Planning to buy or sell a home? There's a good chance you'll work with a real estate agent, broker, or realtor. Though all of these real estate pros are licensed to help you buy, sell, or rent a home, they are distinct from one another, especially when it comes to their qualifications and which rung of the professional ladder they occupy.
To put it briefly:
- A real estate agent is licensed to help people buy and sell real estate, and is paid a commission when a deal is completed. The agent may represent either the buyer or the seller.
- A real estate broker does the same job as an agent but is licensed to work independently and may employ agents. Brokers are paid on commission but also get a cut of the commissions of agents who work for them.
- A realtor is a member of the National Association of Realtors [NAR] and may be an agent or a broker, among other professions in the industry.
Key Takeaways
- Real estate agents have a professional license to help people buy, sell, and rent real estate. They must work for a sponsoring broker or brokerage firm.
- Brokers are real estate agents who have completed additional training and licensing requirements. They can work independently and hire other real estate agents to work for them.
- A Realtor is a licensed real estate agent or broker [or other real estate professional] who is a member of the National Association of Realtors [NAR]. Members must comply with NAR's strict Code of Ethics.
Real Estate Agents
Real estate agents are individuals who are licensed to help people buy, sell, and rent real estate. They are ultimately responsible for bringing buyers and sellers together and are paid a commission—usually a percentage of the property's sale price. Real estate agents are also called real estate associates and real estate salespeople.
The requirements for becoming a licensed real estate agent vary by state [there's no federal license]. In general, however, real estate agents 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
What does a real estate agent do?
Real estate agents organize transactions between buyers and sellers, as well as those between owners and renters. Agents are responsible for carrying offers and counteroffers between each party, along with any queries they may have. An agent will work with another agent when an offer is accepted, guiding clients through the process of filling out paperwork. They also make sure their clients are fully aware of any requirements to complete the sale, including home inspections, moving, and important dates such as the closing.
Agents who represent sellers are called listing agents. These agents help set listing prices, suggest home updates that will increase the home's value [and the chance of a successful sale], help with home staging, and market the home via the local Multiple Listing Service [MLS] and other channels. They also negotiate sales prices, closing costs, and other fees and help prepare, submit, and file documents.
Agents who represent buyers are known as buyer's agents. These agents find properties that match the buyer's requirements [aka the "wish list"] and price range and help arrange home appraisals and inspections. Like listing agents, buyer's agents negotiate terms and help prepare, submit, and file the necessary documents.
Agents can act as both listing and buyer's agents [known as dual agency], though typically not for the same transaction because that can create a conflict of interest.
How do real estate agents get paid?
Real estate agents work for brokers or agencies and are normally paid on a commission basis. This means they receive a percentage of the sale price of a property—so the higher the sale price, the higher the commission.
Commissions are sometimes negotiable, but they typically fall somewhere between 5% and 6% of the purchase price. Of course, the real estate agent doesn't walk away with the entire commission. Instead, the commission is typically divvied up between the buyer's agent, the listing agent, and the firms for which the agents work. So, for example, say a home sells for $200,000 with a 6% commission. A typical split might look like this:
- Listing agent: 1.5% [$3,000]
- Buyer's agent: 1.5% [$3,000]
- Listing agent's broker: 1.5% [$3,000]
- Buyer's agent's broker: 1.5% [$3,000]
Real Estate Brokers
A real estate broker is a real estate agent who continues their education and successfully receives a state real estate broker license. Unlike real estate agents, brokers can work independently and start their own brokerage and hire other real estate agents.
What do real estate brokers do?
Real estate brokers do many of the same things that agents do. Brokers who work with buyers normally look for properties that match the criteria set forth by their clients, conduct negotiations, prepare offers, and help the buyers with any other issues leading up to the closing date. Seller's brokers, on the other hand, determine the market values of their clients' properties, list and show properties, communicate with sellers about offers, and assist in the offer process.
There are three main tiers of real estate brokers, with varying degrees of responsibility:
- Associate brokers have broker licenses but choose to work under another broker. In general, associate brokers do not supervise other agents.
- Managing brokers oversee transactions and daily operations in the office. They also hire agents, train new hires, and manage administrative staff.
- Principal/designated brokers supervise real estate agents to make sure they are in compliance with state and national real estate laws. Each real estate office has one designated broker.
How do real estate brokers get paid?
Real estate brokers earn money by taking a share of the commissions earned by the real estate agents who work under them. They also earn commissions from their own deals, but unlike real estate agents, they don't have to split their commissions with "the office."
Realtors
A Realtor is a real estate professional who is a member of the National Association of Realtors [NAR], the largest trade association in the U.S. Although the term "Realtor" is commonly confused with that of "real estate agent," the designation is open to a variety of professions within the real estate industry, including:
- Residential and commercial real estate brokers
- Salespeople
- Property managers
- Appraisers
How to become a Realtor
Anyone who wants to become a Realtor must meet four requirements:
- 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
Next, the person needs to join one of the National Association of Realtors' local real estate associations, pay a one-time application fee, and pay annual membership dues to maintain their Realtor status. All Realtors must adhere to the National Association of Realtors' strict Code of Ethics.
Bound by the NAR's Code of Ethics, Realtors promise to be transparent and honest and to uphold their clients' best interests in all transactions.
As of August 2021, NAR recorded nearly 1.5 million members across the country, 65% of whom were licensed sales agents. Another 22% of these were brokers, and 15% held broker associate licenses. Anyone who is part of NAR is licensed to use the Realtor trademark as part of their name. It cannot, however, be used as a designation of the professional's license status.
Is it Better to Use a Real Estate Broker or Real Estate Agent?
Often, the distinction will not matter much for the buyer or seller of a home. An independent broker, however, may have access to more properties listed by various agencies. A broker may also be able to provide a little bit of wiggle room with their fees because they don't have to share a cut with an agency.
What Is the Difference Between a Buyer's Agent and a Seller's Agent?
Simply put, a buyer's agent assists a potential homebuyer in their housing search. A buyer's agent will typically be able to gain access to properties for sale via other agencies, as well as their own. A seller's agent [also called a listing agent] lists and markets a property for sale. The seller's agent represents the homeowner and may stage the property, host open houses, or feature the home online. When a house is sold, the commission paid by the seller is usually split equally between the buyer's and seller's agents [with their cuts potentially split with their respective agencies].
Can You Use a Real Estate Broker to Rent a Property?
Yes. In addition to buying and selling, real estate agents and brokers help list rental properties and find eligible tenants. When a property is rented, typically the tenant will pay their broker a fee [typically around one or two months' rent], which is split with the listing agent.
Can You Sell a Home by Yourself?
For sellers who are looking to avoid paying hefty commissions, there are ways to list a home as for sale by owner [FSBO]. These can range from a simple yard sign that reads "for sale" to discount listing services that will post the home's listing along with basic photos on the Multiple Listing Service [MLS] for a flat fee. Of course, there will not be any professional staging or marketing to advertise and generate foot traffic to see the home aside from the online listing. In addition, you may still need to pay the buyer's agent's commission when the house is sold.
Mortgage lending and house hunting discrimination are illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report with the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development [HUD].