Anyone giving professional real estate advice must have a real estate license. However, a “real estate agent” has a different level of responsibility from “real estate broker.” They are two distinct roles. While a broker can act as an agent, an agent cannot be a broker. Understanding the difference is useful when deciding your career path in the real estate industry and for educating clients.
Let’s break down the distinctions between a real estate agent and a real estate broker.
Becoming a real estate agent requires taking and passing the state’s required education and licensing exam. Specific requirements vary by state; for example, Alabama requires completing a 60-hour pre-license course while Texas requires 180 classroom hours.
Real estate brokers start by obtaining their real estate agent’s license. Next steps vary by state, but typically require more coursework and a broker’s licensing exam. Agents and brokers pay annual licensing fees and renew them according to the state’s schedule. Some states require continuing education hours as part of the license renewal.
Education requirements for real estate agents and real estate brokers vary. The Bureau of Labor Statistics says applicants typically complete 30 to 90 hours of classroom instruction from a college, university, or technical school. Some states require brokers to have a four-year college degree or a degree in real estate. Again, all these requirements vary by state, so make sure you learn your state’s real estate license requirements.
Real estate brokers usually have more experience since they started as real estate agents. Some states require agents to work in real estate a certain number of years before they can qualify as a broker.
Work responsibilities are the biggest distinction between real estate agents and licensed brokers.
Agents negotiate between sellers and buyers, work with another agent once an offer is accepted, and educate their clients on the process. They’ll make sure clients are aware of the requirements to close a real estate transaction. Real estate brokers hire real estate agents to take on executive sales functions. By law, agents cannot work independently.
Brokers can work independently, for another broker, or employ real estate agents to work for them. Brokers can start real estate firms. Property management companies are required to have a licensed broker working for them, which is a reason why some pursue a broker’s license. They bear legal responsibility for the transaction and work on more technical parts of a deal. Their work can include property management, managing brokerage office and staff, managing compliance, establishing escrow accounts, recruiting and training real estate agents, and reviewing contracts.
Real estate agents and brokers work on commission, which is typically split between the buyer and seller brokers. The broker earns a percent, and the real estate agent will get a percentage of that amount.
When real estate brokers represent themselves in a transaction, they don’t split their commission with a real estate agent. Even when they do, it’s about the total number of transactions. For example, a broker with three sales agents working to execute real estate transactions essentially closes more transactions and makes more money even though the agent earns part of the commission. For this reason, real estate brokers typically earn more than real estate agents.
In the 2017 NAR member profile, real estate agents averaged $ 42,500 per year, while broker-owners made between $ 54,670 and $ 90,910.
Choosing a Career Path
Depending on your career goals, you may see becoming a licensed real estate broker as a natural progression. Others prefer to remain a real estate agent and skip the additional legal responsibilities of a licensed broker. As both require an investment in education and licensing fees, it’s helpful to research your state’s requirements for each role before making the decision.