The Short Answer
A real estate broker is a licensed real estate professional who can operate as an individual or own a brokerage. Brokers facilitate real estate transactions between buyers and sellers, and they oversee real estate agents to make sure that transactions are compliant with laws and regulations within each area.
A licensed real estate broker can fall into 1 of 3 roles:
- Principal brokers: They will oversee a brokerage and take ultimate responsibility for making sure that all operations run smoothly.
- Managing brokers: These brokers will oversee the agents within the brokerage and handle the day-to-day operations.
- Associate brokers: An associate broker is employed by the brokerage to help with the workload and act as the broker’s agent for real estate transactions.
To qualify as a broker, you’ll need to meet the age requirements, do the necessary educational coursework, get the relevant experience and pass the broker’s license exam. The criteria for each of these varies, depending on the area.
Brokers typically get paid by commission, through their own real estate transactions and the deals that their agents bring into the brokerage. This commission split varies depending on the brokerage and the agents. A typical split is 50/50, where the broker will get 50% commission from the final sale price, and the agent will receive 50% as well.
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What Is A Real Estate Broker?
A real estate broker is a licensed real estate professional or firm that assists with buying and selling property. Brokers facilitate real estate transactions by acting as an intermediary between buyers and sellers, similar to a real estate agent. However, real estate brokers can employ real estate agents, and are paid on commission from the transaction.
Brokers typically work with either the buyer or the seller in the real estate deal. Real estate brokers can assist with finding properties suitable for clients, pricing properties, marketing them, negotiating deals, and ensuring a smooth closing process. Brokers are required to have additional training and licensing to real estate agents and work independently.
Types of Real Estate Brokers
Real estate brokers can be divided into 3 categories, based on their role and level of responsibility in the buying and selling process.
Principal Broker
A principal broker is a licensed broker who oversees a real estate brokerage, in terms of operations and making sure that all transactions run smoothly. A principal broker is often more experienced and educated than the other real estate agents in the brokerage and are therefore able to provide training and development to any of these real estate agents.
One of their main responsibilities is to make sure that all the transactions coming through the brokerage comply with relevant laws and regulations. Principal brokers are involved in the financial aspects of the brokerage which include overseeing the budgets and financial transactions that are taking place for each deal.
Principal brokers may also be responsible for resolving disputes that arise within the brokerage and ensuring that ethical standards are upheld. As such, principal brokers carry the highest level of responsibility and are held accountable for the agents that work in their brokerage.
Managing Broker
A managing broker handles the day-to-day operations of the brokerage, in a leadership position. This includes supervising real estate agents, ensuring compliance with legal and ethical standards, and managing administrative tasks.
Managing brokers are fully qualified and licensed real estate professionals with the additional qualifications required for this position. Managing brokers often act as mentors, to guide and train new real estate agents. Sometimes, managing brokers may be responsible for hiring new agents into the brokerage.
A managing broker is not only responsible for handling the agents within the brokerage, but also their qualifications, creating a productive work environment, and essentially fostering the culture of the brokerage.
Associate Broker
Associate brokers are usually employed by the brokerage to help with the workload and act as the broker’s agent for real estate transactions. An associate broker has the correct license but works under another broker and generally doesn’t take on a supervisory role for other real estate agents.
As they operate with a higher level of autonomy, associate brokers may take on responsibilities such as managing their own client relationships, overseeing transactions, and participating in more complex real estate deals. Associate brokers are often employed as independent contractors, but they usually can’t work for more than one brokerage at a time.
How Do Real Estate Brokers Get Paid?
Real estate brokers usually get paid through commission, which will be a percentage of the property’s final sale price. For the real estate agents who make the property sales, this commission will be split between the agent and the broker. For example, on a $200,000 home sale, if the standard commission is 10%, the commission may be split, 5% to the broker and 5% to the agent.
There are various commission structures that exist, and each brokerage has their own split with agents. However, this is decided upon in advance, between the broker, agent and (if necessary) the client.
When it comes to commission, both listing agent commission and buyer’s agent commission exist. Listing agent commission is the percentage of the final sale price that is paid to the seller’s agent for commission, and it’s paid by the seller. Whereas buyer’s agent commission is the percentage of the final sale price paid to the buyer’s agent as part of the overall transaction.
What Is A Brokers License And How Do You Get One?
Each state requires a different real estate broker’s license, as such these requirements may differ slightly, depending on the state. Typically, there is a minimum age to qualify for a broker’s license, along with a set of educational and applicational requirements. Most states will also require a few years of experience as a practicing real estate agent, before you can obtain a broker’s license.
Typically, this is the process for getting a broker’s license:
You will need to be at least 18 years old (depending on the state) and have completed a certain amount of real estate education. This education may be in the form of college-level courses or specific real estate courses offered by approved institutions. This will need to be accompanied by a few years of licensed real estate agent experience.
Beyond the real estate agent license, there is extra coursework required to get a broker’s license. This includes courses on topics like real estate law, ethics, finance and broker’s management.
Once all of these requirements have been met, you’ll need to take a broker’s licensing exam and pass this. The exam tests knowledge of real estate laws, regulations, and practices. It often includes both national and state-specific components.
After you’ve successfully passed the exam, you’ll need to submit a license application to the relevant state or regulatory authority. Then there are fees to be paid which cover the cost of the application and issuing the license.
Real Estate Agent vs Broker - What's The Difference?
The primary differences between a real estate agent and a broker lie in their level of education, experience, and the scope of responsibilities.
Real Estate Agents
Real estate agents are qualified and licensed to practice real estate in their particular state. They need to work under the supervision of a licensed broker who will oversee their activities. The primary role of real estate agents is to facilitate the buying, selling, and renting properties. Real estate agents will work with either a buyer or a seller through a real estate transaction which includes marketing properties, assisting with price negotiations, preparing contracts and more.
Real Estate Brokers
On the other hand, real estate brokers have advanced beyond the agent level in terms of education, experience and responsibilities. Agents need to pass a broker’s licensing exam, which requires extra studies at a college level, and fulfil the necessary experience before they can operate as a broker. Real estate brokers can open their own brokerage, where they typically manage their own business, as well as supervise real estate agents. Real estate brokers are responsible for ensuring that all transactions within their brokerage comply with relevant laws and regulations.
| Real Estate Agent | Real Estate Broker |
|---|---|
| Need to work under a licensed broker | Work independently or supervise agents |
| Facilitate property transactions for buyers and sellers | Make sure that property transactions are legally compliant |
| Licensed real estate agent | Licensed real estate broker |
| Work in a brokerage | Can own a brokerage |
| Earn income through commission on each property deal | Earn income through their transactions and their agent’s too |
How To Become A Real Estate Broker
Becoming a licensed real estate broker involves fulfilling the educational aspect, the additional experience required, as well as obtaining the necessary license. Let’s take a closer look…
Step 1: Find out the criteria
The first step to becoming a real estate broker is meeting the basic requirements of your state. Each state has their own entry criteria, for those who want to become licensed to be a broker. There’s usually a minimum age requirement (typically 18 or 20), along with an educational requirement (typically a real estate agent license), and there may be an experience requirement as well which would involve experience as a real estate agent in the field.
Step 2: Gain the necessary experience
For the states that require real estate agent experience, this is important to gain before you are eligible to get a broker’s license. The number of years of experience varies between jurisdictions, typically this can be between 1 and 3 years. If you don’t have enough experience yet, you’ll need to work as a real estate agent for a longer period to gain this experience.
Step 3: Fulfil the educational requirements
Becoming a real estate broker requires an extra educational component. Each state will have different requirements, some of which may be at a college level. The coursework will cover topics like real estate law, ethics, financial management, brokerage management and more. However, the content and duration of these courses will differ according to each state.
Step 4: Pass the broker’s exam
Once you’ve completed the experience required, and done the extra coursework, you’ll be eligible to take the real estate broker’s exam in your area. You’ll need to pass this in order to move onto the final stage of the process to becoming a real estate broker. The broker’s exam will cover national and state-specific components that include real estate law, regulations and acceptable practices.
Step 5: Obtain a broker’s license
Once you have met the educational and experience requirements and passed the exam, submit a broker’s license application to the relevant state or regulatory authority. This application typically includes proof of education, experience, and exam completion.
You’ll also need to pay licensing fees in order to obtain a broker’s license. Make sure that you’ve looked up the fees in your area before you complete the process. Once you’ve obtained your broker’s license you can legally begin operating as a real estate broker. You may want to continue your education from time to time, to keep up to date on any changes in laws and practices in real estate in your area.
Step 6: Consider specializing
There are additional certifications that you can obtain, depending on your career goals and ambitions. These include real estate management, commercial real estate, real estate investment and more. These certifications depend on the state, and the level of interest you have in each niche. If you’re particularly interested in a niche and wish to pursue it as the main aspect of your career, then it’s worth specializing in this.
Step 7: Build a network and client base
The final step on your journey to becoming a real estate broker is one that cannot be skipped. Building a network and a client base in the area where you are going to do business is vital to the success of any broker or brokerage. These connections can be extremely useful for finding real estate deals, and getting clients who you can work with repeatedly.
A strong network in the real estate industry can lead to successful partnerships, finding out about exclusive deals before they hit the market, and closing deals quickly. Providing excellent service is one of the key aspect of making a brokerage successful, along with networking and forming a strong client base.
For Example – Becoming a Real Estate Broker in New York (NY)
Let’s take a look at what the process is for becoming a real estate broker in New York.
In the Big Apple, you’ll need to be at least 18 years old to become a real estate agent and 20 years old to become a real estate broker. The educational requirement is 152 hours of real estate coursework through an approved provider or a 4-year college degree in real estate. The experience component is 2 years of work as a real estate agent, or 3 years of experience in the real estate industry overall.
Once the educational requirements and experience components have been fulfilled, you’ll need to pass an exam. You will also need to have a valid NYS Driver’s License or Non-Driver ID.
The cost
A real estate license in New York costs between $500 and $1000, while a broker’s license will set you back around $950 to $1450. The cost of pre-licensing coursework for real estate agents ranges from $379 to $909. Brokers will typically pay around $350 for additional coursework hours, and a broker application fee is around $185. Exam fees for both a real estate license and a broker license are $15.
The timeline
Becoming a broker in New York can take a longer period of time, due to the years of experience as a real estate agent that are required, and the extra hours of coursework. All in all, it can take 3 to 4 years to become a broker in New York, depending on the situation.
Real Estate Companies That Work With Brokers
There are a number of real estate companies that work with real estate brokers, offering services, tools, and resources to enhance their business operations. There are a few notable companies that provide specific services for real estate brokers, let’s take a look.
Hard Money Lenders – New Silver
New Silver is a leading lender providing financing to real estate investors. New Silver works with real estate brokers in their Partner+ program, which allows brokers to be more involved in the underwriting process. Brokers who have clients looking for an investment loan can broker the loan with New Silver, work with New Silver’s underwriters and earn a fee.
New Silver offers real estate brokers a generous 2% broker fee on all fix and flip and ground up construction loans. The appraisal cost is refunded on all brokered deals, and New Silver will work directly with borrowers, which minimizes the work required from brokers.
Lead Generation Platforms – Zurple
Lead generation companies like Zurple work with real estate brokers to provide solid leads for property sales, through the use of data analytics. Zurple combines online lead generation with automated intelligent lead nurturing, so real estate agents and brokers can create more meaningful connections and get more clients.
Online Listing Platforms – Zillow Premier Agent
Zillow Premier Agent allows real estate brokers to advertise on Zillow, connecting them with potential buyers and sellers in their target areas. Brokers can enhance their online presence and generate leads through this platform.
Zillow offers tailored tools for agent teams and brokerages. For brokerages of over 11, the platform will allow them to generate new leads, strengthen their conversion strategy and manage agents’ performance. Brokers can connect with interested buyers on the platform and track the progress of each agent within the brokerage.
Real Estate Data – Reonomy
Real estate brokers can work with platforms like Reonomy, to unlock property intelligence. This platform uses AI, amongst other technologies, to help brokers identify opportunities and strategically pursue them. Reonomy provides data-driven market and real estate industry insights, which can be useful for brokers to understand the landscape that they’re operating within.
Additional Tips For Becoming a Broker
Leadership and management qualities are vital components of a real estate broker, particularly a principal. Leading a team of agents is no easy task, but when it’s done right, this can create a successful and profitable brokerage.
Perseverance and dedication are key attributes in pursuing a career as a real estate broker. Both of these will come in handy when it comes to getting the right deals and making connections. It takes time to build a successful career as a broker, if you’ve got the perseverance and dedication, you’ll eventually come out on top.