When you’re selling your home, you want to make sure you get the highest price possible for it. And, when you’re planning to buy, your goal is to get the best home for the least amount of money. That’s why you need representation. But do you enlist the help of a real estate broker, an agent or a REALTOR®? What’s even the difference between them?
Finding the best real estate professional to work with can be stressful, especially when you aren’t sure of their differences. But, don’t worry, real estate brokers, agents and REALTORS® are all legally licensed to represent you in any residential real estate transaction – regardless of whether you’re a seller or a buyer.
It’s common to confuse these three different terms – people mistakenly tend to use them interchangeably. However, there are nuanced distinctions among each type of real estate professional, which you should understand. So, here’s what you need to know about working with a real estate agent, a real estate broker, and a REALTOR®.
What Is A Real Estate Agent?
To understand what a real estate broker or REALTOR® is, you first need to know about real estate agents. A real estate agent is a term that is commonly used to describe any licensed professional who helps individuals in buying, selling or renting real estate.
These real estate agents are more formally referred to as real estate salespeople in order to properly distinguish them from real estate brokers.
Licensing For Real Estate Agents
In order to become licensed, a real estate agent must first take real estate courses. The number of hours of coursework that potential real estate agents must complete varies dramatically by state – from 75 hours in New York to 40 hours in Michigan to 135 hours in California.
After they’ve completed their training courses, real estate agents must pass a licensing exam that is administered by their state. The exam tests their understanding of real estate practices, federal real estate laws and local laws to ensure that all agents have the knowledge and skills necessary to complete industry transactions.
Once real estate agents receive their license, they must find a sponsoring broker or brokerage firm to work for. After doing so, all real estate agents must take continuing education courses every couple of years to maintain their licenses.
Payment For Real Estate Agents
Like real estate brokers and REALTOR®, real estate agents are paid a commission for their service. The commission is a percentage of the purchasing price, which is agreed upon prior to closing and taken out of the money that the seller receives after closing.
A typical commission is 6% of the purchase price, but an individual real estate agent ordinarily walks away with only 1.5%. The reason that the agent tends to walk away with such a small cut is that the commission is first split between the real estate professional representing the seller and the one representing the buyer. Then, the commission is split again between the real estate agent and the broker or brokerage firm (the house) the agent works for.
So, if you sell your home for $300,000, you may be paying out $18,000 in commissions, but the real estate agent you worked with will only be receiving $4,500.
What Is A Real Estate Broker?
Real estate brokers are actually just real estate agents who have the ability to manage their own businesses. That means that real estate brokers can either work independently or hire other real estate agents to work for them.
Licensing For Real Estate Brokers
For agents to become real estate brokers, they must take additional training courses and pass a broker licensing exam after having worked as an agent for a certain number of years.
Again, the exact requirements vary by state – from 45 hours of courses and 2 years of experience in New York to 90 hours of courses and 3 years of experience in Michigan to 360 hours of courses and 2 years of experience in California. Like real estate agents, brokers must also take continuing education courses every couple of years to renew their licenses.
Payment For Real Estate Brokers
Real estate brokers are paid a commission just like real estate agents. The only difference is how much of that commission they get to keep at the end of the transaction.
Brokers who work independently receive 3% of the typical 6% commission because they do not work for anyone with whom they’d have to share it. Brokers who work for a brokerage firm get a cut that’s dependent on the agreement they’ve made with their agency.
What Is A REALTOR®?
A REALTOR® can be either a real estate agent or real estate broker. The only difference between REALTORS® and real estate agents and brokers is that they are members of the National Association of REALTORS®. To become members, they must agree to conduct themselves and their business according to the NAR’s Code of Ethics.
By becoming a REALTOR®, agents and brokers receive discounts and educational resources that are intended to help them improve their practices and increase their earnings.
Licensing For REALTORS®
REALTORS® must take the same courses and pass the same exams as all other agents or brokers in their state. However, to be a member of the NAR, they must also pay the association $150 in annual dues.
What Is A Listing Agent?
A listing agent, or seller’s agent, is any real estate agent, broker or REALTOR® who represents the seller in a real estate transaction. A listing agent will work with a homeowner after having him or her sign a listing agreement, which stipulates that the agent has an exclusive right to sell the homeowner’s property.
Listing agents help homeowners sell their homes by pricing properties, finding stagers to decorate them (if need be), hiring photographers to take photographs of them and listing them on the local Multiple Listing Service.
Once the properties are on the market, these agents market the listings, schedule appointments, show the properties to buyers and buyers’ agents and host open houses.
When an offer has been made, listing agents will negotiate with buyers’ agents (or buyers if they’re unrepresented), ensure that buyers are qualified, supervise home inspections and appraisals, coordinate with attorneys and attend closings.
What Is A Buyer’s Agent?
A buyer’s agent is any real estate agent, broker or REALTOR® who represents the buyer in a real estate transaction. Most buyer’s agents will have home buyers sign a buyer’s broker agreement, which specifies the terms of their relationship. If this contract is an exclusive agreement, the buyer may not work with any other agent to find a home.
Buyer’s agents help home buyers by finding potential listings that meet their customers’ needs and coordinating showings. Once buyers have selected a property, these agents will acquire disclosures on the property, make and negotiate offers, coordinate with lenders and attorneys and attend closings.
Like listing agents, buyer’s agents are paid commissions out of the purchasing price of the property closed, which means that buyers reap the benefits of representation without having to pay for them.
What Is A Dual Agent?
A dual agent is any real estate agent, broker or REALTOR® who represents both the seller and buyer in a single real estate transaction. (Dual agency can also occur when the seller and buyer are both working with agents who work for the same broker.)
Dual agency can often be problematic and is not legal in all states because it creates a conflict of interest. This conflict of interest occurs because all real estate professionals have a fiduciary responsibility to their clients. Meaning, real estate professionals are bound by law to be loyal to their clients and ensure that the decisions they make are in their clients’ best interest.
Dual agency, thus, often becomes a problem when it comes to negotiations. A single real estate professional can’t get the best price for both the buyer and seller in the same transaction.
However, if both parties agree to allow dual agency, a clause can be added to both a listing agreement and a buyer’s broker agreement that ensures both the seller and buyer understand the arrangement and agree to the terms.
Agent, Broker Or REALTOR®: Which Is Right For You?
Since this real estate terminology can be a bit confusing, let’s review. Remember, a real estate agent is often used to refer to any real estate professional handling a real estate transaction.
However, the term “real estate agent” is typically used to refer to a real estate salesperson who represents a buyer or seller and works for a real estate broker or brokerage firm. A real estate broker can also represent a buyer or seller, but a broker is able to work independently or hire other real estate agents to work with him or her. A REALTOR® can be either a real estate agent or a broker but must be a member of the National Association of REALTORS®.
Keep in mind that although REALTORS® benefit from the discounts and resources provided by the NAR, typically, any brokerage firm will provide both their agents and brokers with similar advantages, especially if the firm is on the larger side.
So, when it comes to deciding which type of real estate professional to work with, you really can’t go wrong. While some real estate professionals are better than others, real estate agents, brokers and REALTORS® all have the knowledge and skills needed to help you through each step of the real estate process.
If you’re looking for a real estate professional, Rocket HomesSM can help you find one. All of our agents are highly rated and experienced, so you can rest assured that you’ll receive the best service possible.