For tax, compensation and work hour requirements real estate salespeople have long been classified as independent contractors, not employees. It isn’t hard to see why brokers prefer this - they aren't Read more...
For tax, compensation and work hour requirements real estate salespeople have long been classified as independent contractors, not employees. It isn’t hard to see why brokers prefer this - they aren't required to reimburse for business expenses, provide health care benefits or pay the employer share of payroll taxes. It would cost brokers a great deal of money and completely change the real estate profession if agents weren’t contractors.
In a recent class-action lawsuit Bararsani v. Coldwell Banker (2015), the plaintiffs alleged they were misclassified as contractors when they should have been employees. Part of the rationale was that the broker exerted so much control over their day-to-day activities that they could not be contractors.
The case eventually settled outside of court in January, with the $4.5 million settlement to be split by approximately the 5,600 members of the suit. Before plaintiffs see any money the court awarded $1.5 million to the attorneys.
It’s important to remember that a settlement is not an admission of guilt or wrongdoing. Coldwell Banker maintains that they have done nothing wrong and will continue their business practices as before. This means no new employee classification for agents and no new benefits.
This challenge to current business practices is not just occurring in California. A similar case (Monell v. Boston Pads, LLC) was dismissed in Massachusetts and the real estate agents were confirmed to be contractors.
The Massachusetts Association of Realtors considered the Monell case to be a significant win for the real estate industry because brokers were not forced to change their business practices. Plus now they have a strong court ruling to support them. The Bararsani case is not as definitive a victory for those wishing to keep agents classified as independent contractors as a settlement was reached.
The overall issue of independent contractors vs employees is not going away. Uber Technologies, Inc. has found itself in numerous federal lawsuits over the issue (with an interesting emphasis on employment being determined by amount of control the employer exerts over the subordinate) that could end up impacting the real estate industry indirectly. Uber will eventually go through a jury trial to decide the classification of its drivers and if they are determined to be employees in a federal court, independent contractors all across the nation could find themselves in a stronger position to sue for employee status.
The Bararsani v. Coldwell Banker settlement may not be the last of this issue.
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I got my license in 2002 and have seen many real estate partnerships flourish and work well. I’ve also seen partnerships end in bitterness and hatred due to missed expectations and disappointment. One Read more...
I got my license in 2002 and have seen many real estate partnerships flourish and work well. I’ve also seen partnerships end in bitterness and hatred due to missed expectations and disappointment. One mentor of mine famously said “If partnerships were good God would have had one.”
With that being said, your chances of being successful can (not will) increase if you find the right partner or get on the right team. Everyone has heard the saying “two is better than one” and if you want to succeed, a team can help you in areas that you are naturally weak.
Part of the temptation associated with starting or joining a team is the perception that it is the path of least resistance. For the rookie agent, starting out on a team may mean that they will be fed with leads so they won’t have to prospect as hard. For the “rain-maker” or team owner, the allure is that they can somehow take themselves “out" of the business and everyone else will do the work for them. One person will handle all the CMA’s while another will show property for you while another will act as a transaction coordinator for your files.
I saw a YouTube video recently where a prominent real estate “coach” was speaking to a group of real estate agents about building a business. In the video he talked about having members of your staff all aspects of your business while you can be “in Mexico sipping a margarita on your phone saying keep up the good work team!”
This dangerous “get rich but do nothing” philosophy is a large part of why it has become so en vogue to form teams in the real estate business. It’s tempting to think about because it makes the real estate agent think that they can somehow delegate all of the heavy lifting to someone else and avoid working. This rarely works and is a recipe for disaster.
I would highly recommend that before you start or join a team you have very clear expectations of your role and the roles of other team members. Sometimes things are a lot easier to get into than get out of.
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Good REALTORS® are used to thinking about the Code of Ethics. Beyond the ethical guidance it provides, it is also a professional obligation. But what about the application of the Code of Ethics as it Read more...
Good REALTORS® are used to thinking about the Code of Ethics. Beyond the ethical guidance it provides, it is also a professional obligation. But what about the application of the Code of Ethics as it relates to social media? While the Code is typically very clear, it's application to social media can be ambiguous.
Between “private” accounts, character limits, and inexperience applying the code to online behavior, it is easy to forget the Code of Ethics or overlook some of its provisions. This could result in an ethics hearing or even a lawsuit. Keep the following rules in mind to avoid finding yourself in trouble over an easily preventable situation.
Assume everything you post is public.
It isn’t just the content you publicly post—whether it be to your Facebook wall, as a Tweet, or a comment on someone else’s public post—that you should be concerned about. Even private messages on a social media platform can come back to bite you, particularly if you choose to say something disparaging about another real estate professional or a client. Messages you meant to be private can be saved and shared with anyone. A quick screenshot of an old Facebook message can be a serious problem.
Give credit where credit is due—clearly.
Let’s say your close friend is also a real estate professional. You attend a broker's open and you decide to share it on social media. No biggie - you think it is an amazing opportunity and include the address. Maybe you post a picture of the property. You think nothing of it—you aren’t trying to steal the listing. A week later you receive notice of an ethics complaint, alleging you violated Article 12 of the Code of Conduct. Someone (perhaps your friend’s employer?) objected to you posting about the property without making it absolutely clear that you were not the listing agent and obtaining consent to advertise the property. While you may think you are being unnecessarily attacked for helping your friend, you cannot assume everyone will feel the same way. There are case interpretations of Article 12 at realtor.org covering similar situations. The simplest way to avoid this situation is to not make posts like this. But if you choose to, make it very clear who is listing the property and that you are not associated with the listing.
Don’t complain on social media either.
While it might be possible to find yourself in hot water over social media posts made with good intentions, it is definitely possible to run into trouble over negative or disparaging posts. Consider another hypothetical. You had a listing on a property that expired. The next day, your clients sign with a new agent. You have suspicions the new agent had solicited his or her services to your clients while your agreement was still active, but you have no way to prove it. Your former clients refuse to speak about the subject. Lacking evidence of an ethical violation you choose to not file a complaint . Instead you post a vague message on your personal Facebook page about the frustrations of your job and stolen clients. Maybe a friend or family member comments, asking if this is about the house you had not been able to sell. Perhaps another person comments about one of their experiences with a shady real estate agent. Your former client’s new agent finds out about this post from a friend (a realistic possibility, I’m sure you could think of a handful of potential common connections in a few seconds), obtains a screenshot, and files a complaint with the Professional Standards Committee alleging a violation of Article 15 of the NAR Code of Ethics. The agent claims that you are knowingly and recklessly making unsubstantiated false and misleading statements. The moral of the story: don’t complain about business on social media. Between clients, employers, and rival agents, someone can and will find something to be offended by. A perceived breach in contract or code of ethics could result in the loss of a client or even a job.
Cover your bases with personal accounts.
It is common knowledge that REALTORS® are required by the Code of Ethics to disclose their status as a REALTOR® when carrying out business. But what about on a personal social media account? If you keep your personal and professional accounts separate, you shouldn’t have any problems. But separation is key. If your friend shares a listing for their house that is on the market, “sharing” it further might be kind and helpful. But, as a real estate professional, you would then be required to make it clear that you are a REALTOR®, that you are employed by Employer X, and that this is not your listing. This might seem unnecessary (particularly if you have a relatively small number of friends on social media and aren’t operating a prominent account), but it is a far better option than a formal complaint when someone decides that you misrepresented yourself.
Keep private information private.
It is easy to let information slip in conversation. You tell a friend about a commission or a client that was trying to downsize after losing a job. While this might constitute a violation of the Code of Ethics, you are also unlikely to find yourself on the receiving end of a formal complaint. Talking about these topics on social media—regardless of whether or not you’re doing this in a private message, a public post, or a private group of some sort—is not just a violation: it’s a paper trail. You’re best off not violating the Code of Ethics (it’s in place for a reason). But you’re worst off leaving evidence of violation that you committed without malice or the desire to damage the reputation of another person. Leave private information out of social media.
Be smart—even if you come out of a Code of Ethics hearing unscathed, you will still have wasted your time and possibly damaged your reputation - your most important asset.
The few hypothetical situations in this post are realistic and just scratch the surface of what can be done on social media. Good intentions won’t prevent an ethics hearing. It’s common these days to reach for our phones and rant. Just remember - someone is always listening.
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I received this email from the Bureau of Real Estate and I wanted to share it with all of our stakeholders.
This is to inform you that all individuals who submit an application for a real estate license Read more...
I received this email from the Bureau of Real Estate and I wanted to share it with all of our stakeholders.
This is to inform you that all individuals who submit an application for a real estate license received on or after January 1, 2016 will no longer need to submit proof of legal presence in the United States.
On September 28, 2014, the Governor signed Senate Bill 1159 (Lara, Chapter 752, Statutes of 2014), which adds Section 135.5 to the Business & Professions Code (BPC), changing the legal presence requirements to obtain a real estate license. Current law requires an individual to provide proof of legal presence (proof of U.S. citizenship or legal alien status), in the United States in order to obtain a real estate license. SB 1159, which becomes effective on January 1, 2016, will remove the legal presence requirement from the application process. Applicants will still be required to provide a social security number or an individual taxpayer identification number for licensure. Please make appropriate changes to your materials and inform your students of the changes to the requirements for licensure.
What this will likely lead to is the elimination of the RE 205 form as well as the need to show either US Citizenship or the possession of a Alien Registration Card “Green Card”. We will update our processes as this date comes closer.
This isn’t the forum to discuss the politics of this, but I wanted to let you know of the upcoming change.
Best regards,
Kartik Subramaniam
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Time for a serious discussion for all you new agents out there. Starting a career in real estate is not like starting a business. A career in real estate sales is starting a business.
If this sounds Read more...
Time for a serious discussion for all you new agents out there. Starting a career in real estate is not like starting a business. A career in real estate sales is starting a business.
If this sounds daunting to you, don't worry. Upon close examination, you will see that the revenue that a real estate agent can make relative to the amount of investment necessary is amazing.
For a moment, let's compare real estate sales with other businesses like restaurants, clothing stores or most other businesses that you might think of.
Imagine how hard it is to own and operate a restaurant, for example. You have to purchase supplies, hire staff and deal with dozens of customers on a daily basis. Don't forget rent each and every month. You're also going to need a phone line and probably Internet access. Additionally, you don't get to take time off randomly like you would as a Realtor. You don't get to create your own schedule. You have to be there six to seven days a week from open to close.
Man... THAT'S HARD WORK.
Compare this with real estate sales:
You don't have to carry any inventory. Our inventory is out there ripe for us to sell! We have zero carrying costs and don't have to pay for the inventory (listings) that we have.
You don't have payroll to make until you can afford it. If you owned a restaurant, bar, clothing store, coffee shop or almost any other business, you would have payroll obligations from day one. In real estate sales, you hire an assistant when you can afford to.
You don't pay for an extra phone line or Internet access, your broker pays for this. Don’t kid yourself about how expensive business class telecommunications can be. Many businesses have a phone and Internet bill of several hundred dollars per month or even more!
You only deal with a small number of select clients unlike the volume game played by most other businesses. Think of something as simple as a coffee shop. How many customers does a coffee shop have to deal with each and every day? Potentially dozens or maybe even hundreds. Every single customer has to leave happy. In our real estate business a successful Realtor might only have to deal with 20-30 clients over the course of an entire year. Yes, this means that each deal comes with more pressure, but you don't have the constant pressure you would have in a higher volume business.
There are a ton of people who get into our business that come to the sad realization that buyers and sellers aren't going to beat down the doors of the newly licensed agent. This causes them to second guess the real estate sales business and dismiss it as "too difficult". They then start to blame the market.. "Hey nobody is buying anyway"... "Haven't you read the news lately? The market sucks..."
The truth is that as Realtors, we don't know how good we have it in our business. Even as a new agent, over 50% of the gross revenue generated is ours to keep. Strong, experienced Realtors often get to keep over 80-85% of the gross revenue.
Think of attorneys as a point of comparison. Attorneys typically bill out at $275-$450 per hour. Do you think that and average attorney working at a firm gets to keep that high of a percentage? Even half of it? No way. An associate at a law firm might be making $40-$50 per hour against the $250+ that they are billing.
Yes the market might be down and prices are lower than they were in many parts of the country but real estate sales can be one of the most most rewarding business out there. This is true from an economic perspective as well as the inner feelings of fulfillment that comes from helping clients navigate the complex world of real estate.
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I love the Internet. Who doesn’t?
However, ask yourself this question: Is the Internet a suitable substitute for an actual mentor?
Listening to our competitors, you would think so. They try to Read more...
I love the Internet. Who doesn’t?
However, ask yourself this question: Is the Internet a suitable substitute for an actual mentor?
Listening to our competitors, you would think so. They try to sell students on the idea that online classes are more effective in teaching than live classes. We completely disagree.
The Bureau of Real Estate requires that a student take 3 classes in order to qualify for a sales person license and 8 for a broker license. Each one of those courses has 45 hours of credit. The Bureau of Real Estate requires that for a home study course there be 10 pages per course hour in each textbook used by a real estate school. Each textbook, by statute, must be at least 450 pages. (45 hours x 10 pages = 450 pages) Now, ask yourself this: If you were to receive three (You need Real Estate Principles, Real Estate Practice, and an Elective course, remember?) 450 page books in the mail, would you have the patience and discipline to read each and every page line-by-line, absorb the material, take the exams online, and subsequently pass the state exam? Even if you made it through each book, how much do you think you would really learn from reading 1500 pages worth of course materials on your own? Taking an online course does not compare to the knowledge and guidance we have to offer through our live real estate program.
Why then are so many other real estate schools online only?
The answer to this question is probably a combination of several factors. First of all, from a business perspective live real estate courses are much more costly to run than a strictly online model. High quality instructors must be compensated for teaching and classroom space must be procured. These costs create a strong incentive for education companies to keep overhead to a minimum and do “online” only.
All of our instructors are licensed and active real estate agents, and most are brokers. Isn't this the caliber of educator you would prefer in helping you begin a new career in real estate?
Our program gives you the greatest chance at success. With the proper guidance and enough determination, every student can ultimately achieve their ambitions of becoming a licensed and successful real estate agent.
Call us at 888 768 5285 or visit us online at www.adhischools.com for more information.
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In this month’s Real Estate Magazine, the official publication of the California Association of Realtors, an article was published about the size of most real estate companies in California. To my surprise, Read more...
In this month’s Real Estate Magazine, the official publication of the California Association of Realtors, an article was published about the size of most real estate companies in California. To my surprise, over 86% of all real estate brokerages comprise four or fewer agents.
How does this statistic affect a new agent?
My recommendation has always been to affix your license to a market leader. In most cases, the market leader is going to be a large organization with fifty or more agents. Most of these larger firms have a systematic training program and scale built up.
This is especially important for a new licensee with very little to no real estate experience. When sitting across the negotiating table with a seller, it’s comforting to be able to lean on what your firm has done to help fill in some of the holes in your own experience.
Besides being able to lean on the accomplishments of your office, it’s also helpful to be in a large office if you can develop synergies within the organization. If you want to to pick up buyer leads by holding a property open, for example, it’s easier to do that when you have 100 agents to approach and hundreds of listing to choose from. Also, being in a large office allows you to learn from the mistakes and failures of colleagues that have been in your shoes before.
Check out this video of veteran Realtor, David Hurtado, talking about how he chose an office to work with when he was a new agent. Also, this video might help you decide on what office to work for.
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Just got this email from CAR. Glad our industry is keeping an eye on things.
UNDISCLOSED SHORT SALE PAYMENTS MAY BE ILLEGAL
Undisclosed payments in short sale transactions, especially those paid Read more...
Just got this email from CAR. Glad our industry is keeping an eye on things.
UNDISCLOSED SHORT SALE PAYMENTS MAY BE ILLEGAL
Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws. Short sale agents have increasingly reported to C.A.R. about requests for agents and their clients to pay junior lienholders and others, oftentimes outside of escrow.
One common scenario is when a short sale seller's senior lender authorizes a payment of $3,000, for example, to extinguish a junior lien, but the junior lender demands that the buyer pays an additional $9,000 outside of escrow. Not only would it be risky for a buyer to pay outside of escrow, but concealing this additional payment from a federally-insured senior lender may constitute loan fraud, which is a crime punishable by 30 years imprisonment plus a $1 million fine (18 U.S.C. section 1014). Furthermore, omitting from the HUD-1 Statement any charges paid at settlement by either a buyer or seller may violate the Real Estate Settlement Procedures Act (RESPA) (Appendix A to 24 C.F.R. Part 3500). Depending on the specific circumstances, carrying out these payment requests may also violate other laws and regulations, and an agent's participation in the scheme may be subject to license revocation by the Bureau of Real Estate or other disciplinary action.
Agents and their clients are encouraged to file any complaints regarding fraudulent activities to the proper authorities, including the following agencies:
Attorney General's Office
California Department of Justice
800-952-5225 Phone
http://ag.ca.gov/consumers/mailform.htm
Department of Housing and Urban Development (HUD)
HUD Office of Inspector General Hotline (GFI)
800-347-3735 Phone
http://www.hud.gov/offices/oig/hotline
Federal Bureau of Investigation (FBI)
202-324-3000 Phone
https://tips.fbi.gov
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I was reading the Los Angeles Times this morning and came across an interesting article entitled “How to keep your job during layoffs”The article advises that the following be done:1. Anticipate what Read more...
I was reading the Los Angeles Times this morning and came across an interesting article entitled “How to keep your job during layoffs”The article advises that the following be done:1. Anticipate what your company needs.2. Keep up your skills.3. Stay positiveI started to think that the above also applies to life as a real estate salesperson.Anticipating what your company needs is important to stay relevant as an employee. How does this apply to life as a real estate agent? What about anticipating what your clients need? This is very important. What if a new listing comes on near one of your listings that is less than yours? Price reduction anyone? What about a new listing that comes on the market for one of your buyers? Staying relevant and timely is important no matter what you do.Keeping up your skills is also important. When was the last time you took a class or went to a seminar? Many local associations give free classes for short sales and REO properties these days. Take advantage of these and keep learning. My mom always used to say ‘In order to earn more you have to LEARN more.’Finally, staying positive always helps no matter what you are doing. Click here for one of my favorite videos about this.
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A recent article I read in the Wall Street Journal talks about a common problem homeowners face when attempting to refinance their homes.Today, bankrate.com shows an average 30 year mortgage rate of 5.03%. Read more...
A recent article I read in the Wall Street Journal talks about a common problem homeowners face when attempting to refinance their homes.Today, bankrate.com shows an average 30 year mortgage rate of 5.03%. Pretty killer deal, right? This is likely much lower than the current rate on your home loan and you may be tempted to refinance.The issue that at least a quarter of all homeowners will have in attempting to refinance is a lack of equity due to declining home values. This isn't such a big surprise - everyone knows real estate values have dropped and many owe more on their homes than they are worth.But what I liked about this article is that it shed light on the fact that if people were actually able to refinance it would have a positive impact on the economy. The following is the chain of logic I had while I was reading this article.If people can refinance their home, it becomes more affordable.If more people can afford their homes, there are less foreclosures.If there are less foreclosures property values will stabilize.If property values stabilize, this could stabilize other facets of our economy.If other facets of our economy stabilize, our country may recover faster.This is kind of a chicken-and-the-egg scenario. You can't refinance because your home value has dropped, but if banks refinanced borrowers this may stabilize home values.Of course, the problem of declining home values isn't something that appeared out of thin air. It's a purge of the gluttony that the real estate industry partook in from 2003-2006. The Wall Street Journal article closed by reporting that the Obama administration is looking into whether or not FHA can help refinance homeowners that don't meet the traditional loan-to-value requirements necessary to refinance.
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