Real Estate Agent vs. Broker vs. REALTOR®

By Ann Heinz, JD, CDEI
Apr 6, 2021
real estate agent vs broker vs realtor

Real estate agent, salesperson, broker, REALTOR® — the real estate industry has a lot of professional job titles and roles. People outside the real estate world may not be familiar with the differences between these terms. Still, these titles all have significant differences when it comes to their qualifications and position on the company ladder. It’s also important to remember that each state maintains its own licensing requirements and titles, which may vary from state to state.

So, let’s look at each of these terms and what they mean.

What is a real estate agent?

A real estate agent is an individual who is licensed to represent people and companies in buying, selling, or renting residential and commercial real estate. Real estate agents are also commonly known as real estate salespersons or real estate associates.

In order to have received their real estate license, an agent must have completed prelicense training, although the number of required training hours can vary widely by state. Once the prospective agent completes their prelicense training, they must then pass their licensing exam. This exam is usually divided into distinct sections covering federal real estate laws and state real estate laws.

Once prospective agents pass their exam, they will receive their license and the ability to operate as real estate agents for homebuyers and sellers. Real estate agents are paid by commission, typically a percentage of the property’s sale price. Real estate agents must be employed by a brokerage and cannot work independently without a broker license.

What are the types of real estate agents?

Real estate agents typically assist their clients in one of two roles: either as a listing agent or a buyer’s agents.

Listing agents

A listing agent may be licensed as a real estate agent or broker and represents a home seller in a transaction. These agents help clients who are selling their home or property with most tasks associated with the sale, including pricing the home, marketing, holding open houses and coordinating showings, negotiations, and overseeing the inspection process and closing procedures.

Listing agents typically are paid only by commission and therefore do not get paid if the home or property doesn’t sell. Listing agents usually receive around 3% commission after splitting the total 5% to 6% commission with the buyer’s agent.

Buyer’s agents

Buyer’s agents may also be licensed as a real estate agent or broker and represent homebuyers through the home-buying process. They help with tasks such as helping their clients find a home that suits their needs, making offers, negotiating, and recommending other professionals such as mortgage brokers. Buyer’s agents are paid entirely through commission and usually receive around 3% of the total sale after splitting the entire 5% to 6% commission with the listing agent.

What is a real estate broker?

A real estate broker is a real estate agent who has received additional education above the agent level and has received a real estate broker license. Unlike real estate agents, brokers can start their own brokerage that employs other agents.

Like the exams for real estate licenses, the required training, education hours, and exam contents for a real estate broker license vary by state. Prospective brokers are trained in real estate legal topics, including how these legal principles apply to real estate investments, property management, and operating a brokerage. This additional education also includes ethics, contracts, and taxes at a more in-depth level than the prelicense education for the standard real estate license.

Real estate agents must have a certain level of experience to be eligible to take a broker exam. This level of experience varies by state but typically is at least three years as a licensed agent.

What are the types of real estate brokers?

There are three primary types of real estate brokers in most states: designated/principal brokers, managing brokers, and associate brokers.

Designated brokers

Designated real estate brokers, otherwise known as principal brokers or brokers-in-charge, oversee all of a firm’s licensed real estate agents and makes sure the agents are complying with all federal and state laws. Every real estate agency (and every real estate agent) must be managed by a principal/designated broker by law. Designated brokers are paid on commission (taking a cut of the commission from the firm’s agents), although many do receive an annual base salary as well.

Managing brokers

Managing real estate brokers oversee the firm’s day-to-day operations and transactions and usually work directly to hire and train new agents and manage the firm’s administrative team. In many firms, the principal/designated broker also serves as the firm’s managing broker. When the designated broker wants to take a hands-off approach to hiring and directly managing the firm’s agents, he will hire a managing broker.

Associate brokers

Associate real estate brokers have broker licenses but works under the supervision of another managing broker. Associate brokers are usually not responsible (at least not solely) for supervising the business’ other agents. Most associate brokers have the same roles as the firm’s agents but have more experience and education. Associate brokers are also known as affiliate brokers, broker associates, or broker-salespeople.

What is a REALTOR®?

A REALTOR® is a licensed real estate agent who is a member of the National Association of REALTORS® (NAR). The word “REALTOR®” is trademarked — in fact, the NAR’s preferred usage is as “REALTOR®”, all-caps and with the registered trademark symbol. Real estate agents who are REALTORS® pay annual dues to the NAR and commit to abide by the Association’s standards and Code of Ethics. Real estate agents who are not members of the National Association of REALTORS® cannot use the “REALTOR®” designation.

By being NAR members, agents gain access to educational materials and resources exclusively available to REALTORS®. However, the REALTOR® title carries no legal weight and does not grant legal rights or abilities beyond regular licensed agents.

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