What Is A Real Estate Broker And What Do They Do?

There’s a lot of jargon in the real estate industry, making many job titles far from self-explanatory for the casual outsider. For many people, real estate brokers are no exception. So what exactly do they do? Real estate brokers are licensed professionals who help people buy, sell and rent properties. They also hire and manage real estate agents.

We’ll explain how they do this in more detail, their qualifications and the critical role they play behind the scenes in real estate transactions.

What Is A Real Estate Broker?

Real estate brokers are highly qualified, licensed real estate professionals with in-depth knowledge of what it takes to buy, sell and rent property. They understand the objectives and concerns of all parties involved in real estate transactions, including lenders.

Real estate brokers typically begin their careers as licensed real estate agents. In many states, aspiring brokers must gain experience in the field before meeting additional education requirements to qualify for a broker’s license.

What Does A Real Estate Broker Do?

Whether a broker works for themselves or a brokerage, their priorities are to ensure lawful real estate transactions, ensure that all paperwork is correct and complete, and properly record and report all money, such as funds in escrow accounts.

Once they’ve earned their license, brokers oversee the real estate transactions conducted by their real estate agents to ensure compliance with all legal requirements and ethical standards.

Because all real estate agents must work for a broker, you can think of a broker or brokerage firm as the umbrella that covers a real estate agent, like the one you’ll enlist to help you sell your home or purchase a property. Real estate agents handle clients, listings and sales, while brokers oversee each transaction and ensure legal compliance.

Additional Broker Duties

Brokers can do everything an agent can do. They can market a home, write up a contract or represent a buyer or seller. But to take on added responsibilities, like hiring and managing agents, real estate agents need a broker’s license.

Most of the key differences between a real estate broker and an agent lie in what they can and can’t do.

• A broker can move money in and out of an escrow account.
• A broker can mediate conflict in a legal dispute.
• A broker can hire agents.

Types Of Real Estate Brokers

There are three types of real estate brokers: associate, managing and principal/designated broker.

Principal/Designated Broker

A real estate brokerage will employ a principal broker who is responsible for all operations and transactions at the firm. Think of them as the CEO of the brokerage. They have the highest level of authority and shoulder the most responsibility.

The principal broker ensures all agents comply with state real estate laws, all transactions are financially and legally compliant and zero fraud is being committed.

Because of the legal implications inherent in each real estate transaction, every brokerage firm must have a principal broker for their office at all times.

Managing Broker

A managing broker has a broker’s license and handles the day-to-day operations of a brokerage. Think of the managing broker as handling more of the HR functions than the real estate transactions that come under the principal broker’s scope of work.

For example, a managing broker would typically handle all agent licensing issues. They would also onboard, train and mentor new agents and facilitate continuing education opportunities for all agents.

Some principal/designated brokers act as managing brokers, but that’s not an industry norm.

Associate Broker

In bigger brokerages, the principal broker will hire salespeople and associate brokers to help with the workload. Associate brokers – also known as broker associates, broker salespersons and affiliate brokers – can act as the broker’s agent when conducting real estate transactions.

Associate brokers are typically independent contractors. They can only work for one broker or brokerage at a time.

How Do Real Estate Brokers Affect You?

For most home buyers and sellers, the broker isn’t the one who maintains the relationship with the client. Buyers and sellers typically work directly with a real estate agent, building a relationship with them. The agent’s broker generally works behind the scenes to complete the legal aspects of the transaction. In most real estate transactions, the buyer or seller doesn’t see or interact with the broker.

Don’t worry if you never meet your agent’s broker. The broker is busy verifying the paperwork behind the scenes. Your agent is qualified to help you through your entire real estate transaction.

How Are Real Estate Commissions Split Between Agents And Brokers?

Real estate agents typically work for a standard commission, which is commonly negotiated to 6% of a home’s purchase price.

Let’s say you list your home with a brokerage, and a buyer submits a contract to purchase your home for $200,000. You agree to pay 6% of the purchase price in commission fees. Your listing broker will get 3%, and the broker who brought in the buyer gets 3%.

You might think your agent is walking away with a $6,000 check for all their hard work. But in reality, your agent will split their commission with their broker.

Suppose the listing agent has agreed to an 80/20 split with their broker, and the buyer’s agent has a 70/30 split with their broker. Here’s the breakdown of the 6% total commission ($12,000 in this example):

• $4,800 to the listing agent.
• $1,200 to the listing broker.
• $1,800 to the buyer’s broker.
• $4,200 to the buyer’s agent.

Splitting commissions between agents and brokers is standard practice in the real estate industry. Commission splits cover a broker’s expenses, like administrative services, and agent supplies, like keys and lockboxes, and yes, earn money for their work, too.

Brokers may also earn commissions on transactions for personal clients. So, in the example above, if the broker is the broker-owner and the listing agent, they would keep every penny of their 3% commission on the $200,000 house. In addition to commissions, brokers can make money in other ways, such as charging agents a monthly fee to cover administrative services, regardless of an agent’s performance.

How Do You Become A Real Estate Broker?

While specific requirements will vary by state, to become a broker, you must be a licensed real estate agent for a predetermined time, be at least 21 years old and live in the state where you’re applying for a brokerage license.

A broker must complete a minimum number of hours of broker education, pass a state licensing exam and have a clean criminal record. These requirements will also vary by state.

The Bottom Line: Brokers Bear More Responsibility

A real estate broker has earned a higher-level license that grants them greater authority and broader responsibilities. Some brokers work at the management level, while others use their brokerage license to work independently. Either way, you can work with a broker or agent on your upcoming real estate transaction.

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