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If you plan to buy or sell a home, you may be thinking about working with a real estate professional. There are several kinds of professionals in the field, each with different backgrounds and credentials.
Take brokers and agents, for example. They both work in real estate sales and often represent the same company, but they serve different functions. Knowing the difference between broker and agent can help you to choose the right person for the job.
Brokers and agents have a lot in common. Both earn licenses that let them facilitate real estate sales. Both can work with buyers, sellers, or a combination of the two. They may even work for the same companies.
Because brokers and agents have so much in common, it's easy to confuse them. Even the media tends to use the terms interchangeably. But there are key differences you should understand, especially if you'll be working closely with one or the other.
So, what is the difference between a broker and an agent?
When someone goes into real estate, they start off as an agent. They earn their real estate license and get a job at a real estate company. An agent's license doesn't allow them to work independently, so they can't work for themselves yet.
If an agent wants to be self-employed or run a business, they go on to earn a broker's license. Requirements vary by state, but usually include one to three years of experience in real estate sales. An aspiring broker also has to complete certain courses and pass an exam.
A licensed broker can still work with buyers and sellers, just as they did as agents. But they can also perform functions that agents can't, such as:
Most importantly, a broker can be their own boss — or someone else's.
In the U.S., a real estate company is a brokerage if it handles purchases and sales. Every brokerage must operate under the leadership of a licensed broker. The company's license is in that broker's name.
Many brokerage owners employ agents and other brokers. Many brokers go this route because it allows the company to close more sales and generate more commissions. A broker can also work independently as a solopreneur by owning their brokerage but not employing agents. Brokers in this role are called broker-owners.
These are the biggest differences between broker and agent. If you dig deeper into what each role entails, you start to see why these differences exist and what they mean for clients.
A real estate agent is a person licensed to buy, sell, and rent property. There's no national certification in real estate, so all credentialing happens at the state level.
Real estate agents have to be at least 18 or 19 years old, depending on the state. They don't need bachelor's degrees but may need a high school diploma or GED. Some states require agents to be high school graduates, and many training courses require a diploma or an equivalent to enroll.
Agents also need to complete a certain number of coursework hours — as few as 40 or as many as 300, depending on the state. Some brokerages sponsor classes or offer to reimburse agents who work for them after graduation.
Passing a state exam is the last step to licensure. The license is only valid in the state of issue, but some states offer reciprocity agreements. These grant licensure to agents already qualified in other states.
Once licensed, a real estate agent can work for buyers or sellers. Some are "dual agents," working on both the buyer's and seller's ends of the transaction. This can be a conflict of interest, so it's not always permitted.
A listing agent (sometimes called a sales agent or seller's agent):
A buyer's agent:
Some agents choose to focus on a particular property or client type. A first-time home buyer real estate agent works primarily with new buyers and knows how to make them more comfortable with the process. Other agents work mostly or exclusively with luxury properties, real estate investors, or property managers.
All agent types are responsible for facilitating property closings, preparing paperwork, and walking the client through logistics. In Zillow's 2018 Consumer Housing Trends Report, the most recent report to cover this topic, administrative tasks topped buyers' and sellers' lists of valuable agent services.
The only service more popular than paperwork was "finding interested buyers." Close to 90% of sellers valued this service.
To learn how to find the perfect real estate agent for your needs, visit our blog!
Who pays the real estate agent? Most real estate agents work on commission. Instead of a regular salary, they earn a percentage of the sale price — typically 5% to 6%. Most buyers' and sellers' agents split that amount evenly.
Sellers are usually responsible for paying both agents' fees. In some states, though, neither party pays agent fees out of pocket. Instead, the commission fee comes directly out of the home sale proceeds before the seller receives any money.
Either way, most agents don't keep the entire commission amount. Unless an agent has also qualified as a broker — which is further explained below — they're legally required to work for a brokerage. The brokerage receives a percentage of the agent's commission.
The split percentage depends on the brokerage and the agent's experience level. Less experienced agents usually receive a smaller share.
Some people think that because real estate agents do most of the hands-on work of showing homes, they must earn more than brokers. But that's not necessarily true. In most states, it's the other way around.
For example:
The difference mostly comes down to commission splits. A broker may receive a portion of the commissions from multiple employed agents, which adds up to more income. Brokers may also work directly with buyers and sellers, creating another possible income stream.
The title of broker doesn't command higher pay, but it adds the possibility.
A real estate broker is just an agent who's completed additional training and licensure. A real estate broker's license allows them to represent buyers and sellers without supervision. The broker may own or manage a firm and can hire licensed agents to work under them.
People occasionally refer to both brokers and agents as "salespeople." This term is generally more appropriate for agents and associate brokers, whose primary job is to facilitate sales. When working for sellers, they highlight a home's most in-demand features and locate buyers who want those features. When working for buyers, they find the right property and move the sale forward.
But most brokers are primarily managers, not salespeople. They spend most of their time overseeing agents and running the business aspects of the brokerage. Some choose to continue with active selling, but many don't — especially if they're the main person responsible for firm operations.
An agent's job title depends on whether they work with buyers or sellers. For brokers, it's about how much management responsibility they take on.
A designated broker, also called a principal broker, owns and operates a firm in their name. They're responsible for:
Designated brokers need high-level business management and selling skills. They also need detailed knowledge of their local market and all applicable laws.
Because their scope of responsibility is so broad, designated brokers may earn a salary instead of commission.
A managing broker works under a designated broker to oversee a firm's day-to-day activities. Their responsibilities are mostly at the middle management level and may include:
Many managing brokers also oversee legal compliance for their firms. Violations of real estate law can have serious financial implications for a firm, so the managing broker must stay up-to-date with any developments. If something changes, they ensure that all agents understand the change and how to apply it to their work.
In general, a managing broker's responsibilities are less high-level than a designated broker's. For example, a managing broker may support agents in reaching daily goals, but it's the designated broker's job to establish those goals firm-wide.
Unlike designated and managing brokers, broker associates don't have management responsibilities. They do the same work as a real estate agent — facilitating sales for buyers and sellers. The difference is that a broker associate doesn't require supervision.
A broker associate does the same work as a real estate agent but doesn't require supervision. Working without supervision lets them keep more of their commission — sometimes the entire commission, depending on how they work. Like agents, some broker associates pay commission shares to a brokerage. Others pay a flat fee to join brokerages or networks, allowing them to keep 100% of their commissions.
For example, if a sale closes with a final price of $500,000, a 5% commission would pay out $25,000 to be split between the buyer and seller. That's $12,500 for each agent, assuming an even split. The average agent/broker split is 50/50, which leaves just $6,250 for an agent. A flat-fee or independent broker associate would earn the full amount. Even a broker associate working on commission would have a better chance of earning a larger percentage.
When you search for an agent or broker, you'll find some who present themselves as REALTORS®. A REALTOR® isn't a third type of real estate salesperson — they're just a licensed professional who belongs to the National Association of REALTORS® (NAR), the industry's largest trade organization. The NAR has more than 1.4 million members who work in all aspects of real estate, from residential and commercial sales to property appraisals.
REALTORS® must agree to abide by the NAR's strict Code of Ethics and Standards of Practice. These detailed documents spell out a REALTOR®'s responsibilities to clients, which include:
Both brokers and agents can be REALTORS®, though not all of them are. Agents and brokers who aren't principals in their firm — or primary firm leaders, as defined by NAR — may only join if their firm principals are members.
When it comes to choosing a real estate agent, buyers and sellers have all kinds of preferences. Some prefer their agent to be highly specialized in a certain location or property type. Some want to find a buyer's agent or listing agent, while others appreciate agents who have worked on both sides of the table. One thing is for sure, buying or selling a house without an agent isn’t the best idea.
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Newzip agents can help you with everything from staging your home to finding a mortgage lender. And if there's something they can't do — like inspect your home or fix a leaky toilet — they'll find you someone who can.
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