What is a real estate broker vs. an agent? We explain the key differences
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Whether you’re looking to start a career in real estate, already have one or are involved in real estate transactions, you may find yourself wondering about industry terminology and job titles. The industry acronyms alone look like alphabet soup. So, let’s start with the basics: What is a real estate broker vs. an agent?
To answer that, we’ll take a deep dive into the differences between the many types of real estate professionals, including a real estate agent and a real estate broker. Real estate agents and real estate brokers are both licensed real estate professionals who can assist buyers and sellers, but you should be aware of some key differences and state-specific distinctions. Let’s dive in!
Summary
What is a real estate agent?
A real estate agent is a licensed professional who represents buyers or sellers in real estate transactions. Though most commonly thought of for residential deals, real estate agents can also help people buy, sell or rent commercial properties, land and more.
There are multiple types of agents — more on that below — but the common thread is that to become an agent, each professional must fulfill licensing requirements in accordance with their state. Much like lawyers needing to take a separate bar exam in each state they wish to practice in, real estate agents’ training and licensing requirements vary by state.
PRO TIP
You may see the terms “real estate agent” and “Realtor” used interchangeably. While a Realtor is indeed an agent, the term doesn’t work both ways. To be a Realtor, an agent must be a member of the National Association of Realtors® (NAR). To become a NAR member, licensed real estate agents must join a local NAR association and pay annual dues.
What does a real estate agent do?
A real estate agent’s tasks will vary depending on which side of the transaction they are on. This section gives you a broad overview of their most common roles.
Arguably, one of the most important functions of a real estate agent is to guide and be a subject matter expert to clients through the buying and selling processes. Put simply, a good agent is a sherpa who knows every step of the journey and expertly leads their client up the path. That can include being a housing market expert and advising clients on the best times to list or buy a home; having referrals handy for inspections, repairs, staging and photography; understanding the mortgage origination process; and more.
Real estate agents are also intermediaries between buyers and sellers, ensuring that their clients are well-represented in negotiations and that any concerns that arise during the transaction are addressed. Direct communication between buyer and seller is rare, and in many cases, can backfire. Agents serve as a safe middleman to keep things moving forward in a professional manner.
Also top of the list, agents are marketers. A top-notch real estate agent knows exactly how to market a home listing to get the right eyes on it. This includes — but is not limited to — posting to the MLS, hosting open houses and getting creative with social media.
Last but not least, real estate agents prepare documents such as closing documents, purchase agreements, and leases while ensuring that the transaction is in compliance with local laws and their client’s terms are met. An agent may also be present at closings to review closing documents and help guide their client through the final steps.
This is far from an exhaustive list of all that agents do, but the common thread is this: Agents serve as experts and guides in real estate transactions to get their clients the best possible outcomes.
How do real estate agents get paid?
The simple answer is that real estate agents are paid on commission, typically a percentage of the property’s sale price. In the average residential transaction, commissions are usually split between the buyer’s agent and the seller’s agent, with the seller typically paying both commissions.
However, if you’ve been paying attention to the news over the past few months, you know this question has been top of mind across the industry. The NAR Settlement, which resulted from a class action lawsuit, brought real estate commissions into the spotlight.
Unfortunately, it also resulted in the circulation of misinformation about commissions. While several changes went into effect in August following the settlement, commissions remained negotiable, as they always have been.
Types of real estate agents
As you’ve likely gathered, there are multiple types of real estate agents. An agent can play many roles but typically stick to one role in a single transaction to avoid conflict of interest. For example, it would be rare for an agent to be both the listing agent and buyer’s agent for the same transaction (what’s called dual agency). However, it does happen, and we cover that below, as well as the various types of brokers.
Here are brief descriptions of each type of real estate agent:
- Listing agent: The listing agent represents the seller. Their responsibilities include listing the property on the MLS, marketing the property and negotiating offers with potential buyers.
- Buyer’s agent: The buyer’s agent represents the buyer. They assist buyers throughout the home search, negotiate the purchase price and guide them through the closing process.
- Dual or transactional agent: As mentioned above, these situations are rare, but a dual or transactional agent represents both the buyer and the seller in the same transaction. This can create conflicts of interest, and real estate agents generally shy away from this.
- Referral agent: A referral agent is a real estate agent who refers clients to other agents in exchange for a referral fee. This is a common practice in the real estate industry, especially for agents who specialize in certain types of properties or markets.
- Commercial real estate agent: Commercial real estate agents specialize in transactions involving commercial properties, such as office buildings, retail stores, and industrial warehouses.
How to become a real estate agent
The path to becoming a real estate agent varies by state, so your natural first step is to research your state’s requirements. Factors like minimum age, education, and background checks differ by state. Generally, you need to be a U.S. citizen or legal resident and be 18 years of age or older. No matter where you’re looking to work, to become a real estate agent, you must complete a prelicensing course from an accredited real estate licensing school prior to sitting (and passing!) your state’s real estate license exam.
Enroll in and complete a prelicensing course approved by your state’s real estate commission. This course covers real estate law, contracts, finance and ethics. The required number of hours varies by state. Find our state-specific guides here to learn how many hours of education you need to complete to become licensed in your state.
We highly recommend The CE Shop. With training courses for all 50 states and easily accessible online courses, The CE Shop is a value-packed resource for agents nationwide. To learn more and find a list of other helpful accredited real estate schools, check out the links, below.
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The next official step is to take the exam, but don’t forget to complete some practice exams first! After you pass your state licensing exam, real estate agent hopefuls submit an application for a license to their state’s real estate regulatory organization. This application will require several documents and a fee, which again, varies by state. Once your application is approved, the state then mails the real estate license to you.
Now, it’s time to join a brokerage. Depending on the brokerage, agents may pay anywhere from $25-$500 per month to be a part of the brokerage. With that in mind, it’s a good practice to interview multiple brokerages before deciding where to land.
Top real estate broker Ashley Harwood included some great questions to ask potential brokerages in her article about working part-time as an agent here. After agents have partnered with a brokerage, it’s time to get to work. But keep in mind that licenses will need to be renewed. For license renewal courses and continuing education, read Best real estate continuing education schools for quick and easy license renewal.
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What is a real estate broker?
Unlike real estate agents, real estate brokers are licensed to work independently and run their own real estate businesses. With this additional licensing, they can employ agents to work for them and receive a portion of the commissions that those agents earn.
Apart from that, their job function is almost identical. They can help people buy and sell properties, and guide clients through the real estate process. If you’ve ever been on the consumer side of a real estate transaction, you may have worked with a broker instead of an agent and never known it.
PRO TIP
In some states, such as North Carolina and Washington, the first level of real estate licensing is called “broker.” These states are called “broker-only” states, meaning the entry-level license is a broker license. The next level of licensing is usually managing broker.
What does a real estate broker do?
In addition to all of the typical tasks of an agent, real estate brokers will often supervise other agents and they will often oversee their own firm or brokerage. Like agents, there are multiple types of brokers, and their responsibilities will vary based on their job titles.
For example, a designated broker is someone who owns a real estate firm and oversees business activities, such as hiring and managing other brokers, agents and office staff.
We’ll dive into the types of brokers and their responsibilities below, but the main takeaway is that brokers can perform all of the functions of a real estate agent with the added element of managing or employing other agents.
Why become a real estate broker?
The answer to this question depends on your motivations, but for many, there are two main reasons: Financial opportunities and the entrepreneurial aspect.
Brokers receive a cut of the commissions their agents bring in, in addition to a greater portion — if not the entirety — of the commissions from their own transactions. There are several ways that brokers can structure commissions with agents.
Straight commission splits are the most typical, and as the name implies, involve the agent splitting a portion of the commission with their broker. These splits are entirely up to the broker and could be anything from 90/10 to 60/40 and so on. Brokers may take into account the seniority of the agent and the hands-on help required when structuring the split. Top-producing agents who join a brokerage often have the advantage here, and will often get a 90/10 split.
Apart from the financial aspect, agents may opt to become brokers out of a desire to be their own boss and mentor others. For those with an entrepreneurial drive, owning a firm may seem enticing. As with any business, though, the more you oversee, the more you’re responsible for. Brokers are often legally liable for the actions of agents working under them.
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Types of real estate brokers
Like real estate agents, brokers can specialize in different areas. We’ve outlined the main types below. Keep in mind that licensing for these roles may vary by state.
- Designated broker: The highest level of broker, a designated broker, is responsible for the actions of all licensed agents working under them. They oversee all real estate activities and ensure compliance with state laws and regulations. They can still interact with individual clients but often focus on managing the overall business.
- Managing broker: Think of this role as a mid-level manager. A managing broker reports directly to the designated broker and manages various aspects of the real estate firm, such as working with clients, training new agents and managing work schedules.
- Associate broker: An associate broker works under the supervision of a designated or managing broker. They can perform all the duties of a real estate agent, but they may also have additional supervisory responsibilities within the brokerage.
- Broker-in-charge or Principal broker: These roles most closely align with designated brokers. The two terms are often used interchangeably and refer to the licensed broker responsible for the overall operation of a real estate brokerage. You’ll more commonly see the title “broker-in-charge” in broker-only states.
How to become a real estate broker
The first step is to become and work as a real estate agent. As with obtaining a real estate license, the requirements for brokers vary by state. To help build skillsets and heighten their reputation, broker hopefuls can earn certifications in addition to the required real estate license.
After gaining experience as a real estate agent, it’s time to take the state-approved real estate broker course. This course is more detailed than the real estate agent course, particularly on topics of contracts, ethics, insurance and taxes. Upon completion of the course and passing the exam, real estate agents are ready to be licensed as brokers.
Much like an agent, brokers must actively continue their education and renew their licenses to stay current. For a list of the best real estate schools to complete your broker licensing course, check out our article here.
We highly recommend The CE Shop for the convenience and speed of their broker licensing courses. The CE Shop offers real estate broker licensing courses in all 50 states, plus Washington DC, and boasts excellent value and course content, plus the convenience of online studies to level up your career.
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The full picture: Real estate broker vs. agent
Going back to the original question, “What is the difference between real estate agents vs. brokers?” The simple answer is that brokers have the ability to do everything a real estate agent does while also managing or employing agents to work under them. Put simply, think of real estate agents as individual contributors and brokers as managers/owners.
Both roles have pros and cons. For brokers, the obvious pro is increased financial gain from additional streams of commission. However, with that comes the increased risk, as the broker assumes liability for any legal issues that may arise with agents working under them. The inverse is true for agents. Real estate agents get the benefit of guidance and mentorship under a brokerage, but it comes at the cost of a portion of their commission.
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FAQs
What is the income difference between a broker vs. agent?
There’s no simple answer to this, as neither position is typically salaried, and commission splits vary.
According to NAR, the average annual income for a real estate agent in the United States is $46,014 (as of January 2024), but the range typically falls between $44,951 and $58,528.
Brokers’ income varies depending on whether they still sell. According to NAR, the median income for a selling broker is $105,900, and for a broker who does not engage in sales, it is $91,900.
How long does it take to become an agent vs. a broker?
Many real estate training sites estimate about a four to six month average on the road to becoming a real estate agent. However, with a structured training course and ample time dedication, agent-hopefuls could cut this time down to just a few weeks.
For those who are already licensed agents, it can take up to three years to become a broker. Most states require that brokers have two years of experience as a practicing real estate agent. Add this to the time it takes to complete training hours and pass the exam.
Can real estate agents work independently?
The short answer is no. Real estate agents must partner with a brokerage and work under a licensed real estate broker.
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