California Real Estate Broker ExaminationAgencyEasy
A real estate salesperson, licensed under a broker, is compensated solely by commission and is responsible for their own taxes and expenses. They are free to set their own hours and choose their own methods of marketing, as long as they comply with brokerage policies and real estate law. What is the employment status of this salesperson with respect to the broker?
- AIndependent Contractor
- BDesignated Agent
- CSubagent
- DEmployee
Show answer & explanationAnswer & explanation
Correct answer: A. Independent Contractor
The characteristics described—paid by commission, responsible for taxes/expenses, and control over hours/methods (within legal and brokerage guidelines)—are hallmarks of an independent contractor relationship in real estate, as opposed to an employee.
Why the other options are wrong
- B. Designated agency refers to a specific agency structure within a brokerage, not an employment status.
- C. Subagency refers to a type of agency relationship, not an employment status.
- D. Employees typically have set hours, receive a salary or hourly wage, and have taxes withheld.
Independent Contractor (Real Estate)
A real estate licensee who works under a broker but operates largely independently, controlling their own work hours and methods, and is compensated by commission, responsible for their own taxes and expenses.
- Paid by commission, not salary/hourly.
- Responsible for self-employment taxes (e.g., FICA).
- Sets own hours and work methods (within legal/brokerage limits).
- Broker provides general supervision, not daily control.
Memory trick: Employee vs. Contractor: Control and Compensation tell the tale.