A real estate broker is a real estate agent who has obtained a license to become a practicing broker within his or her respective state. Unlike traditional real estate agents, brokers can work independently, hire staff, and create their own firm whereas traditional agents must work for a qualifying brokerage.
Real estate brokers are essential intermediaries in the transaction process, navigating transactions from initial listing and discovery to closing.
When you hire a traditional real estate agent, you are also getting the complete package of a brokerage, which provides access to an MLS, lenders, title insurance company recommendations, supervising agents, and so much more.
While agents can help buyers and sellers get through the initial stages of the transaction, a broker is required by state law to finalize the process.
Brokerage laws differ by state, but generally, you must complete a broker’s license exam to become a broker. For example, in Colorado and New Mexico, all real estate agents are licensed as brokers. However, these states require an additional exam and license before a licensed broker can hire agents and start their own firm.
While many may understand what a real estate agent is responsible for, it’s just as crucial for both agents and prospective home buyers to understand the role of the real estate broker.
Two Types of Real Estate Brokers
- Managing Broker: The managing broker advises agents and supporting staff on their duties to both buyers and sellers. Sometimes referred to as the principal broker, the managing broker has the legal authority to sign and finalize real estate transactions on behalf of their clients. In addition, the managing broker is entrusted with the escrow account and handling licensing and insurance claims on a home.
- Associate Broker: An Associate broker is simply an agent with a broker’s license who chooses to work for a brokerage. With the additional competence of being a broker, an associate broker is an invaluable addition to any team. They can act independently or as a managing broker within their own branch or office.
What is the Job of a Real Estate Broker?
A real estate broker’s job is very similar to that of a real estate agent, but it also differs depending upon whether or not the real estate broker is representing a buyer or seller during a transaction. A list of general real estate broker duties and functions include:
- Listing and marketing a home on a Multiple Listing Service (MLS)
- Helping buyers discover homes on an MLS and schedule showings
- Communicating with other agents on behalf of their clients
- Submitting and negotiating offers on behalf of their clients
- Finding lenders for their clients
- Negotiating closing costs (fees, commissions, appraisal)
- Scheduling appraisals
- Handling insurance duties, such as title insurance and mortgage insurance (FHA/USDA loans)
- Finalizing real estate transactions
Understanding Real Estate Commissions and Fees
One of the trickiest parts of the closing process is negotiating commission fees paid to the agents and brokers representing both the buyer and seller. Depending on the circumstances of your transaction, these closing costs could be paid out of pocket or bundled into the final loan amount to be paid as part of your mortgage.
Generally, real estate commission fees amount to anywhere between 4-6% of the final total sales amount. These fees are often paid to the broker, who then pays the real estate agent a commission for discovery and their role in getting the sales process started.
Each broker charges different fees, although it is standard for the buyer’s and seller’s broker to split the commission fees 50/50.
If the broker represents both the buyer and seller within a transaction, they get to keep the total amount of the commission fee.
How to Become a Real Estate Broker
To become a real estate broker you will need to research state licensing laws regarding a broker’s license in your state.
Generally, most states require at least 1-2 years of on-the-job real estate experience as an agent. Once this fulfillment is completed, you will need to take a series of brokerage courses which could require hundreds of hours of coursework for completion.
For example, this means completing 240 hours of coursework in authorized brokerage training courses in Pennsylvania, while states like Virginia require around 180 class hours of training. Course work will include real estate contract law, math, and real estate property law.
The benefits of becoming a broker equate to higher commission fees and the ability to open your brokerage and retain 100% profits.
While the process could be long, many agents become brokers to gain additional knowledge that opens up more professional opportunities and helps their clients more.