Real estate brokers and real estate agents are similar, but not the same. These are two very common careers found within the real estate industry. Whether you’re just starting out, or you’ve been in the industry for a while, you might want to know the differences.
When you look closer are a real estate broker and a real estate agent, you can find plenty of similarities and differences. If you’re considering a new career or looking to advance your current one, this is an important topic. Let’s look at what both of these are and the differences.
What is a Real Estate Broker?
A real estate broker must become an agent first, and then complete the requirements to become a broker, in most states. In some states, agents are brokers, but in most states, a real estate broker is the next level up from an agent.
Brokers will have expertise in real estate. They will have more experience and education than real estate agents.
According to RocketMortgage.com, a real estate broker “holds expertise that can help people with real estate transactions, and like an agent, a broker can also assist with selling or buying real property.”
Brokers have the ability to build a real estate team with agents under them. They can be a sponsoring broker for agents.
There are three main types of real estate brokers, which are:
- Managing Broker – This type of broker is a mid-level broker that will oversee transactions and agents under them.
- Principal Broker – Also called a designated broker, this is the most senior-level broker and will make sure other brokers and agents under them follow all the necessary laws. All real estate brokerages will have one principal broker.
- Associate Broker – This type of broker may also be called a broker associate, broker-salesperson, or affiliate broker. It’s the most junior-level broker and typically this person works under another broker and won’t supervise agents yet.
You will likely start as an associate broker before becoming a managing broker or a principal broker.
What is a Real Estate Agent?
A real estate agent may also be called a real estate associate or salesperson. This type of person is licensed to sell, buy, or rent real property. You will have to complete pre-licensing education and meet the state requirements to become a real estate agent.
When someone buys or sells a house, they will likely work with a real estate agent. This is considered to be the most common career in the real estate industry.
According to Indeed.com, a real estate agent will handle many different tasks, including:
- Answering phones and emails
- Scheduling showings and appointments
- Updating property listings
- Drafting documents
- Ordering supplies
- Performing comparison analysis
- Keeping up with the current real estate market
- Searching listings for buyers
- Marketing properties through social media, ad campaigns, and other marketing strategies.
There are many things a real estate agent can do to help buyers and sellers. Most agents will specialize in a specific location, client type, or property type.
All real estate agents will have to work for a broker. They will be under the umbrella of the broker.
There are a few different types of real estate agents. Some agents will play multiple roles, depending on the clients. The most common types of agents include:
- Listing Agent – This is an agent that represents the seller of a property. They will help them set the price, list the property for sale, market the property, and find buyers.
- Buying Agent – Of course, this type of agent represents the buyer. They will help the buyer find the right home, tour homes, and get the best deal possible on the property they purchase.
- Rental Agent – This type of agent will represent tenants, landlords, or both in a rental transaction.
You can act as one type of real estate agent or multiple, depending on your training and your state requirements.
Real Estate Broker vs. Real Estate Agent: The Differences
While both a real estate broker and a real estate agent will work in the same industry, they are rather different. Both might help buyers and sellers, but they might do it in a different manner.
The first main difference is the necessary training. Agents will have to meet the pre-licensing education requirements and pass an exam. A broker, on the other hand, has to become an agent first, gain experience, complete broker education, and pass the broker exam. It will take more time and education to become a broker than an agent.
The salary earned by a real estate broker vs. a real estate agent is quite different, too. Both get paid on a commission-only basis, but they don’t make the same amount of money.
According to TheClose.com, brokers have an average income of about $163K per year, while agents earn an average of $61K per year. The way they both earn money also is different.
Both real estate brokers and agents can earn commissions from the following:
- Construction Development Consultation
- Third-Party Price Analysis
- Real Estate Investment
- Property Management
- Commissions from Buyers and Sellers they represent
Agents can also earn an income from representing rental clients. Brokers also earn an income from commission splits with agents they manage. They may also earn a secondary income from ownership in businesses, such as mortgage companies or title companies.
Breaking Down the Commission of an Agent vs. a Broker
An agent will earn most of their income when a real estate transaction closes. The common commission is 6% of the sales price of the property. This means, that if a property sells for $250K, the commission will be $15,000. However, this doesn’t all go to the agent.
First, the commission will be split between the buyer’s agent and the seller’s agent. This will be split right in half with 3% for both.
Second, the agent will split their commission with their broker. This may vary, but about 30% is common, which leaves the agent with a gross commission of $5,250 on a $250K transaction.
Third, an agent will need to reinvest back into their business, which is about 25% of the money they earn. This leaves a gross income on this transaction of just under $4,000. After taxes, they will have earned around $2,700 on a $250K transaction.
For a broker, they can earn an income from their own closed transactions, along with income from the agents they represent. Their income can also come from agent desk fees each month, along with title company revenue or even mortgage company revenue.
As a broker, you won’t split your commission with anybody on your own transactions from clients you represent. The full 3% commission will be yours. You will also earn a negotiated amount from each of your agents. In some cases, it may be a flat fee or a commission split. It may also be capped. You might get 30% of all the commissions your agents earn, but it’s capped at $25K per year.
Desk fees are typically paid on a monthly basis for agents to be a part of your team. This is paid whether the agent closes any transactions or not, and it’s often between $50 and $100 per agent, per month.
Brokers can also earn money from owning a stake in other companies. This may include mortgage or title companies.
Expenses for a Real Estate Broker vs. Real Estate Agent
Another huge difference between a broker and an agent is the expenses they will have to pay. Brokers have more expensive than agents. Let’s look at a quick breakdown.
- Brokers Expenses
- Rent
- Utilities
- E&O Insurance
- Training
- Staff Salaries
- Technology
- Marketing
- Recruitment
These expenses will vary, depending on where you are, but most brokers will pay all of these on a monthly basis. Salaries are your support staff, such as an office manager.
- Agents Expenses
- Desk Fee
- Tools and Operating Expenses
- Lead Generation
- Miscellaneous Expenses
Typically, an agent will not have to pay nearly as much as the broker will. They will have some expenses, but most of their expenses are paid to the broker for support and technology.
It’s common for a broker to pay about five times as much each month for expenses. This is part of why they may collect a desk fee and a commission from the agents they represent.
There are many differences between real estate brokers and real estate agents. While you cannot be a broker without being an agent, you can be an agent and never become a broker.
Brokers tend to make more money, but they also take on more risk, more expenses, and more responsibility. As an agent, you will need a sponsoring broker to get your license in most states. Both have expenses, but brokers will take on a larger financial risk.
Of course, with risk comes income. Brokers can make more money than agents. They also have more experience in the industry and more education. In some states, a broker has to be an agent for two or four years before they can start training to become a broker.
