A real estate agent is anyone who has earned a real estate license. A real estate broker is an agent who has also passed their broker license exam. The primary difference between a real estate agent and broker is that a broker can own a real estate firm or hire agents to work for them.
In this guide, we’ll cover all the technical differences between real estate agents and brokers, and explore the differing benefits, salaries, responsibilities, and how to become a real estate broker if you choose it as the next stage in your career.
We would like to thank Brightwood Real Estate Education, a provider of online real estate courses, for sponsoring this article. Brightwood offers a great e-book on “Launching Your Real Estate Career,” which can be downloaded for free here. All views expressed in this article belong exclusively to Fit Small Business.
5 Benefits of Being a Real Estate Broker vs. Agent
Being a real estate broker vs. agent has significant benefits. Though there is a lot of hard work involved and increased education, being a broker allows you to scale your career in ways that remaining a real estate agent cannot. Here are the five biggest benefits, in our estimation, to becoming a real estate broker.
Benefit 1: Real Estate Brokers Can Run Their Own Brokerage
In order to open your own real estate brokerage, you have to be a licensed broker. And once you do, there are two ways to run your own brokerage. You can either work alone and simply keep all commissions earned from your transactions, or you can recruit and hire other real estate agents or associate brokers to work under your license.
If you decide to recruit and hire other real estate agents or associate brokers to work under your license, those individuals will split their commissions with you, the designated broker. Or, if you’re running a 100% commission firm, they will pay desk fees and other fees that you designate.
If you don’t want to open your own brokerage, but are interested in mentoring and managing agents, you may be interested in a managing broker position. A managing broker oversees other agents and brokers within an existing brokerage, and is often a rewarding position for those with many years of experience to offer.
Benefit 2: Real Estate Brokers Earn a Higher Income
While having additional career options and responsibilities is great, most agents choose to become real estate brokers for a very simple reason: they can make a lot more money as brokers. Here’s a quick summary of the differences in income for real estate agents and real estate brokers from the 2017 NAR member profile report that reflects the year prior.
Median Annual Income of Real Estate Agents vs. Brokers: 2016
|Type of Realtor|
|Broker-Owner (designated broker)|
|Broker-Owner (designated broker) |
|Manager (managing broker)|
|Manager (managing broker) |
|Sales Agent (real estate agent)|
Source: National Association of Realtors 2017 Member Profile
Benefit 3: Real Estate Brokers Have Better Commission Splits
If you don’t have an entrepreneurial streak or prefer the safety of working under another broker, then you can always work as an associate broker. While you more than likely won’t have any additional responsibilities at the brokerage, with your heightened licensure and expertise, you can usually command a higher commission split from the managing broker than most real estate agents.
Being well-versed on commission splits as you enter the market and pursue your goals is important. If you need a refresher, we offer a comprehensive guide to how real estate commission splits work. Knowing where you stand, what your options are, and what you can command will give you a leg up in your path ahead.
Benefit 4: Real Estate Brokers Can Run Property Management Companies
The ability to run a property management company is another reason to get your broker’s license. Property management companies can be thought of as a sort of middleman between the owner of the property and the tenants who occupy it. Since the investment market in rental properties is currently hot, property management can be a great additional revenue stream or a new career option.
If you do not own the property yourself, things like leasing and collecting rents are considered to be real estate activities, something that must be done under a broker’s license. By law, every property management firm must have a licensed real estate broker on staff.
Running property management companies can be a wonderful addition to your income. If you’ve ever thought about owning an investment property yourself to test the waters, we have some fantastic tips for buying your first rental property.
Benefit 5: Real Estate Brokers Have Increased Marketing Opportunities
Showcasing your expertise can help you win new clients. If you have your broker’s license, you are likely more experienced and have completed more training than many real estate agents out there. When clients are looking for future representation (either on the buying or selling side), you now have increased marketability.
Use your training and experience to your advantage when marketing to new clients. A great example of leveraging the real estate broker vs. agent differences could be to highlight your broker credentials in your listing presentation to new seller clients.
The Different Responsibilities of a Real Estate Agent vs. Broker
The main difference between real estate agents and brokers is that only a brokers can own real estate firms or manage agents. If you’re an agent, you’ll need to work under a sponsoring broker. This creates differences in day-to-day responsibilities, as our table below shows.
Real Estate Agent vs. Broker Day-to-Day Responsibilities
|Real Estate Agents and Associate Brokers||Designated & Managing Real Estate Brokers|
Broker responsibilities also vary based on what type of broker you are.
3 Types of Real Estate Brokers
Real estate brokers have varying responsibilities and titles depending on the career path they decide to take. Going from real estate agent to broker opens up a number of possibilities in your career. We discuss the three types of brokers most commonly found in real estate as well as their role within the agencies they work.
Designated Real Estate Brokers
By law, every real estate agent and every real estate agency must be overseen and managed by a real estate broker. Legally speaking, that broker is called the designated broker, and bears the legal responsibility for all transactions that agents working under them complete.
Though they are legally responsible for the real estate brokerage, the amount of participation in the day-to-day running of a brokerage by designated brokers can vary. Some designated brokers take a more hands-off approach and let others handle the daily operation of the brokerage. Others take a much more active role to hire and train agents, manage staff, or even work with clients who are buying or selling homes.
Designated brokers who own the brokerage they are the designated broker for are sometimes called broker-owners as well.
Managing Real Estate Brokers
A managing broker is a real estate broker who manages a group of real estate agents or real estate associate brokers. Some designated brokers also work as the managing brokers at their agency, while some hire other brokers to be the managing broker and take a more hands-off approach to running the agency.
As far as day-to-day operation of the brokerage, all managing brokers take a very active, hands-on role in running the brokerage.
Associate Real Estate Brokers
Also (rather confusingly) referred to as a “broker associate,” an associate broker is simply a real estate agent who has completed the coursework and work experience requirements and passed a state licensing test to become a licensed real estate broker.
Although this license allows them to open their own brokerage as a designated agent and manage other agents as a managing broker, associate brokers instead choose to work under another real estate broker. That means they have the exact same roles and responsibilities at a real estate agency that real estate agents do. They’re just more experienced and better educated than their real estate agent peers.
How to Become a Real Estate Broker
If you want to become a broker, you’ll have to meet educational and experience requirements set by your state’s division of licensing. Although every state has different specific requirements, there are common elements. Being older than 18 years of age, having real estate agent experience, broker pre-licensing courses, and passing a broker exam are found across all states.
While places like Brightwood Education make it easy to meet your state requirements by having their online education segmented by state, the requirements to become a broker will vary depending on where you wish to acquire licensure. Here is a sample of requirements to become a broker in five states: California, Texas, New York, Florida, and Illinois.
Real Estate Agent vs. Broker: Requirements by State
|Real Estate Agent: Education & Experience Requirements||Real Estate Broker: Education & Experience Requirements|
*Illinois has separate designations and requirements for Leasing Agent, Real Estate Broker, and Managing Real Estate Broker
|Leasing Agent License (limited to rental transactions only): ||Real Estate Broker (can do rental and sales transactions):|
Managing Real Estate Broker:
To get an idea of the experience that a broker brings to the table, let’s use New York’s requirements as an example. In order to become a real estate broker in New York, an agent needs to have worked as a real estate agent for two years and successfully completed a certain number of real estate transactions based on a point system. They need a total of 3,500 points to qualify for a broker’s license.
This is how the point system works for common real estate transactions in New York:
- Representing either the buyer or the seller in a residential real estate sale is worth 250 points.
- Selling a commercial building or unit is worth 400 points.
- Leasing a commercial space is worth 150–400 points, based on the yearly rent of the space.
- Completing a rental transaction is worth 25 points.
In order to complete the required 3,500 points of experience to qualify for a broker’s license, a real estate agent in New York would have to complete fourteen residential sales, nine commercial sales, or a combination of residential sales, commercial sales, and rentals.
The Real Estate Broker’s Licensing Course & Exam
After completing their real estate licensing course to get their real estate agent’s license, and accruing the necessary experience required in their state, real estate agents then need to take an additional real estate broker’s licensing course as well as pass their state’s broker’s licensing exam.
The broker’s licensing course is typically as long as the real estate agent’s pre-licensing course and covers similar topics. In New York State, for example, the broker’s licensing course is 45 hours. However, the difference between the real estate agent and broker licensing course is that the broker’s licensing course goes into further detail and covers more advanced topics, like how to run a real estate office, property management, business law, and construction and development.
Taking the Plunge
If you’re ready to move your career to the next level and become a broker, there is no time like the present. Since there are more and more new agents entering the profession every year, taking the steps to differentiate yourself can have a significant ROI almost immediately.
We looked at all the top real estate schools and found Brightwood Real Estate Education offers the best licensing courses for real estate agents and real estate brokers. Their courses are more interactive and are taught by industry veterans, and their online courses offer study groups and webinars that mimic a classroom experience.
Brightwood offers full real estate agent licensing in 16 states, and full real estate broker licensing courses in 13 states. We liked that they have some of the best graduation rates and student reviews. People seem to leave their education feeling prepared, and many busy agents can do it from the convenience of home.
Taking the leap into getting your broker’s license is a big step in your career. While we’ve given you an overview on the process, if you’re still on the fence, feel free to read our in-depth guide on how to become a real estate broker to see if it’s something you want to pursue.
The Bottom Line
Real estate brokers, whether designated brokers, managing brokers, or associate brokers, have more experience, undergo more training, and make more money than real estate agents. They are also the only real estate professionals who can open their own brokerage or property management firm.
Getting the proper education to become a broker doesn’t have the break the bank or be incredibly inconvenient. For busy agents who are already doing the work, Brightwood provides an incredible path to increasing your income and finally getting official validation for what you know.