what is a real estate broker

What Is A Real Estate Broker? Definition & FAQs

real estate terms Aug 02, 2023

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 our comprehensive 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:


What Is A Real Estate Broker?

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 possess 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 broker definition

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.

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What Does A Real Estate Broker Do?

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:

  • Developing a marketing plan for real estate brokerage
  • Setting goals for brokerages
  • Record keeping and risk management
  • Mentoring new agents
  • Performing various real estate transactions
  • Employing new agents
  • Offering training to agents on all points of their career
  • Hiring administrative personnel
  • Leasing brokerage office space
  • Keeping a positive culture among agents
  • Property management

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.

Read Also:  10 Real Estate Entry-Level Jobs For Beginners With No Experience 


What Is A Real Estate Brokerage Firm?

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. 

Read Also: 72SOLD Review (2024): Should You Use This Real Estate Broker?


Types Of Real Estate Brokers

  • Buyer’s Agent: 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 helping clients find their ideal homes, recommending professionals such as attorneys to home buyers, submitting offers and helping with paperwork, and negotiating with home sellers.
  • Seller’s Agent: 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 helping sellers prepare to sell their home, showing homes to prospective buyers, negotiating with home buyers, listing homes in the Multiple Listing Service (MLS).
  • Transaction Broker: 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 consulting with sellers on listing strategy, preparing and executing offer paperwork, managing escrow, contractual deadlines, and closing, and ensuring disclosures are signed.
  • Associate Broker: 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. 
  • Dual Agent: 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. 
  • Principal Broker: This is the fearless broker who risks putting his name on the billboard and carries the burden of managing a real estate business. They are the person who is legally permitted to sign agency contracts with buyers and sellers and supervises all the agents working under their 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.
  • Managing Broker: 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. 


What Is A Commercial Real Estate 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, and sellers, or even working as dual agents representing both sides.

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 commercial real estate brokers 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!

Read Also:  Real Estate Jobs Without License Requirements (2023 Guide) 


What Is The Difference Between A Real Estate Salesperson & A Real Estate Broker?

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:

  • Business Responsibilities: 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. 
  • Licensing Requirements: 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.
  • Training: 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.
  • Agents Work Under Brokers: 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.

Read Also: Realtor vs. Real Estate Agent - Salaries, Differences, & Similarities


What Is A Real Estate Broker License?

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:


How Much Is A Real Estate Broker License?

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:

  • Education: Getting through broker’s courses will cost around $300 - $1,000.
  • Exam: The cost of the course doesn’t cover examinations. You will pay $85-$200 per test based on your location.
  • Background Check: You will part with $50-$100 for a background check that is used to prove your eligibility.
  • National Association of REALTORS® Membership Dues: to become a member of NAR, you need to pay a fee of $155 annually.
  • State and Local Association of REALTORS® Membership Dues: Check your state and local organization for fees. These are optional, but most brokers opt-in for these memberships. For example, San Diego Association of Realtors (SDAR) charges $110 annually for membership dues and California Association of Realtors (CAR) membership costs $284 annually.

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.


How To Become A Real Estate Broker In 7 Steps

Embarking on a career as a real estate broker can be both rewarding and lucrative. This profession opens up a multitude of opportunities and allows you to guide clients through significant property transactions. If you're interested in becoming a real estate broker, it's important to understand the steps involved.

how to become a real estate broker

Here is a comprehensive, step-by-step guide to help you navigate the process and set you on the path to success as a real estate broker:

  1. Meet The Minimum License Requirements
  2. Gain Real Estate Experience
  3. Complete 8 College-Level Broker Courses
  4. Get Fingerprinted
  5. Submit The License Application Fees
  6. Schedule Your Exam
  7. Pass The Real Estate Broker Exam


1. Meet The Minimum License Requirements

The three basic requirements that you must meet to attain a real estate broker license are:

  1. You must be at least 18 years of age

  2. You must be a resident of the state you want to start your business in, although you can still apply if you are a non-resident after submitting a Consent Service of Process Form.

  3. You must display high levels of honesty. Therefore, you shouldn't have any criminal record and should have an admirable character. You might be denied an application if you fail to disclose information.


2. Gain Real Estate Experience

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:

  • Get a 4-year degree from an accredited college or university with a minor or major in real estate.
  • Work as a part-time real estate salesperson for four years
  • Have experience in a real estate-related field that is equal to two years experience as an agent. This includes working as a real estate attorney, property manager, builder, real estate developer, loan or escrow officer for real property, or a real estate agent in another state or country.

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.


3. Complete 8 College-Level Broker Courses

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:

  • Real Estate Appraisal
  • Real Estate Economics and Accounting
  • Three Elective Courses
  • Real Estate Practice
  • Real Estate Finance
  • Legal Aspects of Real Estate

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.


4. Get Fingerprinted

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.


5. Submit The License Application Fees

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.

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.


6. Schedule Your Exam

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 authorization prompting you to select a test time.


7. Pass The Real Estate Broker Exam

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:

  • Valuation and Market Analysis
  • Contracts
  • Transfer of Property
  • Financing
  • The Practice of Real Estate and Mandated Disclosures
  • Property Ownership and Land Use Controls and Regulations
  • Laws of Agency

Unlike in the past, 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.


Real estate brokers get paid in a number of scenarios. These are the primary ways how real estate brokers get paid:

  1. Sales Commission: How much a realtor makes depends highly on the time invested in growing their business and the average sales price in the local market. When a broker sells property, the seller is responsible for paying a commission, which is normally 5% to 6% of the sales price. Then, the broker splits the commission with the buyer agent (mostly on a 50/50 basis).
  2. Agents’ Commissions: For real estate agents to do business, they must work under a broker. When a broker employs an agent, they agree on a percentage or a flat fee that comes out of the agent's earnings at every closing. This is known as a split.
  3. Real Estate Broker Salary: Even though it’s uncommon, there are real estate brokers who are employed by brokerage firms and earn a salary every month.
  4. Desk Fees: There are brokers who charge agents a monthly fee known as ‘desk fees’ for being a member of their team. This money is paid whether the agents close real estate transactions or not.
  5. Buyer Transactions: A real estate broker may also work as a licensed real estate agent. Therefore, they are free to pursue buyer and seller clients as the other agents do. This is one way brokers make a lot of money because they don't split earnings with anyone.
  6. Affiliated Businesses: Real estate brokers can make money by buying a stake in other sectors related to real estate. For instance, there are brokers who partly own title companies. Once these companies close transactions, the broker certainly gets a cut.
  7. Leasing Commissions: Real Estate brokers can receive a commission when successfully leasing out residential or commercial properties. This is negotiated with the property owner and is usually a flat fee or percentage of the total gross rent. 
  8. Referral fees: A real estate broker gets paid a referral commission once the transaction is closed if he refers clients to other brokers or agents as referrals. The broker can refer clients to real estate brokers in other states and still earn a commission even if not licensed in that state. A real estate broker gets paid anywhere from 15 to 50% of the other broker's commission.

Read Also:  11 Highest Paying Real Estate Jobs In 2023


What Is A Real Estate Broker Salary?

According to ZipRecruiter, the average earnings of a real estate broker in the United States is $91,873 annually as of July 2023 with a top $132,000 in the 90th percentile. 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. 

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.


Do Brokers Make More Than Real Estate Agents?

According to Indeed, the average salary for a real estate salesperson or real estate agent is $96,665 per year. On average, a real estate broker makes $76,585 per year plus an additional $43,500 in commission.

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. 

Another reason why brokers make more money than agents is that 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.

Read Also: How To Make Money In Real Estate - The Ultimate Guide


Can A Real Estate Broker Work From Home?

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 homes, in their client's 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.


Do I Need A Real Estate Broker To Buy A House?

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:

  • Local Expertise: Even if you do thorough research online, the amount of information you get will not match the knowledge a real estate has on the happenings in the real estate industry. Since they are intensely plugged into the local market, they keep up with the ever-changing trends, which can come in handy when setting making an offer or setting a listing price.
  • Negotiating Skills: A professional real estate broker will use his negotiation skills to ensure you get the best deals. Also, he will give you expert opinions and advice, which will be helpful when buying or selling a home.
  • Marketing Exposure: Real estate brokers are highly connected and have access to a full suite of marketing resources. Therefore, they will use all the channels available to ensure you get a competitive edge.
  • Guidance and Support: A broker will guide you every step of the way and ensure you stay focused on the goals you want to achieve. He will partner with other providers to make sure your interests are protected.

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!


Which Real Estate Brokerage Should I Join?

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 its 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:


Final Thoughts On What Is A Real Estate Broker

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.

While being a broker is a rewarding challenge, it can be a difficult and exhausting start for beginners to get into the real estate industry. That's why we at Real Estate Skills want to help beginners in getting their first taste of a rewarding real estate deal! We invite you to join our FREE training course to get into the real estate industry right away. Sign up today!

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