When it is time to sell your home, or if you are looking to buy, you’ll want to hire someone to represent your interests. But do you need a real estate agent or a real estate broker?
While you might use the terms real estate brokers and real estate agents interchangeably, that would be a mistake.
Let’s take a look at what real estate brokers are and the differences between agents and brokers.
What is a real estate broker?
A real estate broker has passed the same exams and has the same qualifications as an agent, but they have also completed the requirements to be a broker. Brokers that have met these additional requirements can manage their own real estate business, something that agents can’t do.
Agents have to work under the supervision of a broker in a firm, but brokers can work independently. Brokers can hire agents to work for them in their own real estate brokerage.
It is important to note that both real estate agents and real estate brokers can also be REALTORS®. A REALTORS® is a trademarked term for an agent who is a dues-paying member of The National Association of REALTORS® and follows their strict code of ethics.
Real estate broker licensing
If a real estate agent wants to become a broker, there are training courses and exams they need to complete. This might only be possible after the person has worked as an agent for a number of years, though exact requirements between states vary.
Broker requirements range from as little as 45 hours of courses and 2 years of experience in New York to 360 hours of courses in California. On top of this, brokers are expected to continue their education, completing courses and renewing their licenses regularly.
Real estate broker earnings
Just like real estate agents, brokers earn money through commission. If the broker is working independently, they can earn 2.5% to 3% of the selling price of the home.
When the broker is working for a brokerage, they will receive a percentage of the commission of transactions they have been involved in. When a real estate agent closes a sale, they won’t receive all of the commission.
There will be a split with the real estate broker the real estate agent works for. More experienced real estate agents tend to have more favorable splits, while newer agents usually split 50-50 with the broker.
Types of brokers
There are a few different types of real estate brokers that have different responsibilities.
Managing brokers
A broker that is employed by a brokerage to oversee the operation of the firm is known as a managing broker. They will be responsible for training agents within the brokerage as well as ensuring their licensing requirements are met.
Principal brokers
The main broker in the brokerage is known as the principal broker. They are sometimes known as designated brokers, and they are responsible for overseeing all the transactions within the firm to make sure they follow applicable laws. Every brokerage requires a principal broker, and sometimes the same person fills the managing and principal broker roles.
Associated brokers
The associate broker is someone who is licensed the same way other brokers are, but has less responsibility. Typically, these brokers do not supervise agents but still carry out other broker tasks.
Comparing real estate agents and real estate brokers
Real estate agents are licensed professionals trained to help their clients buy, sell, and rent homes. They are more like salespeople, whereas brokers have a more supervisory role and responsibility.
Real estate agent licensing
Agents have to complete courses before they can become licensed. The amount of coursework required is considerably less than that typically required by brokers.
When the courses are completed an exam has to be passed for the real estate agent to get their license. The exam tests the agent’s knowledge of real estate practice and federal laws.
When the agent has their license, they will need to find a brokerage to work for. There is normally a requirement to continue education even when the license has been approved.
Real estate agent earnings
Agents will earn a percentage of the purchase price of the home. Though the seller might pay 5% or 6% of the purchase price in commission, only half of that will go to the brokerage representing the seller, with the other half going to the brokerage representing the buyer.
REALTORS® don’t get all of the commission even then, having to share the commission with their broker. The exact amount the real estate agent will receive depends on their agreement with their brokerage.
While an agent is likely going to earn more from a transaction, a broker will probably be involved in more transactions. Brokers can also help sell a home in the same way that an agent does, and earn more commission that way.
Both REALTORS® and real estate brokers can make a significant yearly income when they produce.
Final thoughts
It is essential to understand there is a distinction between a real estate broker, a real estate agent, and Realtor. While they are all used synonymously, they have different meanings.
You should now have a much better understanding of the definition of a real estate broker.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years.
