A relative of mine recently sat their real estate broker exam. It wasn’t until she was telling me about her studies that I realized that real estate agents, realtors, and real estate brokers have different qualifications, experience and legal authority to oversee property sales and purchases. Before you hire someone to guide you through your property buying adventure you should be clear about who’s who and what they can do for you.
What is a real estate broker? The title “Real Estate Broker” is the highest professional designation for a person working in the real estate industry. A broker has extensive further education and experience beyond that of a real estate agent, with an emphasis on law and ethics. They must also pass a stringent state exam before being allowed to operate as a broker.
A real estate broker can work alone or as part of a team of property professionals and although the details vary from state to state, there are elements of the sale and purchase of properties on which only a qualified, licensed broker can sign off.
The Role Of The Real Estate Broker
A Real Estate Broker assists their clients in buying, selling, and renting properties. Some brokers may specialize in domestic or business property while others may focus on the rental side of the market.
What sets a broker apart from other roles in the process though is that they are the ones that must review the legal documentation of a sale. A real estate agent can prepare things but they do not have the authority to rubber stamp things. Only a broker can review and approve the paperwork. For this reason, real estate brokers are permitted to operate as individuals if they so wish, but real estate agents must work under the oversight of a licensed broker.
Types Of Real Estate Broker
When you are looking for a real estate professional to represent your interests you will come across plenty of different job titles, even within the role of a broker. These are the most commonly seen:
- Principal Broker: Each real estate office must have a principal broker, a person who may also sometimes be referred to as a designated broker. The principal is ultimately responsible for the work of every real estate agent at the company. They must ensure the agents are adhering to all of the state and federal real estate legislation and review all real estate contracts.
If there is a dispute during the purchasing process, the problem will usually be escalated from the real estate agents to the principals of the businesses involved.
- Managing Broker: The managing broker of a real estate office will be in charge of hiring, training, and managing the real estate agents and the administrative and support staff of the company. They will ensure all of the staff are correctly licensed and that they maintain their licenses through ongoing professional training.
In addition, the managing broker will oversee any other elements of the day-to-day running of the office. In smaller firms, the managing broker may also be the principal broker.
- Associate Broker: Depending on the office you may come across an associate broker, an affiliate broker, broker associate, or a broker-salesperson. These are basically all the same role, the name just changes from office to office.
These brokers are usually fairly recently qualified and, although they have the qualifications and legal authorities of senior brokers, they do not supervise other brokers or real estate agents.
What Brokers Do For Their Clients
While some of these duties may be delegated to real estate agents or administrative staff in the firm, real estate brokers are responsible for everything that goes on in their brokerage. This means that if any of the agents make a significant mistake, not just the agent but the broker may incur financial or legal penalties.
Brokers carry out or supervise the following services for sellers:
- Listing properties on the Multiple Listings Service (MLS) and sharing the listing with other brokerages and agents.
- Advising the seller in the preparation, staging, and marketing of their property.
- Scheduling, supervising, and carrying out viewings
- Submitting all offers to the seller and assisting with negotiations, contract preparations, and the details of the closing of the purchase.
For sellers, brokers will:
- Aid buyers in identifying and locating appropriate properties which meet the buyer’s criteria.
- Schedule and accompany buyers on viewings.
- Offer advice on how particular homes, that may not initially look suitable, could meet the buyer’s needs.
- Help structure the buyers offer, purchase agreement, and any subsequent negotiations.
- Coordinate additional others in the process such as home inspectors, repair technicians etc.
Real Estate Broker Qualifications
The details of the qualifications to become a real estate broker vary somewhat from state to state but here are the most common criteria a broker must meet in order to become licensed.
In the majority of states, someone who plans to become a real estate broker will have to start out as a real estate agent.
To qualify, potential real estate agents must first complete a pre-licensing training course offered by an institution that has been approved by the state. These courses are generally between 90 and 120 hours in total, depending on where in the US you are looking to become licensed.
The courses cover areas such as ethical practices in real estate, real estate law and potential legal issues, financing for home sales and purchases, how to draft and review offers and contracts, as well as how to manage their own taxes and insurance.
Following this training, the potential real estate agent will sit an exam and those that pass can become licensed. To do this a student must find a broker willing to sponsor them and help complete the paperwork for the state licensing board.
Once the correct licensing paperwork is in place the new real estate agent can go and work for a broker. Real estate agents must take ongoing professional training in order to maintain their license. This helps to ensure they stay abreast of local, statewide, and federal changes to legislation and guidelines.
After an average of two years, full-time experience, a real estate agent can begin to pursue additional professional training in order to become a broker. Some states have a longer period, while one or two only require a full year.
Once they have completed the mandatory minimum work experience in their state a real estate agent can take a real estate broker training course. These courses cover some of the same areas as the agent level subjects, but in more detail.
Potential brokers also learn about the legislative framework for running a real estate brokerage, property development, and construction, investing in real estate, the intricacies of property management and business law.
Upon the successful completion of the real estate brokers training program, a potential broker can take the state licensing exam. Those that pass are qualified to work as independent brokers, junior brokers in a larger company, and principal brokers, depending on the opportunities available in their area.
One of the greatly underappreciated skills of a good real estate broker is their ability to work well with people in what can be extremely stressful circumstances. Tact, diplomacy, flexibility, and patience are critical if you want to be a real estate broker. They are also important points to look for when choosing a broker to work with you.
The Difference Between A Realtor And A Real Estate Broker
It’s very common to use the title realtor interchangeably with the term real estate agent. However, this is incorrect.
In order to use the term realtor, a person has to be a member of the National Association of REALTORS®. The term REALTOR® has been trademarked. Only members of the NAR can use the term and symbol on their professional and marketing materials.
Those real estate professionals wishing to become a member of the National Association of REALTORS® have to complete an application process. They must take NAR ethics and professional standards course. Then they must go through local chapter orientation and ongoing training updates to maintain membership. In addition, the principal of a firm must be a member of the NAR before any of the other staff can apply to join.
Both real estate agents and real estate brokers can become REALTORS®. If you see this trademark you will know the professional concerned has taken ethics training over and above that of a real estate agent. However, they do not necessarily have the training and experience of a broker.
So, a broker can also be a REALTOR® but a REALTOR® is not always a broker.
The Difference Between A Real Estate Agent And A Broker
You can think of a real estate broker as a more qualified, senior real estate agent. Both can carry out all of the basic activities of the property transaction process, such as viewings, working with customers to buy or sell, and negotiating offers.
However, a real estate agent can only practice under the supervision of a real estate broker, they cannot work independently. A broker is a person who is ultimately responsible for all of the legal and ethical intricacies of the buying and selling a property.
Which Real Estate Professional Should I Hire?
When it comes to choosing a professional to help you buy or sell a property, you need to weigh up the pros and cons. There are both pros and cons of hiring a real estate agent or a real estate broker. Having said this, technically speaking your contract is likely to be with the company and not an individual. Therefore if you agree to work with one person and feel you have made a mistake, there is the possibility of working with somebody else within the same firm.
In larger real estate companies the principal broker is unlikely to work directly with clients. they usually, only becoming involved if there is a significant issue which is escalated to the principal to deal with. With smaller firms, you may find that the principal broker is also the managing broker. In this case, they may sometimes work with their clients.
Be sure to ask the broker you will be working with, plenty of questions. This will ensure if you do choose to work with a broker, that you find the right broker for you.
Advantages Of Working With A Real Estate Broker
The primary advantage of working with a real estate broker is that they are likely to have more experience than the real estate agents they supervise. This can be especially important if you are involved in a more complicated real estate transaction. For a purchase such as a short sale or a foreclosure these professionals are typically much more knowledgeable about the intricacies of real estate law.
When working directly with a real estate broker you do not have the additional layer of personnel to go through. This can make the process speedier and less stressful. For example, what if you are working with a real estate agent and there are issues with the negotiations or contracts? You may have to ask the agent to convey the problems to the broker. Then you wait for the broker to deal with the issue. Then you have to wait for them to pass the solution back down to the agent.
Disadvantages Of Working With A Real Estate Broker
Unless you are working for a lone operator, who does not supervise a team or firm, your broker may have extra responsibilities. They may manage the firm, and supervise a team of real estate agents. They may also oversee multiple sales and purchases all at one time.
Some brokers may only work 9-5 Monday to Friday because that is when they are in demand in the office. This can be restricting if you have work and family commitments that prevent you from looking at houses during these times.
Those brokers who are predominately office-bound can also fall a little out of touch with their local housing market. They have limited time out and about, seeing what is available and talking to community members. A broker with a focus on administration may not be the best person to help you find your dream home.
Finally, there is the question of commissions. The commission on a real estate transaction is split between the buyers and the seller’s teams. Real estate agents may be more flexible with their commission requirements than a broker. If it’s important for you to negotiate a low commission then a broker is unlikely to be your best option.
How Do I Find A Good Real Estate Broker?
There is nothing like a personal recommendation when looking for someone to guide you through your real estate journey. As soon as you begin to consider buying or selling a home, begin to ask around. Talk to friends and neighbors about their experiences. This will help narrow down who you should or should not work with.
Sometimes you are buying in a location further away and do not know of anyone to give a personal recommendation. On other occasions, your local network is unable to help. In this case, begin by looking at the website of your local real estate association.
Then you can begin interviewing potential brokers.
You will want to ask them questions about their experience in the local market. You also need to ask what their up and coming schedule is like. Many people overlook things like asking if their broker has a vacation planned in the next couple of months. This is important if there’s potential for your broker to disappear abroad just when you’re in the middle of negotiations.
How Can I Be Sure My Broker Is Qualified And Licenced?
Each state keeps a register of all of the real estate brokers in their jurisdiction. Each one must complete the required training, pass the state examination and complete all of the requirements for a license.
A broker can have their license revoked for serious misconduct, either by themselves or by their firm. This can also happen if they do not maintain their license according to the local law. So. Do not assume that just because someone was qualified and licensed five years ago, that they are currently qualified.
Before signing on the dotted line, check the current register.
About The Author
Geoff Southworth is the creator of RealEstateInfoGuide.com, the site that helps new homeowners, investors, and homeowners-to-be successfully navigate the complex world of property ownership. Geoff is a real estate investor of 8 years has had experience as a manager of a debt-free, private real estate equity fund, as well as a Registered Nurse in Emergency Trauma and Cardiac Cath Lab Care. As a result, he has developed a unique “people first, business second” approach to real estate.
This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policy.