The salaried agent issue continues to surface in print and online publications. E-brokers, traditional franchise brokers, and industry prognosticators have all extolled the benefits of employment models over those of the traditional independent contractor arrangement. Some have even predicted that salaried agents could become the norm in the real estate business.

Seeking alternatives to the independent contractor set-up is certainly nothing new. Talk of hiring salaried agents has been around since at least the early 1970s. Now, several online and traditional companies are once again experimenting with the concept. Let’s look at the issue from several points of view to see how viable salaried agents might be.

The Agent

Some of the points made in favor of salaried agents are indeed attractive – at first, anyway, and to certain kinds of agents. The security of a steady paycheck and benefits will immediately appeal to many newcomers to the business and to some seasoned veterans who are just too tired to face the possibility of yet one more drop on the economic roller coaster. But what about the hundreds of thousands of agents who are in the industry because of the freedom that real estate sales offers, and the potential for virtually unlimited success? At least up to now, real estate has been dominated by entrepreneurs, salespeople who thrive on taking risks for high rewards. Those lacking the entrepreneurial spirit just do not tend to stay in the business very long.

The Broker

Brokers might understandably welcome more control over their independent contractors. But that control would come at a heavy price. There is a narrow margin of profitability in the real estate business as it is. A broker who would be responsible for matching Social Security benefits and for providing worker’s compensation and health insurance would see that profitability shrink even more. And what about recruiting and retention? Again, many young and/or inexperienced people just entering real estate would find a salaried position secure and comfortable. And older agents weary of the battle would enjoy a predictable income their last years in the business. It would be difficult to recruit quality high-producing agents under such a business model.

Multi-million dollar producers, driven by their determination to succeed, could not be expected to take a pay cut and settle for a salary, even if the compensation could increase. High producers who did join the salaried work force would undoubtedly leave the company to return to independent contractor status or to start their own business. Without dynamic, high-producing agents, the office would be dominated by inexperienced and uninspired employees, unable to compete in the marketplace.

The Customer

Consumers are accustomed to doing their banking during limited business hours (and banks would be one business that would eagerly hire salaried real estate agents). When it comes to real estate, though, home buyers and sellers have come to depend on being in touch with agents at any time of day or night, on weekends, and on holidays. Given a choice between salaried agents available only during certain hours, or independent contractors accessible around the clock, most consumers would surely choose the superior customer service. The salaried-agent experiments continue, attracting a scattered number of salaried real estate agents in North America. However, in major markets in which the concept is being tested, salaried agents hold only a minuscule percentage of listings. Now, it could be that in the distant future, the entrepreneurial spirit will fade, and 30-40-year-old middle managers from other industries might be drawn to salaried positions in real estate. But I truly don’t think that will happen – especially the entrepreneurial part.

Published: July 18, 2001

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