If you’re exploring a career in the real estate industry, you’ve likely had questions about the differences between a real estate broker and an agent. Understanding the contrast between brokers and agents involves not only delineating differences in their functions and compensation but also exploring the compelling reasons why an agent might aspire to become a broker. Here, we’re sharing intel about these two types of real estate professionals, including each role’s requirements, responsibilities, and benefits.
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What is a real estate broker?
Much like real estate agents, brokers can help clients buy and sell property, negotiate sales prices, and sign contracts.
However, brokers also undergo additional licensing and training, gaining in-depth knowledge about real estate taxes, laws, and finance. Unlike agents, brokers may work independently and can start their own real estate firms (or brokerages), where they can hire and manage real estate agents.
What are the different types of real estate brokers?
Designated broker
A designated broker is the owner of a real estate brokerage who oversees business operations, including hiring real estate agents, setting sales goals, and establishing commissions. They’re also responsible for ensuring everyone in the brokerage adheres to state and federal laws regarding real estate transactions. This role may also be called a broker-owner or broker-in-charge.
Managing broker
The managing broker usually reports to the designated broker. They typically hire team members, including administrative staff and real estate agents. They manage the day-to-day operations within the brokerage and deliver reports to the designated broker. Some managing brokers continue working with clients, while others focus solely on managing a team of real estate agents.
Associate broker
Think of associate brokers as super-charged real estate agents. They have their broker license but choose to work for another broker instead of starting their own firm. They usually don’t manage staff within the brokerage and instead focus on working with clients. Associate brokers may also be called affiliate brokers or broker-salespersons.
Note that in some states (Illinois, North Carolina, and Colorado, for example) all real estate salespeople are called “brokers” as soon as they get their licenses. Only those with higher levels of education and licensing can call themselves managing brokers or brokers-in-charge.
How do real estate brokers get paid?
A broker can earn money in two ways:
- Through their own commissions: Many brokers continue to work with clients who want to buy or sell real estate. When the broker acts as the client’s agent, they earn 100% of the commission from that transaction.
- Through a percentage of their agents’ commissions: Real estate agents are required to work for a sponsoring broker, and part of their commission gets split with the broker when they complete a sale. How much commission a broker gets will depend on the pay structure established in the agent’s brokerage contract.
Why become a real estate broker?
Should you get your real estate broker’s license? Here are a few reasons to consider it:
- You can earn more money: Not only are brokers allowed to keep the full check when it comes to their own sales transactions, but they also earn a percentage of their agents’ transactions.
- You get to be your own boss: Agents must work for sponsoring brokers, while a broker license allows you to work independently.
- You get more control over your career: When you work for a broker, they can determine what listings you get, which clients you work with, and how much commission you make. Being a broker means you can position yourself strategically within the industry.
How to become a real estate broker
To become a real estate broker, you must first have your agent’s license. Each state has its own rules and regulations regarding the licensure process. In California, for example, you must have two years of experience as a real estate agent before applying to become a broker. You must also complete 360 hours of broker education, including finance, appraisal, and accounting courses.
Once you complete the pre-licensure courses, you’ll take your state’s licensing exam, submit a licensing form, and pay related fees.
What is a real estate agent?
A real estate agent works with clients who want to buy or sell property. Agents help negotiate prices, market properties, and prepare paperwork for final sale. Each agent must affiliate with a broker, who oversees their work as an agent and ensures they are following state and federal real estate laws and regulations.
What are the different types of real estate agents?
Individual agents may take on a variety of the roles listed below at the same time, and many will shift their primary focus between types throughout their careers.
Buyer’s agent
A buyer’s agent represents the purchasing party in a real estate transaction. They work with their buyer’s best interests in mind, guiding them through the process of purchasing a property. Buyer’s agents help clients find the right place, make an offer, negotiate, and more.
Listing agent
A listing agent represents the seller. They work with their clients to evaluate the property, establish a selling price, list the property for sale, actively market it, and help negotiate the highest possible price.
Dual or transactional agent
A transactional agent is an agent that represents both the buyer and seller in the real estate deal. Dual agents work to find a price that meets the needs of both parties. Because they are working for both the buyer and the seller, they get 100% of the commission.
Referral agent
A referral agent is a licensed real estate professional who connects their client with another agent. They may send a contact who wants to sell a unique piece of property to an agent who specializes in marketing that property type. Or, since licensing is a state-by-state affair, they might refer their relocating client to a trusted professional who’s active in the state their clients are moving to. The referring agent will get a portion of the commission in exchange for the referral.
Commercial agent
A commercial agent is one who focuses on non-residential buildings (retail stores, business towers, storage facilities, and factories, for example) or entire residential buildings that house more than one family unit (such as apartment buildings and condos).
How do real estate agents get paid?
Most real estate agents are paid through commission, a percentage of the final sale price of a property. Commission is always negotiable. For example, some agents may reduce their commission if they represent both the buyer and seller. Real estate agents pay a portion of the commission to their broker, commonly called a split.
A few brokers compensate their real estate agents via a salary, often including a sales bonus on top of their base pay for closing a certain number of deals. However, this is far less common than a commission structure.
What is a Realtor?
Though many people use the terms “agent” and “Realtor” synonymously, they have distinct meanings in practice. A Realtor is simply an active, dues-paying member of the National Association of Realtors (NAR). The term “Realtor” is trademarked by NAR, and the association requires members to conduct business in accordance with its rules and ethical standards.
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