Brokerage is at the heart of the real estate profession and real estate brokers have their fingers on the pulse of local markets. Despite their omnipresence, the term 'Real Estate Broker' is often misused and misunderstood. Brokers are interchangeably, and sometimes mistakenly, called: Real Estate Agents, Realtors, Listing Agents, Selling Agents, Agent Broker, and Buyers Broker.
In What Is A Real Estate Broker? The Ultimate Guide, we lay out all the essential facts about real estate brokers to help you become a wiser real estate entrepreneur.
So, let's dive right in! Feel free to use this menu to jump to your topic of choice:
A real estate broker is a state-licensed real estate professional who may transact with buyers, sellers, and renters of various types of real property. Real estate brokers are highly educated and posses in-depth knowledge of the industry.
Brokers may work independently, or opt to be leaders and employ real estate salespersons to work under them.
Real estate brokers are highly regulated and are required to pass a licensing exam before they can get brokers licenses to run their businesses legally.
There are educational and experience requirements that one is required to meet before taking a real estate broker licensing exam. Nonetheless, these requirements vary from state to state.
For instance, you may qualify for this exam in California as long as you have a four-year college degree, two years of experience as a real estate agent, and have finished eight college-level real estate courses.
Brokers generally have higher standards of knowledge than other types of real estate professionals; hence they are subjected to long and challenging licensing tests.
Real estate brokers work for themselves or manage teams of real estate agents whose work is to buy, sell, and rent property. A good real estate broker should be able to execute various real estate transactions and should have the right skills to coach other real estate professionals to excel in different aspects of the industry.
There are a host of other jobs associated with real estate brokers. They include:
The real estate broker works to negotiate and plan real estate transactions. There are some additional duties that they undertake, including writing contracts and overseeing various transactions for purchasing and sales activities on commercial properties, homes, and land.
Basically, a real estate broker is an agent, a leader, and a coach at the same time.
Real estate brokers and real estate salespersons all help people buy and sell property. Nonetheless, their roles differ in the operations of the real estate business.
Watch this short, educational animation below titled "What's The Difference Between A Real Estate Agent and A Real Estate Broker?"
Below are some differences between real estate brokers and real estate salespersons:
One of the most significant differences between real estate brokers and real estate salespersons is how they are involved in the business. Brokers either manage large real estate companies, or they are business owners. They control all aspects of the business, including policies, budget, and marketing.
On the other hand, real estate salespersons are independent workers. Unlike brokers, agents don't assume any level of supervision over others. They are simply in business for themselves. Agents are focused on front-line sales activities like obtaining new listings, holding open houses, and marketing their services.
Both salespersons and brokers are required to acquire licenses to operate. To get one, brokers need to complete an extra level of coursework, possess a greater depth of experience, and pass a more difficult exam than that done by real estate salespersons.
Brokers receive training that salespersons don't. This training focuses on business management, business law, and regulatory compliance. The number of hours a broker is expected to undergo training varies from state to state.
For instance, one needs 360 hours of training to become a real estate broker in California and work as a full-time real estate agent for two years before undertaking the broker license exam.
Real estate salespersons and brokers are bound by the regulations in their state, and it's the duty of a broker to ensure that agents comply with the laws. However, what you should know is that even though agents work under brokers, they do so as independent contractors, not employees. They are, therefore, responsible for their own income taxes.
The law requires both brokers and salespersons to attend periodic continuing education programs to stay abreast of changes in regulation.
A real estate broker license is an official permit awarded to an individual that allows them to legally practice real estate in the capacity of a real estate broker. It is a tier above a real estate agent license, as it requires more thorough education, experience, and responsibility.
What a real estate broker license allows is greater freedom to transact with buyers, sellers, and renters of real property, as well as the ability to operate independently from another broker.
Each state has an official authority that grants qualified individuals this permit to practice real estate within their jurisdiction.
Such state authorities include:
“The only place success comes before work is in the dictionary.” -Vince Lombardi, NFL Coach
Below is a step-by-step guide on how to become a real estate broker:
There are three basic requirements that you must meet to attain a real estate broker license. They are:
Before becoming a real estate broker, you must gain some real estate experience. Generally, you need to have two years of full-time experience as a real estate agent prior to becoming a real estate broker.
Other ways to gain experience are:
When applying for the broker exam, you need to document this information for consideration. Also, you need to submit an Equivalent Experience Verification, which comprehensively explains the type of work you have been doing. This form must be signed by two referees.
If you are a full-time agent, you need to submit an Employment Verification form signed by the broker you work for.
You will need to complete eight college-level broker courses before applying for the broker exam. However, you don’t need to do this if you have been admitted to the California State Bar. Check with your state's Department of Real Estate for additional exemptions.
The courses include:
Broker courses can be undertaken in private real estate schools and accredited institutions of higher learning. Depending on where you take them, these courses can be 45 hours, three-semester units, or four-quarter units in length.
As soon as you complete your exam, ensure you get course completion certificates and official copies of your transcripts. These are crucial documents that you are academically capable of undertaking all the responsibilities of a real estate broker.
If you are getting a license for the first time, the law requires that you get fingerprinted in a live service scan location. In case you are a real estate agent, you can forego this process because you have undergone it before.
The fingerprinting process helps authorities do a thorough background check on applicants before they can be approved. You will need to carry the Live Scan Service Request form along so that the provider can fill out a portion.
There is a fingerprint card processing fee involved, which varies from state to state. Also, based on your state's requirements, there could be a service fee needed.
Now that you have gone through the last four steps, it’s now time to apply for your license exam. Fill out the Combined Broker Examination and License application, attach the required documents, pay the exam and license fees, and mail your application.
Real Estate Skills Tip: Instead of submitting your broker exam application on its own, it’s more convenient to submit both the license and the Combined Broker Examination applications. However, note that you will pay the license fee upfront, which cannot be reimbursed if you don’t pass the exam within two years.
In your application, you will be required to choose whether to have the Department of Real Estate (DRE) schedule your exam, or you want a self-schedule. In case you chose the former, you will be given an Examination Schedule Notice, which contains the date, time, and location.
If you choose the latter, you will be given an authorization prompting you to select a test time.
From the time of application, you will have 24 months (2 years) to pass the real estate broker exam. For verification purposes, carry a photo Identity (ID) Card with you whenever you are taking an exam.
In the exam, you will have five hours split into two sessions to complete 200 multiple questions. The questions fall into seven distinct categories which are:
Unlike in the past, the real estate broker exams are taken digitally, which ensures that test takers get their results in real-time. If you don't get immediate results, you can use the eLicensing platform to access them within five days.
If you don’t pass the test the first time, you will receive a notification to reschedule the exam. You can take the test as many times as you need within the two years stipulated by law.
Once you pass this exam, focus on everything else as you wait for your license to be processed.
The cost of a real estate license varies dramatically from state to state. Below is a breakdown of the costs you will incur to get your real estate broker license:
You can talk to your local authorities so that you can determine the actual amount of money you will spend to get your real estate broker license.
A real estate brokerage firm is a company owned and operated by a licensed real estate broker who represents buyers and sellers of real estate. It is often owned and operated by a principal broker, who then hires other real estate brokers and agents to work under him.
The business entity a real estate brokerage firm operates under should also be licensed or affiliated with the principal broker's license.
Real estate brokers get paid in a number of scenarios. These are the primary ways how real estate brokers get paid:
The amount of money a real estate broker makes depends on the volume of work they do. There are those who make nothing, and there are those who make millions of bucks every year.
According to the U.S. Bureau of Labor Statistics, the average earnings of a real estate broker in the United States is $78,940 annually. In some states such as Illinois, the average earnings can be over $103,430 annually.
Statistics show that in 2018, real estate brokers and real estate agents earned a median income of $50,300.
In 2019, the top 10% of real estate brokers made a whopping $163,540.
The bottom 10% of brokers made an estimated $22,750.
The U.S. Bureau of Labor Statistics reports shows that real estate brokers earning the highest annual mean were based in District of Columbia at $148,730, New Hampshire at $132,600, and Nevada at $121,440.
Real estate brokers in North Carolina earned the lowest at $40,000.
While most of these figures are averages and means, the elite brokers who own large brokerages with many agents working under them can make those annual figures in one month!
Top real estate brokers make a lot more, while agents who sell a few properties in a year make less. Therefore, it can be confidently stated that the amount of effort a real estate broker puts into marketing, systems, and other aspects of her brokerage business determines the amount of money he or she makes.
According to a 2019 National Association of Realtors NAR member profile report, an average real estate broker's income is more than double what the agents under him make. Brokers typically make money from salaries, commissions, and a percentage of sales commissions that their team earns.
While base salaries are sometimes paid, most brokers and agents today operate on 100% commissions. This allows for less stability in exchange for higher earnings potential.
In 2018, the gross median income of real estate brokers and broker associates was $70,400, while that of real estate agents was $31,900. The variance can be attributed to the gap in experience, considering that most states require those who intend to become real estate brokers to have at least two years of experience and pass a difficult licensing exam.
You can see the 2018 median incomes of REALTORS®, including real estate brokers and agents in the following chart:
Another reason why brokers make more money than agents is because the former generally work for more hours than the latter. You'll find many real estate agents work part-time, while it’s uncommon to find a real estate broker who doesn’t treat real estate transactions as their full-time job. They, therefore, get more repeat and referral business than agents.
Finally, brokers usually keep a percentage of the sales commission that agents working under them earn. Therefore, a real estate broker with a large team of agents can make significantly more than a single agent working under them
With all that said, real estate agents and brokers can still earn more than the other depending on a number of factors including the number of sales, gross transaction (sales) volume, commission percentage earned, agent broker commission split, and average transaction size.
Yes, real estate brokers can work from home. In fact, there are many brokers who make a lot of money from the comfort of their own homes. However, this is largely a question of resources and preference since there are those who prefer to operate from an office.
Since most real estate brokers own their own businesses, they can work as much or as little as they want. They can choose the place to work in, and the flexibility of working from home is always at the top of their lists.
Besides touring and showing properties to clients, the majority of a broker's business can be conducted at their own home, in their clients' homes, and in public venues.
Those brokers who prefer working in brick and mortar locations are listing agents who need a place where they can have prolonged conversations with their prospects, and reassure them that they are the best in the real estate industry.
We cannot shun away the fact that perception is a vital variable in real estate, and businesses with offices are considered more legitimate. However, we the fact that the world is becoming more technology-driven, such that most people prefer to buy goods and services, including properties online.
Therefore, the value placed on brick and mortar locations is fading fast, and real estate brokers are now more than ever inclined to work from home.
Truthfully, you don’t need a real estate broker to buy a house. However, this professional is an indispensable partner who can bring a host of benefits to the table including:
Buying a house is exciting, but it can be stressful if you choose to go solo. Unless you know how to find and purchase houses on your own, allow a professional broker to do all the work, and you will doubtlessly find the home of your dreams in no time!
There are different types of real estate brokers. They include:
This is an agent who works in the best interest of the people who want to buy houses. They guide them through every step, from a home search to closing a transaction.
The duties of a buyer’s agent include:
This is an agent who works in the best interest of home sellers. Also called listing brokers, Some of the duties of a seller’s agent include:
This is a broker that provides transactional services to buyers and sellers of real estate. The main difference is that they act as a neutral third-party and do not owe any fiduciary responsibility to clients, as traditional agency requires.
Duties are mostly administrative and include:
An associate broker hangs his or her license under another broker. What differentiates associate brokers from agents is the fact that they have a broker’s license, but have decided to work under the management of another well-established broker. Also called affiliate brokers, this phenomenon is quite common in the real estate industry.
This is a real estate broker who represents both the seller and the buyer in the same transaction. This agent normally has a contract with both parties, which presents the highest revenue opportunity of all broker types.
The law stipulates that such a broker needs to disclose his role in the transactions or the parties can choose to withdraw the deal. Undisclosed dual agency is generally illegal and prohibited in all states.
This is the fearless broker who risks putting his name on the billboard and carries the burden of managing a real estate business.
He is the person who is legally permitted to sign agency contracts with buyers and sellers and supervises all the agents working under his brokerage firm.
This professional is licensed by members of the National Association of Realtors and is expected to follow a strict code of ethics in all undertakings.
A managing broker is a licensed broker whose responsibility is to manage the daily operations of an agency or office. This broker also hires and trains new agents, creates policies and manages teams. The principal broker may also be the managing broker.
A commercial real estate broker is a licensed professional who helps clients sell, buy, or lease properties to be used for commercial purposes, such as office buildings, hotels, retail shopping centers, and restaurants. Essentially, they act as mediators between buyers and sellers of commercial property.
There are commercial brokers who focus exclusively on the leasing of commercial property, working for landlords, business tenants, or both. Then there are commercial real estate brokers that focus on representing buyers, sellers, or even working as dual agents representing both sides.
The steps to become a commercial real estate broker are virtually the same as becoming a residential real estate broker - even though the properties are very different.
While a high-school diploma and college degree are recommended, they are not prerequisites to success as a commercial real estate broker. The trade can be learned, so finding a successful mentor is essential.
Many strive to become a commercial real estate broker because of the large commissions that can be earned in commercial real estate. Imagine earning a 2% commission on a large office building that sells for $20,000,000. That's a $400,000 commission in your pocket!
As a real estate broker, you have the option of creating your own brand, starting from scratch, and building an empire. However, if you prefer to join an established brokerage, there are countless real estate brokerages that you can join, each with its own reputation and brand identity.
Most regions have several top real estate brokerages that are doing most of the business. Whiles the big ones are worthy of exploring, you may prefer working with a smaller, boutique-style brokerage with a niche of their own.
It comes down to finding people you can see yourself working with and a brand that you can identify with.
Below are some of the best real estate brokerages you should consider joining:
We've covered in detail what is a real estate broker, as well as how to become one.
A real estate broker is a powerful and important participant in the real estate industry. This is a professional who is taken with high regard; thus, he should not only be authoritative in what he does, but should also be a strong leader, mentor, and ambitious goal setter.
Remember, being a real estate broker is not for everyone. It comes with great responsibility, hard work, attention to detail, persistence, and continued education, among other things.
Ensure you take your time and determine whether you want to make a commitment before you get a license. Becoming a real estate broker is a huge accomplishment and something that you should strive to achieve if you want to own and operate a lucrative real estate business.
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