3 Looming Shifts That Could Change Real Estate

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Three changes are looming on the horizon that could fundamentally change the way the industry will do business in the future.

These threats include increased regulatory enforcement, as well as two main threats that can eliminate or significantly reduce the ability of real estate agents to function as independent contractors.

1. Strengthening regulation and enforcement

The scope of regulation and enforcement is increasing. Examples include an ongoing dispute between the Department of Justice and the National Association of Realtors (NAR) and Biden administration decision increase the IRS execution budget by 67 percent.

These also include President Biden on July 9, 2021. disposition adding FTC to “realize FTC Regulations authority, as the case may be and in accordance with applicable law, in areas such as “unfair restrictions on professional licensing”,unfair tying practices or prohibitive practices in brokerage or listing real estate “; and” any other unfair industry practice that substantially impedes competition. “

Additional measures also apply to fair housing. Recently Stunning Women in Real Estate ConferenceLaurie Benner, deputy vice president of programs at the National Alliance for Fair Housing, explained how the Biden administration took steps immediately after taking office to enforce fair housing regulations.

For the real estate industry, this means enlarged testers (people posing as clients to see if realtors are engaging in discriminatory behavior) and an increased budget for prosecuting violators. Therefore, a systematic approach is absolutely essential, in which all customers are treated equally and with the highest level of professional service.

2. PRO Law

President Biden’s $ 3.5 Trillion Spending Package Now Includes PRO lawwhat will end independent contractor (IC) status for most professions, as well as eligibility laws in 27 states. (The original PRO Act, which was passed by the House of Representatives, is currently suspended in the Senate.)

For Biden’s $ 3.5 trillion spending bill to become law, all 50 Democratic senators would have to vote for it, and a Senate member would have to agree that the spending package could be passed using concordance (i.e., Simple by a majority of 50 votes). plus Vice President Harris’ vote to end the draw). If this tactic works, Republicans will not be able to use a filibuster to prevent the bill from being passed.

The consequences of reclassifying agents as employees rather than independent contractors are severe. 100% commission models, virtual brokerages and firms that support a large number of agents who do not make deals will be hit particularly hard, as will membership in most realtor associations.

Even if the bill is not passed by Congress, there is a much more serious threat looming that could force the industry to adopt a wage labor model – increased oversight by the state and the National Labor Department.

3. The state and national ministries of labor are prepared to use enforcement as an alternative method of terminating the status of NK.

In the recent Wall street journal author’s opinion, WSJ columnist Kimberly Stassel expressed serious concern about David Weil’s approval to lead the Department of Labor Payments and Hours, a position he held from 2014 to 2017 during the Obama administration.

Even if the PRO law does not pass, Stassel warned:

“The White House will instruct the Department of Labor to implement this to the greatest extent possible through a regulatory order. Mr. Weill will be the chief security officer and history shows that he will not be shy. “

Stassel went on to explain:

“Doctor. Weil issued regulations stripping most contractors of their independence by forcibly reclassifying them as employees (in order to better organize them into unions). Most recently, he worked with the Massachusetts attorney general to file a lawsuit. Uber and Lyftpart of the efforts of this blue state to destroy its own gig economy. ”

Two important cases in California show how costly these actions can be for brokerage firms in a case run by their state Department of Labor.

Bararsani vs. Caldwell Banker

This class action argued that Coldwell Banker had incorrectly classified current and former affiliate trading partners as independent contractors, although they should have been classified as employees.

On behalf of the alleged class, the plaintiffs requested “to take advantage of California labor law benefits in respect of expenses, wages and other amounts, as well as alleged fines, attorney fees and interest.”

Coldwell Banker settled a $ 4.5 million lawsuit. Several experts have suggested that if this lawsuit were successful, it would force the entire industry to adopt the employee model. There were fears that up to 50 percent of brokerage companies and an even larger percentage of agents would be stopped on the first day if the lawsuit with Bararsani was not resolved.

Zip Realty Lawsuit and Settlement

The California Department of Labor continues to actively prosecute companies that violate existing independent contractor laws. The cost of these violations can be enormous.

To illustrate this point, four Zip Realty IC Agents filed a lawsuit claiming they were employees and not independent contractors. Zip Realty paid compensation in the amount of $ 586,000. Following the settlement of the lawsuit, the California Labor Commissioner demanded an additional $ 17 million in unpaid wages, damages and fines across California. Zip Realty agents… The case was settled for $ 5 million.

In contrast to the changes in the law that the PRO law seeks to make, the bulk payments described above are the result of the California Department of Labor’s implementation of Current labor legislation.

Regardless of what happens to the PRO Law, very few companies have the financial ability to stay in business facing court decisions and fines like those paid by Coldwell Banker and Zip Realty.

Get ready for what awaits us

No matter what happens to the PRO Law and Biden’s $ 3.5 trillion bill, enhanced regulation and the execution has arrived.

Real estate professionals should always be vigilant about complying with fair housing laws and should avoid any action that could lead to prosecution for misidentifying employees as independent contractors.

For a more detailed discussion of IC status and areas where brokers and agents may be at risk of violating these laws, read this article by Inman

Bernice Ross, President and CEO Brokerage and RealEstateCoach.com, is a national speaker, author and educator with over 1000 articles published. Learn about her broker / manager training programs designed by women for women at BrokerageUp.com and her new sales training for agents in RealEstateCoach.com/newagent



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