Whether you’re buying or selling a home, there are many different terms for parties involved in a real estate transaction to meet. If you’re new to the lingo, these can be confusing: realtors, real estate agents, real estate brokers, mortgage brokers — what’s the difference? Here, we will explain exactly what a real estate broker is and what distinguishes it from other similar topics.
What is a real estate broker?
Real estate brokers are licensed professionals with training similar in many ways to real estate agents. Both can help with many aspects of buying and selling homes. But a broker has more licensing and training than is required to become an agent. In other words, a broker can do everything an agent can do and then some.
Real estate brokers can work independently, but agents must work under a broker or brokerage firm. An agent works with a broker to complete a property transaction, but it’s the broker who does the work of making sure it complies with all the rules – they literally “broker” the transaction. This includes filing paperwork correctly, transferring funds and completing records and reporting to the appropriate authorities. Brokers often receive a share of their agents’ commissions.
Being a broker
To become a real estate broker, you must first become a licensed real estate agent. Often an agent will gain several years of experience in the field before pursuing the certification required to become a broker. Many states have a two-year requirement before applying for broker status.
Obtaining a broker’s license requires passing a training process established by the licensing state. Coursework usually takes several weeks to complete and covers real estate law, finance, agency operations, contract law, and other related topics.
After completing the course, you can apply to take the broker license exam. If you pass the exam, you will be eligible for a license and become a real estate broker.
What does a real estate broker do?
Real estate brokers perform many of the same functions as a real estate agent, including working with buyers to find properties, preparing and submitting offers, and managing the closing process. However, real estate brokers are involved in the legal and financial aspects of housing transactions. A broker, for example, can deposit and withdraw funds into an escrow account and mediate legal disputes related to contracts.
Leslie Singer, a licensed broker with Brown Harris Stevens in New York City, explains: An agent has the skills to “educate you about the market, guide you to a home that fits your needs, and coordinate other necessary professionals.” And negotiate for your needs,” says Singer. A broker can help you navigate topics, zoning or legal issues that may seem like another language.
Types of real estate brokers
There are three main levels of real estate brokerage:
- Main: A primary real estate broker acts as a supervisor for a broker’s agents and other brokers, overseeing them as they engage in the sale or purchase of real estate and comply with all applicable laws in the process. Brokerages typically have a broker who performs this function, signing off on every transaction the company makes.
- Managing: Brokerage management is involved in managing the day-to-day operations of a broker. You can hire agents and train staff as well as work independently as a broker or agent.
- Associate: An affiliate broker has a broker’s license but chooses not to operate independently. Instead, they work under another broker or broker. Typically, an affiliate broker does not supervise other agents.
Real estate brokers and mortgage brokers
Real estate brokers and mortgage brokers are not the same thing, even though they both contain the word “broker” and both are involved in real estate transactions. Mortgage brokers only work to finance the purchase.
“A mortgage broker is an intermediary between the borrower or homeowner and the bank or mortgage lender,” says Singer. “Licensed mortgage brokers work directly with consumers and banks to help consumers qualify for a mortgage, whether it’s a purchase or refinance.”
Mortgage brokers are useful for people with special financial circumstances or requirements who can benefit from pairing them with a professional who can handle that situation.
Why Should I Hire a Real Estate Broker?
Real estate brokers offer many benefits to home buyers. Benefits of working with a broker include:
- saving time; A real estate broker is like a one-stop shop, as they can act as an agent and help with the finer points. A real estate agent will eventually work with a broker to complete the transaction, so working with a broker makes the process easier.
- Provision of additional manpower: A broker can hire additional agents to work on a transaction if necessary – useful on very large deals or in markets where many clients are competing for attention.
- Help with minor legal matters: Hiding the details of a real estate transaction can be tricky, especially if there are unusual circumstances surrounding the deal. Brokers have additional knowledge and training to help guide the process so that everything works safely.
Like agents, real estate brokers work on commission – meaning they get a percentage of the home’s sale price. Hiring a broker won’t cost you more money. When a broker has an agent working under them, that broker typically gets a portion of the agent’s commission. When a broker works independently on a transaction, they are not required to split the commission with the broker or anyone else. Be sure to discuss the commission rate with both agents and brokers before signing a contract to work with them, so the amount doesn’t take you by surprise.
Real estate broker vs agent or realtor
- Real estate agents are licensed professionals who work with individuals to buy or sell a home.
- Real estate brokers are agents with additional training and licensing. They can act as agents and are licensed to handle certain financial and legal details. (But they are not real estate attorneys.)
- Realtors are agents or brokers who are members of the National Association of Realtors.