Guide to Unemployment Options for Real Estate Agents

A real estate agent has two employment statuses: sat at a closing table or unemployed.

It’s an up-and-down industry that has a small success rate and most agents fall out within the first two years of getting their license. As agents start to feel that pinch, they may feel like they need to look at options.

The hustle never stops,. The next paycheck is never a given. And the time between closings and clients can feel a lot like being unemployed.

Unfortunately, that is not how unemployment laws see it.

Are Agents Eligible for Unemployment?

Unfortunately, as 1099 independent contractors, real estate agents are not eligible for unemployment benefits. Salaried W2 agents, which make up about 5% of real estate professionals, are eligible for their state’s unemployment benefits.

There have been exceptions to this historically, like the federal government’s 2020 CARES Act due to the COVID-19 pandemic which temporarily allowed 1099 independent contractors to take claim unemployment benefits.

Unemployment availability and rules vary from state to state. The US Department of Labor has a good resource to find your state’s key departments for work-related information.

Self-Employed as a W2 Employee

Another possible exception is if you pay yourself as a W2 employee.

This is how I structure my own business. I am an LLC formed as an S Corp and am the sole member of my small business. But I pay myself as a W2 employee, including all applicable taxes, and keep the rest of my funds with the business.

As a W2 employee, I am required to pay both state and federal unemployment taxes.

Assuming you have collected a salary as a W2 employee in your business and paid, you may be eligible for unemployment depending on your state. Some states do not allow unemployment benefits if you are a shareholder of more than 10% of your entity.

Refer to the IRS guide on whether you count as an employee in your own business or not.

1099 Independent Contractor Controversy

Independent contractor status and employee benefits have been hot topics in the United States.

The lack of benefits, like unemployment benefits, is what spurred advocates of California’s controversial AB 5 law. The California Association of Realtors (CAR) and National Association of Realtors (NAR) were careful to get real estate agents exempted from the law, allowing agents to continue to work as independent contractors instead of employees.

Independent contractor status in the real estate agent has been a source of contention and lawsuits in the past, as well. Unlike other self-employed contractors, real estate agents are not free to work for different brokers, meaning they are in the gray area between the common law definition of an employee versus an independent contractor.

Options for Struggling Real Estate Agents

Cut expenses

It’s extremely easy to overspend when starting a business, and especially for real estate agents. If your money from closings isn’t covering your expenses, the first place to inspect is your outgoing expenses.

I believe agents spend way too much money more often than not.

Stick to the essentials for your business and cut the rest.

Side Job

I wrote an article about a multitude of good side jobs for real estate agents.

Few will yield immediate income outside getting a full-time job or a side gig. There are plenty of agents who spend some of their day driving clients to home showings and the rest of their day driving Uber clients around.

Join a Team

If you jumped straight into the business working for yourself and are feeling overwhelmed, you may want to consider hopping onto a team.

Top producers in your area are often hiring buyers agents. While still usually commission roles with higher splits, the leads are usually much more plentiful. A good team will also have structure and support to help you get on your feet as a real estate agent.

If you aren’t already familiar with the top teams in your market, check out the rankings at Real Trends for your area. They rank the most productive agent teams and brokerages.

Salaried Roles

According to NAR, about 5% of real estate agents are salaried instead of independent contractors. The best known brokerage with salaried agents is Redfin.

Offerpad and Opendoor are also brokerages with salaried, licensed roles.

There are other salaried roles for which your experience as a licensed real estate agent may set you up for success:

• new construction salesperson
• transaction coordinator
• title agent
• inside sales agent
• MLS/association roles

Many brokerages also have staff and administrative roles. The big ones like KW, Coldwell Banker, RE/MAX, Compass, eXp Realty, etc., are always hiring.

Conclusion

If in doubt as to whether you are eligible to apply for unemployment benefits, talk to your broker or accountant. Or engage with your state’s labor office directly. They should be able to answer your questions and get you the support you are entitled to.

For most real estate agents, however, that will be very little.

Updated March 20, 2024; Originally published January 27, 2021