chance to establish their own brand independently of the brokerage company. In a crowded market, this can help them stand out and draw in more customers.
The Negative: Difficulties in Working Independently
Although working as an independent contractor has many benefits, real estate agents must also be aware of the drawbacks.
Lack of Employment Benefits
The typical perks of employment, such as paid time off, health insurance, and retirement plans, are not available to real estate brokers who operate as independent contractors. They are responsible for purchasing their own insurance and creating retirement plans, which may be challenging for certain individuals to accomplish. On the other hand, independent contractors have the freedom to decide on their holidays and retirement plans. It is common in the industry for real estate agents to take long vacations after completing successful deals, especially for those working in the luxury real estate sector.
Risks to Money
Even while the possibility of making more money is alluring, independent contractors run the danger of losing money. Their earnings are highly erratic and closely tied to the status of the real estate industry. In addition, they cover additional business expenses, including marketing, office space, and professional development.
Complexities of Law and Regulation
Being an independent contractor might mean navigating a complicated legal and regulatory environment. The tax ramifications, real estate rules and regulations, and managing legal obligations are all things that real estate salespeople must be aware of. Legal issues and financial consequences may arise from misclassifying their work position.
Options for Self-employed Real Estate Agents
However, there are ways to make real estate agents’ life easier in spite of these difficulties. For example, Transformify provides solutions to automate invoicing and payments to contractors in many currencies and across 184 countries. That includes contractor payments in cryptocurrencies, which are being seen as a great option by many real estate agents today. The innovative workforce management system is particularly good for real estate agencies managing hundreds of realtors. Automating compliance, billing, and payments can greatly simplify the financial management process.
In Conclusion, the global market for brokerages and real estate agencies is expected to grow from $1.4 trillion in 2023 to $1.8 trillion by 2027, according to Research and Markets. As the real estate market develops and changes, more real estate agents ought to choose to work as independent contractors because of the chance for greater freedom, financial rewards, and added flexibility.
Being an independent contractor has numerous benefits in the real estate industry, but there are disadvantages as well. However, these challenges can be effectively overcome with the right tools and strategies, providing access to a successful and rewarding real estate profession.
As per CNBC, the gig economy has had a 27% surge in the number of participants over the last two decades, with a significant contributor being the emergence of independent real estate contractors. For those looking to carve out a niche for themselves in this fast-paced industry, the independent contractor model appears to be the cornerstone of the real estate market going ahead.