People who aren’t familiar with the real estate terminology quickly get confused by all those titles, licenses, and requirements they come across once they decide to sell their property and find someone to help them with it. Although, in everyday speech, many of these terms, such as real estate agent vs. broker vs. Realtor, are used interchangeably, there are, in fact, differences among them, and each of these real estate professionals needs to have a different skill set.
In short, the main difference between an agent and a broker lies in the fact that agents must work under a broker, while brokers may operate independently. Real estate agents take a commission of a successful sale, out of which a percentage goes to the broker they work for, while brokers take both a percentage from their agents and a commission from their sales. Finally, a Realtor is anyone belonging to the National Association of Realtors.
Now, since this is a very broad explanation, let’s get into what each role entails in more detail.
The real estate agent is typically the person people rely on when deciding to buy or sell a property. Also known as real estate associates or salespeople, agents meet with clients, list properties, host open houses, and handle everything else in the process of finding a new home for their customers.
It's also the title anyone looking to sell houses will likely have at the beginning of their real estate career.
Each state has its own set of requirements for becoming a real estate agent, from age and education level to strict background checks. However, regardless of the state, the steps for obtaining a license are the same - if you want to become a real estate agent, by definition, you have to take a prelicensing course and pass the licensing exam. Once you get your license, you’ll have to activate it with the state’s real estate agency.
After activating their license, agents can start searching for the right brokerage to work with. It's essential to choose the brokerage with fair commission splits an excellent lead generation set in place. Brokers achieve this by assigning this duty to one or more of their employees or by purchasing a subscription at one of the best lead generation companies.
Once they have a brokerage and their leads, agents can go ahead and help their clients sell or buy their homes.
There are several roles agents can fulfill. Depending on whom they represent, agents can be listing agents, buyer’s agents, and rental agents. Each of these specialists has their own set of responsibilities to help their clients make a sale or purchase they’ll be satisfied with.
A listing agent represents home sellers and is there to help them through every step of the process, including pricing and marketing the home, hosting open houses, negotiating with buyers, and navigating closing procedures.
The closing procedure is where the difference between a real estate agent vs. a broker is most noticeable to clients. At this point, the brokerage will step in and handle the legalities, hold the money in escrow, and help with the paperwork needed to seal the deal.
On the other side of the deal, there’s the buyer’s agent. Buyer’s agents are responsible for finding the right home for their clients, negotiating the offer, and troubleshooting potential problems.
The third role a real estate agent can take on is the role of the rental agent. These agents usually help prospective tenants find and lease their new homes or commercial property. They can also help landlords who have trouble finding and screening prospective tenants on their own.
A broker is someone who has started as a real estate agent but has completed additional training and obtained a real estate broker’s license. This additional license allows brokers to work independently and hire real estate agents.
Just like with agent’s exams, each state has its requirements for becoming a broker. The courses typically go a bit more in-depth than the regular real estate agent’s, but they cover similar topics, such as contracts, taxes, and insurance. Within these courses, brokers also get familiar with the relevant laws and regulations and how to legally approach issues that may arise in construction, property management, and operating a real estate brokerage.
All brokers have the primary goal of finding new leads and clients. All parties in a brokerage are responsible for maintaining relationships with their leads/clients, either in person or with some help from real estate CRM software. Depending on their other duties, real estate brokers can be associate brokers, designated, and managing brokers.
Associate brokers are those who have a license but are working under another broker. In this instance, an associate’s responsibilities are similar to an agent’s, as they typically don’t supervise agents - that’s the job for principal brokers, also known as designated brokers. Every real estate brokerage has a designated broker, and their job is to supervise agents and ensure that they are operating in accordance with the law.
The third type of broker is the managing broker. Managing brokers oversee daily operations in a real estate company. They are responsible for handling transactions, hiring new agents and training them, and managing any other administrative staff employed at the office.
The last title that can be somewhat confusing is the title of Realtor. A Realtor, by definition, is anyone who is a member of the National Association of Realtors. Both agents and brokers can be Realtors, but other real estate professionals, such as appraisers and property managers, can also become members. All members must strictly adhere to the NAR’s Code of Ethics.
Both positions have their pros and cons, but it’s generally considered that being a broker is a “step up” from being an agent. The main difference between a real estate agent and a broker is that agents can’t work independently and have to give up a percentage of their commission to the broker. However, this buys the agents out of handling legalities, managing a firm and their own employees, and other tasks brokers handle daily.
The startup costs of a new real estate brokerage are $10,000 at a bare minimum and can go up to $200,000 under a franchise. It's essential to calculate the costs of running the brokerage for at least two years and have a safety net prepared in advance, as the first two years are crucial.
Yes, and this is the main difference between a real estate agent vs. a broker. A real estate broker can work independently, but it’s typically recommended that new brokers work as associates in an already established brokerage firm to gain the needed experience.
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