Just like everything else, real estate professionals come in all shapes, sizes, structures, and philosophies. They may have ideas, strategies, and tactics that span from one end of the spectrum to the other. But when you’re getting ready to hire someone to help you sell or buy what may potentially be the most valuable and expensive assets you’ll ever own, or to manage your real estate property management portfolio, it helps to understand some of the differences so you can make a good educated decision. Although both agents and brokers can assist you with finding homes for sale, there are substantial differences between the two.
Agent vs. Brokers
To start from a simple perspective and work down, let’s compare the two basic types of real estate licenses… a real estate broker versus a real estate agent (sometimes also called a real estate salesperson). Generally speaking, a real estate broker is an individual licensed by their state to negotiate a real estate transaction from start to finish, independently of anyone else. A broker’s license is often the highest level of licensing one can obtain to transact real estate activity. A broker can do just about anything, within the law, to acquire, contract, negotiate, and close any real estate purchase or selling transaction.
Difference Between Real Estate Agents and Brokers
As a real estate broker gets busier and busier, he or she might decide to hire real estate agents to assist him or her. Real estate agents have a limited authority and are only licensed to act on behalf of an employing broker. This means the sales agent may not be the highest person in your real estate chain of command. A real estate broker can operate without any real estate agents, but real estate agents usually cannot operate without a real estate broker. Sometimes, to make it easy to understand, I use an example of a doctor and a nurse. Both professions are similar, but a nurse is almost always operating under the supervision of a doctor. Both have different licenses, and both have different roles and responsibilities. So if you ever experience difficulties with your agent (or nurse), you always have the supervising broker (or doctor) to go to for additional help.
The Relationship Between Real Estate Agents & Brokers
Many times buyers and/or sellers have a specific confusion when it comes to agent and broker relationships. In the majority of sales or purchase transactions, a real estate agent may be the only person you ever see, the only person physically assisting you with your buying or selling transaction… but every agent will always have a supervising broker. Clients just aren’t always aware there is a broker in the background providing supervision, advice, and the legal authority necessary for the agent to operate. Now this doesn’t mean that a broker can’t do the same job as an agent; in fact, many times they do. It’s just that there are more agents in the world than there are brokers, and depending on your particular state laws, a person usually has to work as an agent for a few years before they can get a broker’s license.
Different Types of Real Estate Brokers
Now, not to confuse matters worse, there are also two different positions a broker can fill within a real estate brokerage (or real estate company). One is frequently referred to as a Managing Broker, and the other is referred to as an Associate Broker. A Managing Broker is usually the person with the highest level of authority and is responsible for managing sales agents within their firm or brokerage. A Managing Broker can employ both Sales Agents and Associate Brokers. An Associate Broker, simply put, is a person holding a full broker’s license, but has chosen only to operate in the capacity of a sales agent. An Associate Broker may have the exact same license as a Managing Broker (although in some states, the licenses may differ very slightly). Associate Brokers just don’t bear the additional responsibility of supervision. Just in the same way that a sales agent is acting as an extension of the managing broker, an associate broker is operating in the exact same capacity as a sales agent.
Different Types of Brokerage
Brokerages, or Real Estate Companies, are not all the same either. Some brokers operate independently from large major firms, similar to how attorneys and doctors enter into “private practice”. Other brokerages are comprised of one office, such as a mom-and-pop real estate office in your small hometown, while others may be regional or even national franchise firms. There are pros and cons of franchises vs independent real estate firms. Franchises, by nature, are not nation-wide companies. Many of the major real estate franchises you are familiar with in the states are also in Canada such as RE/MAX.
They purchase the right to use a name, marketing materials and protocols. Many times, franchises are usually small firms also. Good examples of national real estate brokerage franchises are Weichert Realty, ReMax, or Century 21. Be aware, in addition to real estate brokerages, there are also other types of companies who only specialize in advertising, lead generation, and promotion of others’ real estate companies. Many people are often surprised to learn that companies like Zillow, RedFin, and Trulia are not real estate companies at all… they are, in a nutshell, advertising agencies who use data pulled from real estate multiple listing services (MLS’s) to spread the word about other company listings in exchange for marketing and advertising fees.
What the Hell?
Why would anyone choose to be an associate broker? That’s a good question with many possible reasons, but it probably comes down to the associate broker simply not wanting to supervise or run business operations of the brokerage. Maybe they got their broker’s license simply for personal achievement and never actually stepped into a management role. Maybe they did work as a managing broker and just didn’t like it. But the way real estate licenses work, you only move up, not down. It’s a one-way street of sorts. So in the event that someone gets a broker’s license, but doesn’t prefer the management role, they may choose to become an associate broker. Real estate licenses don’t revert back down from broker to agent. Once a broker, always a broker… but it’s up to the individual to decide what role they want to fill.
So in summary, it helps to know if the person sitting across from you (or next to you) at the negotiating table is a broker or an agent. For more information on the differences between agents and brokers, please contact us at any time.