The real estate industry is full of words that might be tricky to understand. For that reason, we’re building our glossary to clarify most of them at Real Estate IQ. But today, we wanted to go a little further and address three words that aren’t synonyms, though sometimes are used interchangeably. We’re talking about realtors, real estate agents, and real estate brokers.
First, all of them designate types of real estate professionals that help people buy, sell, or rent a home. And they also have in common a mandatory license to be able to work. However, they differ in their qualifications, and therefore, there are things that some of them can’t do. Think of it as a game: each certification you get unlocks a series of possibilities.
What’s a real estate agent’s job?
Let’s begin with agents. Their mission is to organize transactions between buyers, sellers, and renters. They’re in charge of providing information regarding a property sale, carrying offers and counteroffers, and guiding their clients to fill out the paperwork.
The requirements for becoming a real estate agent vary among the states, but in general, they must:
- Be at least 18 years old.
- Be a legal resident of the U.S.
- Complete their state’s required pre-licensing class.
- Take and pass the state real estate license exam.
- Complete a background check.
- Be sponsored by a licensed real estate broker.
- Complete the continuing education classes required to maintain the license.
In order to get the state license, pre-licensing training is required (keep in mind that the number of hours needed varies by jurisdiction). After that, applicants must take a written exam, generally divided into two parts: one on federal real estate laws and general real estate principles, and the other on state-specific laws.
They’re also known as real estate associates and real estate salespeople. If they represent the buyer, they’re called buyer’s agents, while the ones representing the seller go by the name of listing agents. The first ones are involved in the setting of listing prices, as well as publishing the home in MLS listings, home staging, and negotiating closing costs. The second ones find properties for their clients, assist with the appraisal process and home inspection.
Real estate agents can’t work by themselves. They need to work for a broker or an agency. They’re paid on a commission basis, typically subjected to the sale’s price.
What is a realtor?
A realtor is a real estate agent or broker – or property managers, appraisers, counselors, and so on – registered in the National Association of Realtors (NAR). In fact, the term realtor is a trademark that identifies NAR members. To become part of this association, you need to abide by their code of ethics.
To become a realtor, the following requirements must be met:
- Have a valid and active real estate license.
- Be actively engaged in the real estate business.
- Not have a record of official sanctions involving unprofessional conduct.
- Not have filed for any recent or pending bankruptcy.
If you’d like to become one, first you have to join a local real estate association. Then, you’ll have to pay a one-time application fee and an annual membership fee to maintain your status. Plus, as we mentioned before, you must adhere to the NAR’s strict code of ethics. It consists of 17 articles, but the central command is to be transparent and honest and to uphold their clients’ best interests in all transactions.
Defined as America’s largest trade association, NAR currently has more than 1.4 million members, 1,200 local associations/boards, and 54 state and territory associations of realtors.
What does a real estate broker do?
Lastly, it’s time for the brokers! Real estate brokers are agents that moved one step forward with their careers. After getting their license, they continued their education, took another exam, and obtained a new one, which entitles them to new options. Perhaps the most significant one is that they can work by themselves and don’t need to be part of an agency anymore.
Aside from that, they mostly do the same things agents do: search for properties, negotiate offers, inform their clients, and assist with the sale process. They also earn by the commission; however, besides getting a percentage of their sales, they also receive a portion of their agent’s commissions.
In this case, the exam also varies state by state, but they’re usually educated on ethics, contracts, taxes, insurance, law, real estate investments, construction, and property management. Although some of the topics were covered by the agent’s license, the broker’s course gives a more in-depth level of knowledge needed to run a business. Applicants tend to have a few years (around three) in the industry before moving forward to this next stage.
According to their responsibilities, there are three types of real estate brokers:
- Principal/designated broker: this is the person that oversees all agents at a firm and ensures that they’re performing according to the law. Each real estate office has one.
- Managing broker: in this case, it’s the person responsible for overseeing the day-to-day operations and transactions of the office, hire and train new agents, and manage administrative issues.
- Associate broker: also known as a broker associate, broker-salesperson, or affiliate broker, it’s someone that has a broker’s license but chooses to work under a managing broker. In this case, he or she doesn’t supervise other agents.
As you can see, differences can be subtle in some cases or add responsibilities in others. And it’s possible to combine these professions if you meet the requirements. For instance, you can be a real estate agent that is also a broker and a realtor, or you can be a real estate agent that is a realtor as well. You could also be a broker that works as a real estate agent, though that’s not possible the other way around. Nevertheless, it’s helpful to analyze the differences to understand the possibilities at each stage and plan ahead.
Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.