Buying or selling a home isn't easy, but real estate agents and brokers specialize in navigating the process. Real Estate brokers have gone through more training and have more responsibility than agents, but these aren’t the only differences.
You could hire either a real estate broker or an agent to ensure your best interests are represented. But before you hire an experienced real estate professional, it is a good idea to know the difference between real estate agents and brokers.
Let's take an in-depth look at these two types of real estate professionals.
What is a Real Estate Agent?
Before a real estate agent can represent clients when buying or selling a home, they need to meet the licensing requirements in their state. And these licensing requirements for a real estate agent vary from state to state.
The basic requirements for someone wanting to become an agent typically include being a legal U.S. resident, being at least 18 years old, completing the required courses, and passing the exam.
Real estate agents generally need to work within a brokerage, and a newly licensed agent also needs to be sponsored by a brokerage before they can work with clients.
There are two main types of real estate agents; buyers and listing agents. The buyer's agent assists their clients in finding, making offers, and negotiating for their ideal property.
The listing or seller's agent executes an exclusive right-to-sell contract, and their work begins. The listing agent helps to ensure that the home is listed at the right price, shows the home to potential buyers, and ensures the purchase contract represents the seller's interests.
Sometimes real estate agents can represent both the buyer and the seller though this isn't always allowed. It's referred to as dual agency and has been banned in some states because it doesn't benefit consumers.
In most circumstances, real estate agents are paid by commission, so they only earn if and when the sale closes.
What is a Real Estate Broker?
To be a real estate broker, you generally need a few years of experience as a licensed real estate agent. Brokers must do more educational courses than agents and pass another licensing exam.
Brokers need to have a deeper understanding of the real estate processes, including taxes, insurance, and ethical and legal requirements. They also often have to know about running a business and managing employees.
Brokers can work for themselves and employ agents to work for them, something agents can't do. They can start their brokerage and need to supervise real estate agents that work for them. They will need to manage the brokerage, negotiate contracts, and assist in real estate transactions if they are needed.
A real estate broker's most significant responsibility is collecting a buyer's earnest money deposit and holding it in the company's escrow account until closing.
A broker can be a real estate agent or Realtor. Most real estate brokers are Realtors and follow the National Association of Realtors Code of Ethics.
There are a few Different types of Real Estate Brokers
Associate brokers
These brokers often perform the same role as real estate agents, but as they have a broker license, they can receive a higher commission. They might also be responsible for dealing with some of the administrative duties in the brokerage.
Managing brokers
As their name suggests, they manage the brokerage. They have responsibilities to supervise the agents though they can sometimes directly involve clients.
Principal brokers
These brokers are sometimes known as designated brokers, and they are the ones that will apply for a brokerage license from the state. The principal broker will be the overall manager of the real estate brokerage and could be paid a salary instead of the commission other brokers receive.
Real Estate Commission For Brokers and Agents
Aside from brokers that take a salary, most agents and brokers are paid through commission. The seller will be responsible for paying the commission when the sale closes, which means paying the buyer’s agent and their own agent. This is how real estate agents get compensated for their work.
The commission is typically around 5% of the purchase price, which is split between buyers’ and sellers’ brokerages. If a home sells for $350,000, and the buyer and the seller have an agent representing them, a 5% commission will be $17,500. This will be deducted from the sale amount received by the seller.
In this example, $8,750 will go to each brokerage the agents work in. The agent will be paid by their brokerage based on their agreement, meaning they receive 60% or 70% of the commission. If the agent has a 60/40 split with the brokerage, they will receive $5,250 of the original $17,500 paid by the seller.
Final Thoughts on Real Estate Brokerage
At times the real estate industry can be challenging to understand. Many terms are used loosely as if they have the same meaning. Real Estate agents, brokers, and Realtors all have different meanings. Many in the industry use the terms as if they are the same. Consumers are left confused because of it.
Whether you decide to become a real estate agent or a broker, you usually get out of it what you put in. It takes a lot of hard work and many hours to be successful. Those who think they can get into the business and make a killing without the time and effort are sadly mistaken.
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