Check Your Understanding Answers
- What type of contract will a new real estate licensee likely first experience?
An employment contract with his or her sponsoring broker
- List three characteristics of licensees who are independent contractors? (Additional correct answers on page 4.)
- The agent controls his or her schedule, hours, and workload
- The broker cannot control HOW the agent performs his or her real estate duties.
- The broker does NOT withhold any money from the agent’s paycheck.
- Although it’s usually easier for brokers to hire licensees as independent contractors rather than employees, what is the trade-off?
The amount of control brokers have over their licensees
- What are the conditions of the IRS safe harbor test?
- The person must be a qualified (properly licensed) real estate agent.
- Compensation paid to the real estate agent for services performed must be based on production, not hours work.
- A written agreement must exist between the independent contractor and the broker stating that the contractor will not be treated as an employee for income tax purposes.
