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Real Estate Brokerage

Life after Bararsani v Coldwell Banker: Brokers must proceed with caution

The recent Bararsani v Coldwell Banker lawsuit has the real estate industry on edge, feeling our way through murky waters. Let’s take a look at what this all means, especially for independent brokers.

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Person holding phone challenging the myth of an ideal worker

Did you hear the news? Bararsani v. Coldwell Banker, the case that called into question whether agents should be classified as employees or independent contractors, was settled for $4.5M this month. In total, there were approximately 5600 members of the class action lawsuit. After paying the attorney’s fee of $1.5M, I calculate that each agent will receiving a little over $500—much less than a single commission check.

But, what does this mean for the industry? In a January 17 article on his blog, Rob Hahn writes:

The pattern in the past has always been that one lawyer gets a significant settlement, the others see the payday, they smell blood in the water, and then the swarm attacks begin. It’s happened to asbestos, to tobacco, to drug companies, etc. etc. So… it’s going to happen. It’s just a matter of time.

If Hahn’s predictions are accurate and there seems to be an historic precedent, we will be reading more on this topic in the future.

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Employee or Independent Contractor?

So, are real estate agents to be classified as employees or independent contractors?

Realty Times reports that “according to federal law (26 U.S.C. §3508 (b)), for federal tax purposes, real estate agents will not be treated as employees if a 3-part test is met: (1) The agent must be licensed, (2) Substantially all payment is made on the basis of sales or output, but not on hours worked, and (3) There must be a written contract between agent and company providing that, for federal tax purposes, the agent will not be treated as an employee.”

The IRS has a different evaluation system

Yet, the Internal Revenue Service has a different evaluation system; it’s a 20-factor test (not a 3-part test) that determines whether the status of an individual worker is that of employee or independent contractor.

So, is it a 3-part test or a 20-part test? And, without specific guidance from the National Association or Realtors®, how should brokers proceed going forward?

Moving forward: Considerations for brokers

With all of this hullabaloo, brokers and brokerages may need to rethink some of their practices. National and local franchises will likely have a dictum that come from their corporate headquarters that will expressly set forth policies and procedures relating to this issue.

But, what about the independent brokerage (which comprises over 80% of our industry)? What immediate steps can independent brokers take to assure that they will not be part of the next class action suit?

  1. Brokers should get to work right away and review their policy and procedure manuals to assure that they pass the “sniff” test. Specifically, look for language that violates the 20-factor test and make appropriate edits. After all, it’s a new year, so it is probably a good time to update the manual anyway.
  1. Brokers need to modify their scripting. Instead of telling all the agents that there is a mandatory meeting on Monday at 9:00, it would be better to remind agents of the time. Then, drip in language, which implies that the best producing agents are the ones who attend the meeting. Brokers who receive late night phone calls and texts from frantic agents can set precedent that issues are resolved at the office meetings.
  1. Cut bait or suggest that certain agents find a new home. Brokers have a duty to supervise their agents. In California, for example, the Real Estate Commissioner Regulation 2725 specifically states, “Reasonable supervision includes, as appropriate, the establishment of policies, rules, procedures and systems to review, oversee, inspect, and manage…” If you have an unmanageable agent, it may be time to cut bait. Look long and hard at your business model and decide whether the cash rogue agents brings in is worth risking the health of your business. At the end of the day, when the state licensing bureau investigator comes a-calling, the broker is usually the ultimate loser as a result of lack of agent supervision.

As I mentioned in a July 2014 article on a similar subject, it is a pickle. Eighteen months later and with a class action settlement on the table, lack of supervision is still a slippery slope. Brokers are required to supervise their agents. Adequate supervision can only happen if agents attend trainings, learn policies and procedures associated with risk management, contracts, and closings. Nevertheless, Bararsani v. Coldwell Banker puts us on high alert.

The takeaway

I’m not sure what the answer is here. But, at least the latest news reminds us that we need to look long and hard at our business practices in order to assure that they are up to snuff.

#Conundrum

Melissa is an in-demand business success speaker and author, as well as a real estate broker with thousands of short sale transactions under her belt. She leverages her experience as a short sale insider to motivate thousands of business professionals to plan their careers better, execute more effectively on their plan, and earn more because of it.

Real Estate Brokerage

How you can stick with your habits and actually achieve your goals

(BROKERAGE) Sticking to new habits can be tough, but there are ways to train your brain. We’ve got the deets on the best way to beat fatigue.

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Person typing on computer representing habits in our workday.

Just about every Sunday night I say to myself, “This week, I am going to eat better.” And, just about every Monday afternoon, I find myself cooking the same frozen pizza I always eat. Why is it so difficult for us to stick to our guns and really follow through on developing better habits? Well, if you’re anything like me, it’s mostly because doing what you’re used to is so much easier.

Trick of the trade

Each year I find myself being notorious for skipping out on my New Year’s resolutions, my fitness goals, and my attempts at reading one book per month. Right when I was beginning to feel completely fed up with myself, I found a trick that has helped me form habits and maintain behavior to accomplish my goals.

And, this trick is quite simple: accountability.

This can be found in the form of a friend or in the form of a planner or calendar.

Creating accountable ideas

I have thousands of ideas per day, many of which are fleeting. However, some ideas are about self-improvement.

For example, I often have the idea of beginning a workout routine. While I know that I should be doing daily exercise to increase my overall health, it can be a difficult task to stick with.

By developing this idea into something that I am accountable for, it makes me much more likely to stick with this habit. Let me explain…

Accountable for others

The two aforementioned methods of accountability, a friend or planner, can be used for the given workout example.

If you find a friend who can daylight as your workout buddy, you have someone that will motivate you and that you can motivate.

Now that you’ve made this friend your workout buddy, you have someone to hold you accountable if you miss a day. Gone would be the days where you could skip a workout and have no one to answer to.

Accountable for yourself

But, if you are a solo exerciser like myself, it can be difficult to find a method of accountability. What I have found works for me is taking my thought of, “I should workout,” and putting my goals down on paper.

By writing down a workout plan and the attached goals, it fosters a sense of tangibility.

I then create a calendar where I write down what exercise I want to do on what day, and, after I complete my goal, I am able to check it out.

For the accountability aspect, I like to put this calendar somewhere in everyday eyesight, so that I can’t ignore it. And, sure, I could easily throw it away and pretend it never existed in the first place, but I promise the act of writing out your goals will motivate completion.

In the end…

While sticking to habits can be a tricky business and different methods work for different people, developing an environment in which you hold accountability helps to inspire motivation.

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Real Estate Brokerage

Sales Exercise: Can you sell water as well as you can sell a house?

(BROKERAGE) Spice up your office life! Create a friendly office competition and see if the sales prowess is limited to just homes.

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sales competition negotiating

Here’s a fun way to shake up the daily grind at your brokerage and give your team a chance to practice their skills: a one-day sales challenge.

Choose a random day of the week to cancel all other plans and have the competition. It will be even more fun if you don’t warn your team – just spring it on them. Before you do, make sure no one is working up to any pressing deadlines.

How to play

Divide your staff into teams and give them the challenge of selling a tangible product. One group in Chicago sold bottles of water. Have the teams decide how much inventory they would like, with the rule that they can’t buy more later. It’s up to the teams to decide how much to charge for each unit.

This will challenge the teams to estimate how much inventory they think they can move

Overconfident teams may end up with too much inventory, while others will sell out quickly and may wish they had sold at a higher price, or had bought more to start with.

If you’d like, you can let teams that sell out quickly negotiate to buy extra inventory from teams that overbought.

Send your teams out to the streets and see how much they can sell in one day. Celebrate with a happy hour at the end of the day where you compare remaining inventories and net profits, congratulate the winners, and discuss lessons learned.

The benefits

This is a great challenge for encouraging teamwork. Teams have to communicate, make decisions, and make sales cooperatively. The competition and the time limit put the pressure on, but since it’s just a game, it’s also low stakes and there is no real risk.

Teams have to rely on their own skills, rather than the pre-existing systems of your business.

A sales challenge is obviously a great way to practice sales. Many Realtors are great at marketing or negotiation, but that doesn’t necessarily mean they can nail it when it comes to sales. The challenge can also help identify star salespeople, even in departments where you might not expect.

What’s to lose?

Bonus points for blogging about the challenge. Show your customers some of the personalities behind your company and celebrate the unsung sales heroes of your team.

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Real Estate Brokerage

3 important things to consider before you pivot your business model

(BROKERAGE) Many businesses have had to pivot during the global pandemic but maybe yours isn’t one of them. Consider these questions first!

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Team discussing the pivot of a business model.

When Ross asked Rachel and Chandler (Friends TV show 1994-2004) to move a couch, many of us will never forget his voice inflection and how many times he yelled “PIVOT”! It’s actually a really funny scene and if you’ve never seen it, it might be worth 3.5 minutes of your time. Ross had the best of intentions by starting with a sketch and enlisting help from friends but even that ends up in hilarity as getting his couch into his apartment doesn’t work and he ends up being offered $4 when he tries to return it (stay for the end of the clip).

The best plans and intentions for your business are often met with what the market and customers demand, where technology grows, and where your ROI is the best. You often know that your original plans will grow and evolve, even in the uncertainty and now… a global pandemic.

Many entrepreneurs and small businesses have had to lean on technology to add virtual services (or expand their offerings) to meet our current norm where people are just not out and about like they used to be. Some have seen this work well and others have had to completely re-design their offerings to maintain safe and socially distanced considerations.

The thing is, businesses that have pivoted are being highlighted. But it is also worth looking at what has worked for some businesses that didn’t have to completely shift their strategies in 2020. It is likely that they had to adapt but maybe not a ridiculous Ross-type “pivot” that resulted in a complete failure of the mission.

Harvard Business Review (HBR) shared an incredible article, “You Don’t Have to Pivot in a Crisis” with great insights about what to consider if you think you need to make changes or if you want reassurance you are still on the right track.

HBR shares a powerful thought:

“The lesson here is that when a crisis hits, it pays to resist knee-jerk reactions on how to handle external shocks and ask what is going to work best for your company, based on the particular realities of its business. Ignoring the playbook of rapid cuts plus strategic pivoting can be the smart move… However, staying the course doesn’t mean inaction.”

Here are three thought-starters you may want to consider for your business:

  1. What product line or service is best serving your customers right now? Is that one of your strongest and/or could it use some attention?
  2. What product line or service is not quite meeting your needs or customer demands at the moment that had seemingly always worked (not forever! Just right now)? For example, in-person gatherings and promotions like events, conferences, trade shows.
  3. Is there something you’ve always wanted to explore? And could now be a great time since people want things more virtually? Examples: Selling branded swag, workbooks, content subscriptions, educational webinars.

These are three simple things but could help point you in the right direction of where to focus your time and energy – at least for now. You may not need a complete re-design or to take a new road, it might be some tweaks and adjustments to hang on to what you’ve worked so hard to build.

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