There are so many types of different real estate professions, and frequently, people get confused about which agent does which job. But there are apparent differences (even small ones add the other title) between license levels and certifications one agent has.
The real estate industry offers many different positions, including agents, appraisers, inspectors, salespeople, associates, realtors, consultants, and independent brokers. The two professions that most commonly get mistaken are the real estate agents and brokers.
But these two don’t sit on the same professional ladder, and there are clear differences between their qualifications. Therefore, there must also be a clear difference between their annual salaries, right?
In this article, you will learn about the major distinctions and similarities between the two professions, as well as how much they make. So without further ado, let’s get started.
What’s The Difference Between Brokers And Real Estate Agents?
The main difference between these two professions is that real estate brokers can work as agents and hire other agents or own a real estate firm, while real estate agents can’t work as brokers.
Put differently, a real estate broker is one step above agents – has more subject-matter education and training. Also, you need a special license to become a broker, and the biggest distinction between the two is that the broker can work independently.
In contrast, an agent has to work under a licensed broker. So, when you are buying or selling a property, you’re actually working with someone that works for a real estate broker. Thus, the agent is basically working as a company’s representative throughout the whole process.
|Real Estate Broker||Real Estate Agent|
|Can work independently||Can’t work independently|
|Can hire other agents||Must work for a broker|
|Has more training and experience||Can’t work as a real estate broker (not without a license)|
|Can work as a real estate agent||Has less training and experience|
Different Types Of Real Estate Agents And Brokers
Real Estate Agents
There are several different types of real estate agents. Each has unique responsibilities and skills – from agents that sell homes and agents that help people buy real estates, to listing agents and dual agents.
The five crucial types of real estate agents are:
1. Listing Agent
- A listing agent is an agent that represents their clients (sellers) home to potential buyers. They must represent their client’s homes in the best possible way and get the best possible contract terms. If the buyer doesn’t have its own agent, a listing agent can become a dual agent (for both buyer and seller).
2. Buyer’s Agent
- In contrast, the buyer’s agent helps homebuyers in their search and purchase of a new home. For that reason, they must put their buyer’s interests ahead of the sellers. In other words, they will negotiate the best possible price and assist through due diligence and closing.
3. Transaction Agent
- When the buyer doesn’t have its agent, the listing agent may write an offer for them. In some countries, that’s not legal, and so the listing agent can elect to become a transaction agent. A transaction agent doesn’t represent a buyer nor a seller, and instead, acts as an impartial facilitator throughout the transaction.
4. Dual Agent
- A dual agent represents both buyer and the seller. Dual agency is not legal in all states because of the conflict of interests. Hence, many homebuyers tend to have their exclusive agent to represent their interests.
- Brokers and real estate agents can earn a Realtor designation by joining the National Association of Realtors (NAR). The agent can’t use a trademark Realtor unless he or she is a part of the organization. Realtors have to be honest and transparent with their clients and avoid misrepresentation and exaggeration. To become a realtor, a person has to uphold its code of ethics and abide by its standards.
Real Estate Brokers
On the other hand, there are three types of real estate brokers:
1. Designated Real Estate Brokers
- As the law requires that every agency must be lead by the real estate broker, the designated broker is the person that manages every business. A designated broker bears the legal responsibility for all transactions that agents commit. They are sometimes called broker-owners.
2. Managing Real Estate Brokers
- A managing real estate broker is the person that manages a group of real estate agents or associate brokers. Some designated brokers work as managing brokers, while others hire another person to do that.
3. Associate Real Estate Brokers
- These are real estate agents who gained a license to become a real estate broker. Although these agents can open their brokerage and manage their agents, most of them choose to work for other brokers.
|Benefits Of Real Estate Agents||Benefits Of Real Estate Brokers|
|Aquire fewer licensing requirements||Can run their brokerage|
|Not financially or legally responsible for agents||Have better commission splits|
|Have fewer management responsibilities||They’re more likely to be trusted by clients because they have more training and experience|
What Do Real Estate Agents Do?
A real estate agent serves as the facilitator of real estate transactions. They represent buyers or sellers, and their job is to make them come together and make transactions. Real estate agents work for brokers, and so the agent is the representative of the brokerage agency the client is working with.
- 18 years or older
- 30-90 hours of pre-licensing courses
- High school graduation or higher (in some states even that is not required)
- Real estate licensing exam
- Real estate continuing education requirements (different for every state)
- No criminal record
How They’re Paid
- These agents get paid through a commission, usually a percentage of the sale price of the property. In other words – the higher the sale price, the higher the commission will be. There is no standard price because everything is done through negotiation.
- Representing buyers and sellers
- Setting the price of the home
- Marketing homes for sale
- Managing transactions and negotiating offers
- Renting (commercial and residential units)
- Showing homes, etc.
What Do Brokers Do?
A broker is a person that is step above the real estate agent. This means that the broker continues education beyond the real estate agent level and successfully gets a real estate broker license.
Real estate brokers can have their firm, hire other agents to work for them or work as independent agents. As we’ve already mentioned, a real estate agent that passes the broker exam and gets the real estate broker license but chooses to work for other brokers is called an associate broker.
- 18 years or older
- High school or equivalent
- Collage courses in real estate or real estate training program
- 60-90 hours of studying for licensing exam
- Real estate licensing exam
- 1-3 years of sales agent experience
- Post licensing requirements
- No criminal record
How They’re Paid
- Same as real estate agents, brokers also receive a commission once a sale is completed. The amount is always listed in the contract between the broker and the seller/buyer.
- Recruiting, managing, and training agents
- Resolving brokerage conflicts
- Reviewing contracts
- Marketing and lead distribution
- Property management
- Managing the brokerage staff
- Communicating with governments
- Conduct negotiations
- Prepare offers, etc.
So, do brokers make more than real estate agents? The answer is – yes, brokers make more than real estate agents. According to the Bureau Of Labor Statistics, the average annual income for real estate agents is $61,720, while it is $78,940 for real estate brokers.
Let’s explain this in an example. So, the real estate agent is paid through a commission, which is often between 5-6%. If another agent represents the other seller or buyer party, the commission of 5-6% is split between the two real estate agents (2,5-3%).
However, there are certain expenses to be paid. As real estate agents work for brokers, there is a broker’s fee. It is usually between 25-45% per year. After that, other expenses are to be paid (like running a business plan) before that money slides into the real estate’s agent bank account.
On the other hand, brokers rely on the commissions their agents make to get paid. The usual commission is 3 %, and most brokers have more than 15 agents working for them. Let’s say it is a 70/30 split between the broker and the agent.
Once the agent pays the broker from their commissions that year, they have ‘capped,’ and the broker no longer makes money from the rest of the agent’s sales that year. If you multiple the income by the number of agents working for a brokerage, you can see that the potential gain is pretty high. Of course, brokers also have more responsibilities and taxes to pay. However, they will make much more money at the end of the day than real estate agents.
Having all of this in mind, brokers can make from $30,000 to $250,000 more or less, while real estate agents will make between $23,000 and $110,000 annually. Please bear in mind that this will depend on the person, the country they’re working in, and several other factors.
Do Brokers Make More Than Real Estate Agents – Conclusion
Real estate brokers have more training and experience. In contrast, real estate agents play a critical role in negotiations, representing properties and closing the offers.
Generally speaking, brokers make more money than real estate agents. However, the greater the position, the more the responsibilities and taxes. Not only that, but brokers are accountable for all the business activities of their agents.
Lastly, it is crucial to remember that they both serve an essential role in the real estate industry. Some people just don’t like running their businesses on such an elaborate scale and want to keep it simple; thus, they stick to their salesperson role.
However, those who want to gain more experience and transition into the back-end strategic executive role may consider the broker route in the long run. A broker’s license will definitely get you more money, but will also come with more responsibilities and managing chores.