The real estate industry is an exciting and lucrative career path that has enabled many to design and fashion their own version of the American dream. According to The Balance Small Business, there are numerous reasons to choose this career trajectory, including being your own boss, low start-up costs, working your own hours, the opportunity to earn “big money”, as well as taking vacations and time off when you choose. No wonder many entrepreneurial-minded people are attracted to this industry.
Real Estate Agents: The Potential Pitfalls
Although it’s true that many people do very well indeed as real estate agents, it’s also a fact that there are a number of peculiarities about this profession that may pose a risk to achieving financial success. Up until recently, most brokerages have not provided much in the way of a salary and total benefits package to their agents, who essentially function as independent contractors. The combination of variable commissions, potentially cooling real estate markets and the lack of a supportive benefit package can put the American dream in jeopardy for some agents.
A Tale Of Two Agents
Take a look at these two hypothetical scenarios: Vanessa and Theresa are both real estate agents in the same busy urban market. The city has reasonable good real estate sales, but the housing market has cooled somewhat over the last year and a half.
Vanessa is working for a brokerage where she is valued and cared for. Her compensation structure includes a mix of salary and commissions, and the firm provides a supportive benefits package. Despite the declining market, she has been able to make a number of sales. The commissions on these have added nicely to the salary she brings home.
Theresa works for commission only. In addition, her brokerage does not provide a benefits package. She is essentially an independent contractor and needs to provide her own insurance. The cooling market had chipped away at her total take-home money. Unfortunately, she was involved in an auto accident while rushing to meet a prospective homebuyer. She suffered a broken leg and was unable to drive for six months. Although she did purchase health insurance on her own, she did not have disability insurance.
Vanessa is well on her way to reaching all her financial goals. Theresa is not: When the market became lean and she suffered a work-related disability, this two-pronged punch knocked her out of the game.
A New and Better Way
A new and better way is emerging in the way that real estate agencies and agents work together. Up-and-coming brokerages are finding it in their best interest to offer total benefit packages to their agents. Agents who work in these firms are more relaxed and less worried, enabling them to put more attention into their sales efforts. This “Win-Win” is enabling firms to attract and retain top employees, boosting the financial bottom line for both the firm and the agent.
Yoreevo, a real estate brokerage we discussed in our previous blog, has taken up the emerging business model that includes offering a salary and benefit package to its agents. James McGrath, who has been with the firm since its first days, says that their agents “Get paid a salary so they don’t have to be paranoid and constantly worrying about their next deal.” In addition, Yoreevo finds that this business model benefits prospective buyers as well: According to McGrath, “When we hand a deal to our agents, we want them to be as pumped about the transaction regardless of if it’s a $300,000 studio or a $3 million condo. We didn’t want our compensation to be strictly compensation based because then the agents may or may not prioritize the higher deal because there’s more of a commission offer.”
Rosenbaum Financial and the 1099 Advantage Plan
Real estate agencies and brokerages that are looking to attract and retain top agents are increasingly providing competitive benefit packages to their professionals. Rosenbaum Financial is the first to design and offer a comprehensive benefit package for real estate brokers, especially those looking to create a top-working environment for their agents.
The 1099 Advantage plan offers long and short term disability insurance, life insurance, accident and supplemental health insurance. This plan is completely customizable. Rosenbaum Financial will design a set of benefits that specifically fills the needs of your brokerage and those who work there.
President & CEO, Rosenbaum Financial