Whether you are buying or selling a home, there are a lot of different terms that you are likely to run into for the parties involved in a real estate transaction. If you’re new to the lingo, these can be confusing: Realtors, real estate agents, real estate brokers, mortgage brokers — what’s the difference? Here, we define exactly what a real estate broker is and what differentiates it from other, similar-sounding titles.
What is a real estate broker?
Real estate brokers are licensed professionals who are similar to real estate agents in many ways, and have the same training. Both can assist in many of the aspects of buying and selling a home. But a broker has additional licensing and training, above and beyond what it takes to become an agent. In other words, a broker can do everything an agent can do, and then some.
Real estate brokers can work independently, while agents typically must work under a broker or a brokerage firm. An agent works with a broker to finalize a property transaction, but it’s the broker who does the work of making sure it is compliant with all laws — they literally “broker” the transaction. This includes making sure paperwork is filed correctly, money is transferred and records are completed and reported to the proper authorities. Brokerages often earn a share of their agents’ commission fees.
Becoming a broker
To become a licensed real estate broker, you must first become a licensed real estate agent. Often, an agent will get experience in the field for several years before pursuing the certification required to become a broker. Many states have a two-year requirement before applying for broker status is permitted.
Earning a broker’s license requires going through a training process that has been established by the state of license. The coursework usually takes several weeks to complete and addresses matters of real estate law, finance, agency operations, contract law and other related topics.
After completing the course, you can apply to take the broker licensing exam. If you pass the exam, you qualify for a license and can become a practicing real estate broker.
What does a real estate broker do?
Real estate brokers typically perform many of the same duties as a real estate agent, including working with buyers to find properties, preparing and submitting offers and managing the closing process. However, real estate brokers also get involved in the legal and financial minutia of a housing transaction. A broker can, for example, move money in and out of an escrow account and mediate contract-related legal disputes.
Leslie Singer, a licensed broker with Brown Harris Stevens in New York City, explains: An agent has “skills to educate you about the market, guide you to a home that fits what you’re looking for, coordinate other professionals who will be needed and negotiate for your best interests,” Singer says. Whereas a broker can also “help you navigate titles, zoning or legal matters, which can seem like another language.”
Types of real estate brokers
There are three main tiers of real estate brokers:
- Principal: A principal real estate broker serves as oversight for a brokerage’s agents and other brokers, supervising them as they work through the sale or purchase of a property and making sure that they are in compliance with all applicable laws throughout the process. Brokerages typically have a designated broker who performs this role, signing off on every transaction the company performs.
- Managing: A managing broker is involved in overseeing the daily operations of a brokerage. They are able to hire agents and train staff, as well as operate independently as a broker or agent.
- Associate: An associate broker has a broker’s license but chooses not to work independently. Instead, they work under another broker or brokerage. Typically, an associate broker does not oversee other agents.
Real estate brokers vs. mortgage brokers
While they both contain the word “broker,” and are both involved in real estate transactions, real estate brokers and mortgage brokers are not the same thing. Mortgage brokers deal exclusively with financing the purchase.
“A mortgage broker is essentially a middleman between the borrower or homeowner and the bank or mortgage lender,” says Singer. “Licensed mortgage brokers work directly with both the consumer and the bank to help consumers qualify for a mortgage, whether it’s purchased or a refinance.”
Mortgage brokers are especially helpful for people who have unique financial circumstances or requirements, who could benefit from pairing with an expert who can handle that situation.
Why should I hire a real estate broker?
Real estate brokers provide plenty of benefits to potential homebuyers. The advantages of working with a broker include:
- Saving time: A real estate broker is like a one-stop shop, as they can serve as an agent as well as helping with the finer points. A real estate agent will eventually work with a broker to finalize the transaction, so working with a broker directly can simplify the process.
- Providing extra manpower: A broker can also hire additional agents to work under them on a transaction, if necessary — helpful on very large deals or in very busy markets where many clients are competing for attention.
- Helping with delicate legal issues: Hammering out the details of a real estate transaction can be tricky, especially if there are unusual circumstances surrounding the deal. Brokers have additional knowledge and training that can help guide the process to ensure everything works out favorably.
A broker’s commission
Like agents, real estate brokers work on a commission basis — meaning they earn a percentage of the home’s sale price. Hiring a broker won’t necessarily cost you more money. When a broker has an agent working under them, that broker typically gets a portion of the agent’s commission. When a broker works independently on a transaction, they do not have to split the commission with the brokerage or anyone else. Be sure to discuss commission rates with both agents and brokers before you sign a contract to work with them, so the amount does not take you by surprise.
Real estate broker vs. agent or Realtor
- Real estate agents are licensed professionals who work with individuals to buy or sell a home.
- Real estate brokers are agents who have additional training and licensing. They can act as agents and are also licensed to handle certain financial and legal details. (They are not, however, real estate attorneys.)
- Realtors are agents or brokers who are members of the National Association of Realtors.