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Writer's pictureAlec Kearns

Independent Contractors vs. Employees in Real Estate: Why It Matters for You

Updated: Oct 16, 2024




In the world of real estate, the majority of agents operate as independent contractors, a model that’s been the industry standard for years. But this setup comes with its own set of challenges—both for agents and the clients they serve. Let’s dive into the key differences between independent contractor agents and employee agents, and why this distinction matters when it comes to your real estate experience.


The Industry Standard: Independent Contractors

The vast majority of real estate agents are independent contractors. This means they work for themselves under the brokerage’s name, but they are not employees of the brokerage. Independent contractor agents are responsible for managing their own business, paying self-employment taxes, and covering their expenses, such as marketing, office fees, and continuing education.


Because independent agents’ income is directly tied to closing deals, they’re often highly motivated to work nights, weekends, and push hard to finalize transactions. This can mean a high level of commitment and focus on getting deals done quickly, but it can also lead to agents being stretched thin, as they juggle multiple clients to meet their financial needs. Independent agents operate individually, which means collaboration within the brokerage is rare, creating a fractured system where each agent works independently of the others.


Employee Agents

In contrast, employee agents make up only about 5% of all NAR members. These agents receive a salary or hourly wage in addition to any commissions they earn. While they benefit from job security, this can sometimes reduce the urgency to close deals or be available outside regular business hours, as their income isn’t solely dependent on each transaction. This can sometimes impact motivation, particularly when it comes to working late nights or weekends.


However, employee agents are more likely to collaborate and share resources, as their goals are tied to the success of the brokerage as a whole. Their income is more stable, which can allow them to focus more on quality service rather than the sheer volume of transactions. This creates a more team-oriented atmosphere, with the brokerage’s clients benefiting from the combined experience and expertise of the entire team.


How KRG Combines the Best of Both Worlds

At KRG, we’ve created a system that combines the best aspects of both independent contractor and employee models. Our senior partner project managers, who oversee each transaction and act as the principal agent, are highly motivated thanks to our unique bonus and compensation structure. This ensures that they remain driven to close deals and deliver exceptional service, without sacrificing the focus and dedication that comes from not being stretched too thin.


Meanwhile, our associates are employees who collaborate closely with the lead partner, working together to accomplish the goals of each client. This team-based approach ensures that our clients receive the best of both worlds—highly motivated leaders guiding the process and a dedicated team of agents working collectively to provide seamless service. Every client benefits from the expertise of a full team of professionals, all aligned to ensure the best possible outcome.


Why This Matters for You

In traditional brokerages, independent contractor agents may be motivated by the need to close deals quickly, but that often comes at the cost of collaboration and long-term client care. On the other hand, employee agents can provide a more stable, team-oriented service, but may lack the drive to go the extra mile when a deal isn’t tied directly to their income. At KRG, we’ve bridged the gap by creating a system where our senior partners are incentivized to succeed, and our associate agents work collaboratively to ensure every client receives the highest level of service.

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