Real Estate Agent Vs. Broker: Let’s Clear the Confusion

the difference between a real estate agent and a real estate broker

If you’re new to real estate, you’ve already heard of real estate agents and brokers. You’re probably wondering what the differences are between them and you may have even heard of real estate agents being referred to as brokers. They may sound similar, but they play very different roles.

So is there a difference? Yes, there is, and we’re here to clear the confusion.

What is the difference between a broker and an agent?

An agent is a person responsible for facilitating the real estate transaction. They can work with buyers and sellers but are ultimately responsible for bringing the two together and aiding the sale along.

Real estate brokers can own real estate firms that agents work for. In simple terms, agents work for brokers. Brokers act as the liable party and are responsible for the actions and managing interactions of the real estate agent. They are also responsible for negotiations, arranging, and overseeing the entire transaction.

The real estate agent is whom the buyer and seller interact with. The agent shows homes, introduces buyers and sellers to one another and walks either party through their end of the process. Brokers handle legal contracts and report any requests relative to the transaction to the broker.

What can lead to confusion is when someone who is a licensed broker still works as an agent.

Brokers must attain their real estate license and have active experience as agents. They keep this license once they complete the educational courses and pass the exam required to become brokers.

Even as a broker, one can still act as an agent. They can interact with buyers and sellers, just as an agent would. They also have the option to open a real estate firm and hire other agents to work for them.

Take note – even though a broker can act as an agent in real estate transactions, agents may not function as a broker.

Do Real Estate Brokers Make More Money than Agents?

Based on average salaries in MD for example, successful brokers have the potential to make around $40,000 more per year than an agent. But an agent has the potential to surpass the broker by making more sales. This is because of commission split. Traditionally, the agent takes home a greater percentage of the commission.

How the commission is split can vary. It’s typical for a 75/25 split to be put in place by the broker. This means the agent collects 75% of the commission, leaving the broker with the remaining 25%.  The split can vary but in almost every case the agent makes more on the commission.

When a broker employs multiple agents, the money they make on commissions adds up to more than what the average agent will make—the amount of money they can earn increases if they decide to act as an agent as well.

One must note that a broker is also responsible for paying expenses, and for training employees. This is important as their income relies on the performance of their agents.

What is the Average Salary of Either?

Salary is something that varies depending on performance. On average, real estate agents can make from $39,000-$110,000 per year. Brokers can make from $38,000-$150,000 per year.

If an agent performs better than most and finds better opportunities, they have the potential to surpass this average. Additionally, brokers with a team of great agents can do the same. Other factors that come into play is how many homes are sold, how many agents are employed, and what the commission split is.

Is it Better to be a Real Estate Agent or Broker?

Whether it is indeed better to be a broker or an agent is something that can depend on each individual’s situation and goals.

Brokers do have more responsibilities than agents, which is the reason many agents don’t pursue this title. Owning firms and being involved with multiple transactions is a lot of hard work. It does come with its benefits, though.

As a broker, one has the ability to own and manage firms and property management companies. This can be very liberating as one can set their own standards and work at their own pace.

Marketing leverage is another significant benefit of being a broker. The experience and education requirements to become a broker make them more desirable by clients.

While some agents may have a better level of knowledge and years of experience on some brokers, the physical license goes further than hear-say in many cases.

Many people become real estate agents solely to become brokers. This is not to say there aren’t benefits to remaining an agent, though.

Agents have fewer responsibilities and fewer financial liabilities than brokers do. Again, being a broker is hard work and can be considered much more stressful with little to gain if one is already a successful agent.

Can I be a Real Estate Agent Without a Broker?

The laws on a real estate agent’s legal abilities can vary state by state, but the short answer to whether or not an agent can work without a broker is no.

Real estate brokers are the only entity that may legally enter into a contract to buy or sell a home. Real estate agents must hang their real estate license under a brokerage in order to partake in and benefit from these transactions.

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