Becoming a real estate broker brings more career options, a higher earning potential, but also higher liabilities. Is it worth the effort becoming a broker, or are you better off staying as a real estate salesperson?
Are you a real estate agent looking to expand his/her career? Do you want to build a real estate team? Would you like a better commission split for every transaction?
If so, you may already be considering becoming a real estate broker. Though becoming a broker takes a lot more education and effort, and you'll have more responsibilities and financial liabilities, real estate brokers typically make more than real estate salespeople and have more career options.
On the other hand, real estate salespersons have fewer hassles, fewer financial liabilities, fewer educational requirements, and can still make good money.
So is it worth the hassle of becoming a real estate broker? Or are you better off staying as a real estate salesperson?
Let's take a closer look.
What is a Real Estate Broker?
If you’re already a licensed real estate agent, you already know what a real estate broker is. But for the sake of completeness, let’s define what exactly do we mean by real estate broker.
A real estate broker is a real estate professional that in addition to meeting all the educational and legal requirements of a real estate salesperson, has also met all the additional educational, legal and experience requirements of a real estate broker.
Every broker starts as a real estate salesperson (the legal term of a standard-issue real estate agent). But not every real estate salesperson becomes a real estate broker.
It helps to think of a real estate salesperson as someone that has a bachelor’s degree, while a real estate broker has a master's degree.
But if we're talking about big picture differences, the biggest one is that a broker can legally own, run and operate a real estate firm (or property management firm), and hire other licensed real estate agents to work there.
A real estate salesperson can only hire non-licensed assistants for other non-real estate related tasks.
Since real estate brokers oversee all real estate salespersons they hire, they are ultimately the ones who take legal responsibility for any real estate transaction that takes place in their firm.
Just like there are buyer and seller agents, there are several kinds of brokers. The most common ones are:
Designated Real Estate Brokers
Whenever we think of the typical real estate broker, the image that first comes to mind is that of a designated broker.
A designated broker is typically a broker that both owns and operates a real estate firm.
They are responsible for hiring and training new agents, establishing company policies, rules, and procedures, purchasing software and tools, developing big-picture marketing strategies, setting company financial goals, and making sure their agents have all the tools they need to succeed.
Though designated brokers are legally responsible for a real estate brokerage, their actual involvement in day-to-day operations can vary significantly from broker to broker.
Some brokers love being in the frontline and take a hands-on approach when it comes to training new agents. They might accompany them to listing interviews, difficult closings, open houses, and other real estate activities.
Others prefer to act more like managers and let other agents (and even brokers) handle the daily operations of the brokerage.
A broker’s income growth lies in the success of their agents. It’s in their best interest to train and empower the team and provide the tools they need to thrive as a salesperson.
Managing Real Estate Brokers
A managing broker is a licensed broker that has met all the legal and educational requirements to earn their broker's license. But instead of owning and operating a brokerage, they are hired by a designated broker to oversee the day-to-day management of the latter's real estate firm.
As their name suggests, they are primarily managers. They assist and train agents, coordinate marketing, handle disputes among agents, oversee transactions, and documentation, etc.
Managing brokers must remain up-to-date on their state's real estate laws and city ordinances, and inform any agents they oversee about any changes or legal issues they need to be aware of. That way they can help less experienced real estate agents catch mistakes on their paperwork, offers, and marketing efforts.
Associate Real Estate Brokers
Associate brokers are real estate professionals that have met all the requirements to become a real estate broker, but instead of acting as a broker, they work as a regular real estate salesperson.
While it may seem like a step-down, there are actually a number of advantages to this decision. Because associate brokers have more real estate experience and education than a typical real estate salesperson, they are able to command more favorable commission splits from their broker.
They also have less financial and legal liability than a broker and fewer overall responsibilities.
Benefits Of Becoming A Real Estate Broker
1. More career options
One of the main reasons someone might want to get a broker's license is if they wish to operate and/or own their own real estate brokerage. This typically means hiring real estate agents, assistants, marketers, and other staff members. But there’s nothing preventing a broker from running a one-person operation if he/wished to do so and keep 100% of the commission.
Of course, running a one-person operation is easier said than done, since it would mean that the broker must handle ALL the tasks needed to keep a brokerage running.
On the other hand, the broker can also choose to hire other real estate agents and brokers and focus on managing the brokerage instead. And if at any point the broker decides to work as an associate broker and simply focus on doing the same tasks as a real estate salesperson, that's always an option too.
Finally, a broker also has the option to run a property management company. In most states, renting out and managing property, collecting rent and finding tenants for a third party are considered real estate activities, which must be done under the supervision of a real estate broker.
2. More Money Career options are great and all. But if we’re being honest here, one of the most appealing reasons why someone might become a real estate broker is having a higher earning potential.
Real estate brokers make on average significantly more money than real estate agents.
According to GlassDoor, real estate brokers make an average of $75,935 in the USA, whereas real estate salespersons make $51,392 on average.
3. Associate Brokers Are Seen As More Trustworthy And Experienced The majority of real estate brokers have more experience in the real estate industry than many agents. That's by design since experience as a real estate salesperson is one of the requirements of a real estate broker state exam.
In fact, a large number of brokers go beyond the minimum educational requirements of a broker and choose to earn additional specializations and real estate designations.
For this reason alone, prospects looking for a real estate agent are more likely to choose an associate real estate broker than just a regular real estate salesperson.
Brokers can use this to their advantage by including in their marketing material the fact that they are experienced brokers and mentioning their certifications and designations.
Finally, associate brokers can use their extensive experience and certifications as leverage in order to get better commission splits with their managing or designated broker.
Benefits of Staying As A Real Estate Salesperson
1. Agents Have Fewer Licensing Requirements
Compared to a real estate broker, real estate salespersons must meet relatively few requirements.
To work as a real estate salesperson you must:
- Be at least 18 or 19 years of age (depending on your state).
- Have legal US residency.
- Complete your state's required pre-license education.
- Pass your state's real estate license.
- Find a brokerage willing to hire you.
On the other hand, real estate brokers have the following requirements:
- Must have met all the requirements of a real estate salesperson license.
- Must have a clean criminal record.
- A minimum of two years full-time licensed salesperson experience within the last 5 years, or equivalent experience (depending on your state).
- Must have passed 8 college-level broker courses.
- Pass your state's real estate broker license exam.
2. Agents Have Limited Financial Liability
Real estate salespersons are not allowed to own their own brokerage, hire other licensed salespersons, nor manage them. While this does limit their earning potential, it also means that they can't be held responsible for the actions of other licensed agents.
Their broker is the one legally responsible for any real estate transaction that occurs in the brokerage.
3. Agents Have Fewer Management Responsibilities
While successful real estate salespersons are always busy, they are primarily responsible for their own success, not the success of others.
That means that they can focus on giving the best client representation they can, and on improving their own marketing efforts.
Becoming a Broker Is More Than Getting A Shiny New Title
The life of a broker isn't easy. While there are some significant advantages to getting your broker's license, it's not cruise control for success.
Just because you got your broker's license doesn't mean you will automatically make more money. Higher earning potential is just that: a higher potential. Achieving that potential requires a ton of work, dedication, and applied knowledge.
Your motivation should not be just to have a more impressive business card either. Real estate professionals are quite familiar with the differences between a broker and a salesperson. But the general public might not always know the difference.
If you decide to become a broker, it should be because you're genuinely interested in running your own brokerage, you enjoy the additional responsibilities of management, not just the additional prestige or earning potential.
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