What’s the Difference Between a Real Estate Agent and a Broker?

What’s the Difference Between a Real Estate Agent and a Broker? article image.

Real estate agents and brokers are both specialists adept at helping their clients navigate the tricky process of selling, buying or renting homes. But brokers typically have more in-depth training than real estate agents, and they often operate in supervisory roles, overseeing agents who work for them.

It's most important to work with an expert who has your best interests in mind and who will help you reach your individual goals with skill and compassion. That means either an agent or a broker could be best for you. But as you embark on the journey to sell, rent or buy a home, the differences between real estate agents and brokers are useful to know.

What Does a Real Estate Agent Do?

Real estate agents must complete certain licensing requirements and pass an exam in their state, which then allows them to represent clients who want to buy, sell or rent a home. An agent with a real estate license typically must work on behalf of a brokerage, which supports and supervises them.

The steps required to get a real estate license and become an agent depend largely on the state of residence. But in general, a prospective agent must have legal U.S. residency, be at least 18 or 19 years old, take specific courses and pass a licensing exam. They must then find a brokerage that will sponsor them as a newly licensed agent, where they can begin to take on clients.

There are several different types of real estate agents. During the homebuying process, you may come across buyer's agents and seller's agents, also called listing agents. A buyer's agent works with a homebuyer to find and tour potential homes, make an offer, negotiate the contract and make referrals to mortgage lenders and home inspectors.

A listing agent represents the seller and helps list the property at the right price, find interested buyers, set up home tours and make sure the final contract takes into account the seller's wishes. Some agents represent both the buyer and seller. Agents are paid on commission, meaning they only earn money on the sale when it closes.

What Does a Real Estate Broker Do?

Real estate brokers must typically have a few years of experience as agents before beginning training as a broker. They complete additional education requirements and pass a separate licensing exam, making their preparation deeper and more well-rounded than that of agents. Brokers learn about insurance, taxes, legal and ethical issues, as well as business management, since they run larger-scale businesses and oversee others as part of their work.

Unlike agents, brokers can work on their own without sponsorship, which means they can start their own firms or work as independent contractors. Their duties include managing the brokerage and supervising agents plus developing and negotiating contracts and serving as expert-level agents during real estate transactions.

There are three main types of brokers:

  • Associate brokers: These perform similar duties to real estate agents, but they have the licensing level of a broker and may receive a higher commission than an agent would. They do not have to be supervised by a broker, but they work at a brokerage that may help them find clients and deal with administrative tasks.
  • Managing brokers: These brokers work in a supervisory role at the brokerage, though they may also work directly with clients on a home purchase or sale.
  • Principal brokers: Also called designated brokers, this type of broker is the person who applies for and holds the brokerage's state license. They are the top manager, supervising the real estate agents at the brokerage, and they may take a salary instead of a commission.

How Are Real Estate Agents and Brokers Paid?

In the real estate world, agents and brokers (other than those who take a salary) receive a commission when a sale is complete. The seller of the home pays the agent's fee, which is typically 5% or 6% of the home's sale price. The supervising brokerage the agent works for will keep a cut of that commission and pay the rest to the agent. Brokers who work on behalf of sellers or buyers, however, can earn commissions without having to split it with the brokerage they work for.

Here's an example of how it works. Let's say a home sells for $400,000, and the buyer and seller each had a separate real estate agent. The two agents will take, all together, a 6% commission, which gets subtracted from the seller's earnings on the home. The commission in this case is $24,000 total.

The seller will split that $24,000 between the buyer's agent and the seller's agent. Each agent's commission payment—in this case, $12,000—will go to the brokerage where they work. The brokerage will then pay the agent based on their agreement. If the agents keep 60% of the commission and the brokerages they work for keep the rest, each agent will receive $7,200 as their fee for the sale.

The Bottom Line

Your community likely has many experienced and trustworthy real estate agents and brokers. Interview several and thoroughly review their qualifications, how well you get along and the successes they've had in your local housing market.

While brokers are the more highly trained of the two, you may decide to go with an agent—and in either case, choosing the best person to represent you when buying, selling or renting is just as important as coming up with a down payment and identifying how much house you can afford. Your agent or broker will be your guide through an often tricky undertaking, and the right one can go a long way toward growing your confidence and comfort during that process.