For many, a career as a real estate agent is a dream opportunity. This career can offer the possibility of high earnings, flexible working conditions, interacting with a wide variety of interesting people in the community, developing personal and interpersonal skills, creating win-win transactions and the joy of closing a major deal.
Along with the high points come several risks specifically associated with this career that if not planned for, may hamper the success of this potentially lucrative path. These risks have to do with the structural and entrepreneurial nature of the industry as well as the ups-and-downs of the real estate market itself.
Risks That Real Estate Agents Face
The financial and commercial risks faced by real estate agents include:
- Commission-Based Independent Contractors. The majority of real estate agents function as independent contractors whose income is largely a function of variable commissions, not a regular bi-weekly salary. This generally results in a “lumpy” income, which may pose personal financial difficulties in lean times.
- Lack of Employer-Provided Health and Retirement Benefits. Although most agents work under the auspices of a real estate agency, they generally do not receive from them benefit packages that include health, disability or financial assistance. For example, according to a recent Real Estate Express article, less than 20% of real estate brokerages offer health insurance to their agents. Worse still, less than 10% provide disability coverage to their agents.
- Fickle Real Estate Markets. The hot-and-cold nature of many real estate markets also contributes to concerns of many agents for their personal financial security. A lean market coupled with the two preceding risks can cause some agents to moonlight in an additional job, or even worse, leave the field altogether.
Offering Benefits Helps The Brokerage As Well
Clearly, those agents that receive a salary and/or benefit package come out better than ones who do not. In reality, the employing brokerage comes out better as well. Here’s how: According to Real Estate Express, 83% of brokerages have difficulty in attracting and retaining agents. By providing a new business model in which agents are compensated with salary and benefits, brokerages are able to attract and retain happy and motivated partners.
A Breath Of Fresh Air: A Brokerage That Offers Benefits
New York City-based Yoreevo is one real estate brokerage that has adopted the emerging business model of offering a salary and benefit package to its agents. James McGrath, who has been with the firm since its beginning, says that Yareevo has taken essentially all the personal-financial risks off the table for their agents. They become more productive because they are not constantly under intense pressure to find their next deal.
The 1099 Advantage
Help is available to those agencies that are attracted to this modern business model. The 1099 Advantage plan, offered by Rosenbaum Financial, was created specifically for the real estate industry. It fills an insurance need that was, up to now, unfulfilled. It provides win-win solutions for firms that see the wisdom of offering group benefit plans to their agents, employees and other contractors.
The 1099 Advantage plan offers long and short term disability insurance as well as life insurance, accident coverage, and other coverages. This plan is completely customizable. Rosenbaum Financial will design a set of benefits that specifically fills the needs of your agency and those who work there.