What is a real estate broker?

Most people have heard of and probably worked with real estate agents. They are intermediaries who bring property buyers and sellers together so that real estate transactions take place. Who or what is a real estate broker? Is the real estate broker the same as a real estate agent? What does a real estate broker do? Do you need to work with a real estate broker if you want to buy or sell property? If you had these questions in your mind, read on to know the answers.

When you complete a transaction with a real estate agent, you probably may not be aware that while the agent is front ending the transaction, the broker is at the back end ensuring the transaction is done properly as per legal requirements. As per the law, every real estate agent must work with a real estate broker. The real estate broker is responsible to monitor the work of the real estate agents and ensure that their transactions are completed as per requirements.

Types of real estate brokers

A real estate broker manages a brokerage that carries out real estate transactions. The real estate broker can function as an agent himself and also employ other agents. The real estate broker is thus one level above the real estate agent. There are different types of real estate brokers.

  1. Associate broker: This is usually the first stage in the process of becoming a real estate broker. A real estate agent can become an associate broker. Most associate brokers work under a designated broker. They can even choose to work independently.
  2. Designated broker: The law mandates all real estate agents to work under a designated real estate broker. The designated broker is responsible for all the realty transactions carried out by the agents on behalf of the brokerage. A designated broker usually works under a managing broker.
  3. Managing broker: A managing broker runs a brokerage and manages or supervises a group of real estate agents and associate brokers who work under him. The managing broker is responsible to manage the brokerage and run its operations effectively.

How can you become a real estate broker?

A real estate broker requires licensing in the state where he works. Real estate agents also need to pass an exam to be licensed. The license a real estate broker needs has higher requirements than what an agent needs. The requirements to become a real estate broker vary from state to state. In general, the requirements are:

  • Experience as a real estate agent is mandatory in some states. Usually, two or more years of experience is needed. In some states, if you have a four-year college degree, the experience requirement is waived.
  • If you want to become a real estate broker, you need to undergo training. Real estate finance, taxes, business law, real estate investments, are some of the topics you need to study to qualify to be a real estate broker.
  • Every state has a licensing agency that conducts an examination. In order to be a real estate broker, you need to pass the exam, after completing the training.
  • On passing the exam, you are awarded the license that allows you to work as a real estate broker by opening your own brokerage or by working as an associate broker under the supervision of a managing broker. Some states may require a criminal background check to be completed to get the license.

What does the real estate broker do?

The real estate broker is one who would already have a real estate agent license. The broker can thus work as an agent and take up the work of the broker additionally. The broker is legally responsible for the transactions done by agents who he supervises. Some of the common activities that real estate brokers do are:

  • Manage real estate transactions of buying and selling
  • Supervise work of real estate agents who work for them
  • Market property to customers
  • Represent buyers/sellers when transactions are carried out
  • Show homes to buyers
  • Negotiate price on behalf of the buyer/seller

Managing brokers also do other activities like:

  • Manage other associate brokers
  • Review contracts
  • Manage all records in the brokerage
  • Ensure compliance to laws and regulations
  • Hire new agents
  • Coordinate with government agencies
  • Ensure the success of the brokerage

How does a real estate broker get paid?

Whenever a real estate transaction takes place, the broker would be involved in the transaction representing either a seller or a buyer. When the transaction is complete, a commission of 6% of the sale value is charged for the transaction. This has to be shared between the buyer’s broker and the seller’s broker. A brokerage may represent both the buyer and seller, in which case they can retain the entire 6%; else, they would get 3% of the commission.

From this commission earned, usually 60% is paid to the real estate agent and 40% is retained by the broker. This can vary depending on various factors, including the experience of the agent. The division may be 50:50 or even 70:30. Since the agent does most of the work, he would get a higher share of the commission. The broker can also be a real estate agent, in which case he gets to keep the entire commission.

The broker usually charges fees from a real estate agent towards expenses. So, a broker earns by retaining a share of the commission and expenses paid by agents. In order to make money, the broker needs to ensure a large number of transactions take place. A broker will have many other expenses like office expenses, advertising expenses, fee for listing properties in an MLS, and of course taxes. The median pay[i] a real estate broker can hope to earn is $58,210. The more the transactions, the higher would be the earnings.

A real estate broker is the one who manages real estate agents and ensures buyers and sellers complete real estate transactions smoothly.


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