Real Estate Agent Vs Broker: 7 Key Differences That Could Cost You Thousands

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Are you caught in the real estate agent vs broker debate and wondering which path might be best for your career? Spoiler alert: there’s no one-size-fits-all answer. In fact, some days I wonder if I should even still be in the industry myself (just kidding… maybe)! Each has its own set of pros and cons, and what works for one person might not work for another. So today, we’re going to break down the major differences between a real estate agent and a broker, and I’ll help you decide which role suits your needs.

The Short Answer: Agent Vs Broker

So what’s the difference between a real estate agent and a broker? Technically speaking, a real estate agent and a real estate broker have the same job—they both help clients buy, sell, and lease real estate. The key difference lies in the education and training they’ve received and their ability to manage a real estate business. Simply put, a real estate agent is someone who has passed the state licensing exam and is able to practice real estate under a broker or brokerage. A real estate broker has additional training and has either passed the state licensing exam or worked in real estate for a certain number of years.

My Story

Before I started my real estate career, I worked for a large corporation and ran their global training department. It was a well-paying job, but at the end of the day, it just wasn’t me. And then one day, a friend of mine took me to lunch and said, “Hey, you’re great at teaching people how to do stuff. Why not get your real estate license?” I told her she was nuts! But after some time, I decided to give it a shot. I went to the state board of real estate, took their three-day cram course, and passed the exam on the first try! The board approved my application, and soon after, I got a call from a large franchise company asking me to meet with them.

And guess what?

The recruiter said to me, “You know, real estate agents can become brokers too!” She had been following my career and felt I was a natural fit to move into the role of a broker. She explained to me how being a broker would allow me to start my own business and offer even more value to my clients. This sounded great to me! And so my journey into becoming a real estate broker began.

1. Legal Responsibilities

One of the key differences between an agent and a broker lies in the level of supervision. When you first get your real estate license, you must find a brokerage to work under. This is where the larger companies, like Keller Williams and Coldwell Banker, come into play. If you want to start your own brokerage, you’ll have to get your broker license. But here’s the kicker: each state has different requirements for getting a broker license.

The Agent Perspective

As a real estate agent, you have some responsibility to your clients, but at the end of the day, it’s not entirely on you. For example, the National Association of Realtors (NAR) has a Code of Ethics that we all must abide by. But even if you break one of the ethics, and it’s proven you have broken it, you don’t face criminal charges. Your punishment would consist of a fine, a mandatory class, or a slap on the wrist. So, you can break the law, and your punishment might be a small fine. I’m just saying…

The Broker Perspective

If you decide to get your broker license, your liabilities are different. Not only are you responsible for yourself, but you are also responsible for your agents. If your agents break a rule or get sued, you’re on the hook. Welcome to the big leagues, rookie!

2. Working Situation

In the battle of real estate agent vs broker, working for yourself vs working for someone else can be a double-edged sword. Agents, of course, work for a broker or brokerage. But you don’t just show up and leave. As a team member, you will be required to participate in meetings, training, and other tasks your broker assigns.

The Agent Perspective

As a real estate agent, I worked for a larger brokerage. I was expected to attend weekly meetings and quarterly training. Some agents get annoyed by mandatory meetings and training. I mean, who likes mandatory events? (Besides me!) But you get the picture. Sometimes it’s nice to have a team to fall back on and share the burden of success or failure. If your sale falls through, it’s nice to know you have some people to commiserate with who are going through the same experience. It’s also great to have a little accountability.

The Broker Perspective

Once you get your broker license, you have the ability to work for someone else, work for yourself, or both. Some people decide to become an “independent contractor” and go to work for a larger brokerage under their umbrella. This way, you get the benefits of being with a larger company without the added responsibilities of running your own business.

3. Financial Responsibilities

We’re not going to talk about how much money you can make. Instead, we’re going to break down how you get paid. Both real estate agents and brokers make the same amount per sale. However, the percentages you keep and the expenses you’re responsible for will be different based on the type of company you work for or own.

The Agent Perspective

Real estate agents usually get paid 3% of the sale price. For example, if a home sells for $500,000, that’s $15,000 for you, buddy! You still have to share this commission with your brokerage, desk fees, marketing fees, etc. But that’s a different article! Let’s just say you’ll take home about 60%-70% of the total. Some companies will advertise 100% commissions, but that’s not entirely true. You still have to pay your cap, fees, and split your client’s loyalty with your company.

The Broker Perspective

As a broker, you’ll be able to charge agents a split on commissions and charge them fees to cover their marketing and desk space. If you own the office, you will be responsible for the costs of running the business, like rent and utilities. You will be able to take home a lot more than 60%-70% of your total commission, though. If you decide to charge agents 70%-30%, you will keep the 30% and any fees paid. That’s a nice little bonus!

4. Growth Potential

The big question you should be asking yourself is, “What are my goals?” If you plan to go at this alone, you’ll need to decide between becoming a real estate broker or starting your own brokerage. Growth is possible in both situations, but in different ways.

The Agent Perspective

As an agent, you have the ability to move up in your brokerage and become a team lead. This will give you the ability to mentor other agents and take a cut of their commission. I have been a mentor to new agents in my office, and it’s a lot of work. You need to be available to answer questions and meet with your mentee regularly. I’ve never been a team lead, but I’ve always admired those who are. Team leads will hold team meetings, train the agents, and get involved in their community. So, if you’re looking for a little less responsibility, you might want to rethink this move.

The Broker Perspective

As a broker, your growth potential is limited only by your ambition and your ability to attract agents to work for you. You can open multiple offices, hire other agents, and expand your territory. You can also decide to stay a real estate broker, but mentor other agents in your office. When agents are working under you, you will receive a small percentage of their commission. And if you’ve got the stomach for it, you can open your own brokerage and take home a larger percentage. That’s a lot of risk and investment, though. And in the end, it won’t matter how hard you work. What matters is how well you’re able to attract clients to work with you.

5. Marketing Efforts

Once you decide to work for yourself, you will need to learn how to attract business and clients without the support of a larger company. We all have heard the stories of new agents spending thousands of dollars on real estate coaches and social media training, but the truth is you don’t need a lot of fancy bells and whistles to attract business. You need to figure out who you are and how you’re uniquely positioned to help your community.

The Agent Perspective

If you plan to stay an agent, that’s great! You won’t need to invest any money into the technology side of your business. You can take advantage of the systems already in place at your brokerage. And many of the larger brokerages will have social media and technology classes. You also won’t need to buy errors and omissions insurance until you’re ready to start selling real estate. That’s nice, right?

The Broker Perspective

But here’s the catch. Your commission will not change, but your expenses will be higher. So you will need to bring in more business to take home the same amount as you did before. Also, you will need to learn how to train your agents if they leave for another brokerage. You can only receive loyalty rewards from your agents if they stay in your office. You must spend time building relationships with your team members.

6. Education Requirements

The difference between a real estate agent and a broker isn’t that big of a leap, but it does require more time and effort to get your broker’s license. For some of you, that’s a deal breaker. But for others, it might be an opportunity to really lean in on what you can offer your community. Let’s face it, some people are just not cut out to run their own business. So, if you’re considering taking the plunge into your own brokerage, make sure you can manage your time well.

The Agent Perspective

To become a real estate agent, you must take a state-approved pre-licensing course, study, and then take and pass the state licensing exam. That’s it! You’ll be paying for the course and exam. And the more you spend on those items, the better quality schools will say you are getting. I went through a $400 program to get my license. You can get a license for less than half that price. But I didn’t join Keller Williams until I became a broker.

The Broker Perspective

To become a broker, you must have four years’ experience working as a salesperson and take a certain number of classes before you’re allowed to sit for the licensing exam. It costs more and takes longer to become a broker, but it’s not out of reach. You will need to show up and work harder to become a broker, but it’s worth it if you want to be in control of your career.

7. Knowledge of the Industry

If you are going to enter into the real estate agent vs broker debate, you should know that you will have access to coaching and training at a larger brokerage. And the beauty of being at a larger brokerage is you get to meet other agents and learn from them. I can’t tell you how many times I’ve been at an open house and someone has shown me how to use a new lead gen program. By working with other agents in your community, you will be able to determine what tools work best for you. This access to other agents also helps new agents in building their referral network. I was always looking for other agents to refer my clients to when the transaction wasn’t in my area of expertise.

The Agent Perspective

As a real estate agent, you will have access to coaching, technology training, legal updates, and so on at your brokerage. So why spend more money and take on more responsibility when you can get that training for free?

The Broker Perspective

Well, you’re the boss, and now you have access to free coaching and technology training for your agents! So go ahead and start a team and spend less money on lead generation. It’s a win-win!

Conclusion

In the end, it all boils down to your career goals. What are you looking for in your career? Do you enjoy working with a team and the support of a larger company? Or do you want to strike out on your own and manage every aspect of your career? For me, I love being a broker and running my own brokerage. It gives me the opportunity to show other people how to become successful in their careers and give back to my community. I hope this article has given you some insight into what you want from your career.

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Picture of post by Laura Perez

post by Laura Perez

I’m Laura Perez, your friendly real estate expert with years of hands-on experience and plenty of real-life stories. I’m here to make the world of real estate easy and relatable, mixing practical tips with a dash of humor.

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