Duties | Pay | Licensing | Broker vs. agent | Vs. salesperson | Vs. Realtor | Who should I hire? | Types
Real estate broker definition
A real estate broker is an agent who holds an upgraded real estate license that requires additional experience and education. Like other agents, they can represent buyers and sellers in real estate transactions. However, unlike most agents, they're also licensed to start their own brokerage firms and supervise other real estate agents.
Note that, depending on the context, the word "broker" may be used as shorthand for two terms that are related, but have slightly different meanings:
- Brokerage: A company that arranges real estate transactions
- Designated/managing broker: A broker in charge of supervising other agents at a brokerage
In this article, we'll use "broker" to refer to any real estate agent who possesses a broker license.
What does a real estate broker do?
At a basic level, a real estate broker helps mediate property transactions between buyers and sellers. However, what an individual broker's job description looks like depends on their role within their firm.
The three most common roles are:
An associate broker fills the role of a "typical" real estate agent. They spend most of their time working with clients, helping them buy and sell property.
The designated broker is the person ultimately responsible for running a brokerage. When someone talks about "the broker" at a company, this is who they're most likely talking about.
A designated broker's duties include activities like:
- Hiring and training agents
- Ensuring the firm maintains legal compliance
- Preparing contracts
- Managing the firm's finances
- Mediating conflicts with other brokerages
The designated broker is often the company's owner, but depending on state regulations, a brokerage owner may be allowed to fill this role with a qualified employee.
This position has different names in different places; it's sometimes referred to as principal broker, qualifying broker, or broker-in-charge.
At some brokerages, the designated broker delegates supervision of the firm's day-to-day operations to a managing broker. The managing broker reports to the designated broker, who still bears final responsibility for running the company.
Note that these are just general descriptions. Actual responsibilities for associate, designated, and managing brokers could differ between brokerages, and naming conventions for these roles vary throughout the country.
How much brokers make - and how they get paid
The average broker earned a median of $78,900 in 2019, according to a report from the National Association of Realtors (NAR).
However, income varies significantly based on a broker's role within their company. Brokers who own their own firm make nearly double the gross income of associate brokers.
|Main Role||Median Gross Income|
|Managing Broker (Employee)||$91,000*|
|Designated Broker (Broker-Owner)||$121,400*|
|*Earnings include only brokers who work in a purely supervisory capacity. Broker-owners and managing brokers who also sell earn a median of $93,800 and $100,000, respectively. Source: National Association of Realtors 2020 Member Profile|
Like other real estate agents, associate brokers normally earn most of their income through commission on the homes and other properties that they help sell.
» MORE: What Is Realtor Commission?
An associate broker's income depends on two variables:
- The total value of their sales for the year
- Their "commission split" with their company
How commission splits work:
When a real estate agent sells a home, their firm earns a "commission" for helping close the deal. The average commission rate is 5-6% of the purchase price, which is divided between the two brokerages representing the buyer and the seller.
Each brokerage "splits" their share of the commission with the agent who represented them in the transaction. Split ratios vary tremendously between companies and often fluctuate based on an agent's performance.
As an example, Keller Williams and their agents have a 64/30/6% split:
- 64%: The agent's share
- 30%: The brokerage office's share
- 6%: The Keller Williams franchise fee
Once Keller Williams agents hit their annual "commission cap" — which ordinarily takes around 8-10 completed home sales — they keep 100% of their commission for the remainder of the year.
Brokers who own their own brokerage collect a portion of the commission on all deals their agents close. And on transactions where they act as the agent themselves, they keep all of their firm's share of the commission.
Brokers employed in supervisory roles may earn a base salary in addition to performance-based incentives, such as a gross percentage of agent commission or a share of the brokerage's net profit.
Broker licensing requirements
Real estate licensing is regulated at the state level, and requirements to become a broker vary significantly based on location.
In general, applicants must possess several years of full-time experience as an agent with an entry-level license, complete additional education in approved real estate courses, and pass a licensing exam.
Depending on the state, agents may need to upgrade to an even higher license level to open their own brokerage or serve as a company's designated broker.
The entry-level real estate license is called a "broker" license in nine states: Colorado, Illinois, Indiana, New Mexico, North Carolina, Oregon, South Dakota, Tennessee, and Washington.
Entry-level brokers in these states are roughly equivalent to salesperson licensees in other parts of the country. They must still "upgrade" to a higher license level before they can manage other agents, start their own brokerage, or conduct other activities typically reserved for brokers.
To learn more about becoming a broker, read about this career field in the U.S. Bureau of Labor Statistics' Occupational Outlook Handbook. You can check your state regulatory agency's website for specific licensing requirements.
Broker vs. real estate agent
All brokers are real estate agents, but many agents are not brokers.
Real estate agent is a general term that refers to any person licensed to help consumers buy and sell homes, either independently or on behalf of a brokerage.
A broker is a specific type of real estate agent who is qualified to take on more responsibilities than an entry-level agent. Agents must accrue multiple years of experience and complete advanced coursework before they can "upgrade" to this license level.
There are several benefits of becoming a broker. Most significantly, it may increase an agent's earning potential by broadening their career options.
While entry-level agents must work under a manager's supervision, brokers can take on a supervisory role or start their own company and recruit agents to work for them.
In some states, brokers can also affiliate with more than one brokerage. So, an agent could work as an associate at one firm while running their own property management company on the side.
Broker vs. real estate salesperson
Although both real estate brokers and salespeople are licensed agents, a broker may work independently, while a salesperson must operate under a broker's supervision.
In most states, "broker" and "salesperson" are the two main categories of real estate agent licenses.
The "salesperson" license is for entry-level agents. It doesn't require any previous experience — just several dozen hours in a classroom and a passing grade on the licensing exam. This license technically qualifies agents only to practice real estate on a broker's behalf.
The "broker" license is for experienced agents ready to take a step up the career ladder. It generally authorizes them to start their own brokerage or begin working in a managerial capacity at their current firm.
Virtually all brokers begin their careers as salespeople, and they sometimes continue to work in a salesperson role even after obtaining their broker license. These brokers are usually called "associate brokers," "broker associates," or "broker salespeople."
Broker vs. Realtor
Although "realtor" — with a lowercase "R" — is often used as a generic term for real estate agent, the word Realtor technically refers only to members of the National Association of Realtors (NAR), a trade group for real estate professionals.
A broker may or may not be a Realtor, depending on whether they're a member of NAR.
NAR is a private organization, not a licensing board. Membership isn't necessary for a broker or any other agent to practice real estate.
» MORE: What Is a Realtor?
Should I hire a broker?
Most of the time, a real estate agent's specific license level shouldn't be the most important factor in who you hire to help you buy or sell a home.
What matters most is finding a veteran agent who you trust to help you navigate one of the most life-changing financial journeys you'll ever make.
We recommend discussing your concerns and expectations before you commit to working with any real estate professional.
Glossary: Common broker types and definitions
Below, we've compiled a list of common broker types you may encounter during a home sale or purchase, along with their general definitions.
Note that these terms are somewhat fluid and may have slightly different meanings depending on the context. For example: while "qualifying broker" is often used as a general term for a firm's top broker, it represents a specific license level in New Mexico.
|Associate broker (or broker associate)||A licensed broker who works in the capacity of a salesperson under the supervision of another broker|
|Broker-in-charge||The broker ultimately responsible for all real estate activities within a brokerage|
|Designated broker||The broker ultimately responsible for all real estate activities within a brokerage|
|Employing broker||A broker licensed to open a brokerage and hire agents to work under their supervision|
May also refer to the brokerage itself
|Independent broker||A broker licensed to arrange real estate transactions without supervision|
Depending on state regulations, an independent broker may be allowed to be self-employed but not authorized to hire other agents
|Listing broker||A broker or brokerage who represents a seller in a real estate transaction|
|Managing broker||A broker licensed to manage other real estate agents|
May be the top broker in a firm or may work under the authority of a designated broker
|Principal broker||The broker ultimately responsible for all real estate activities within a brokerage|
|Provisional broker||The entry-level real estate agent license in North Carolina|
|Qualifying broker||The broker ultimately responsible for all real estate activities within a brokerage|
|Real estate broker||A real estate agent licensed to arrange property transactions between buyers and sellers, with or without supervision|
Note: In some states, "broker" is the entry-level license, and licensees must operate under the supervision of a higher-level broker
|Responsible broker||The broker ultimately responsible for the supervision of real estate agents at a brokerage|
May refer to an individual broker or the brokerage as a whole
|Self-employed broker||A real estate agent licensed to arrange real estate transactions under their own name or at their own company|
|Selling broker||A broker or brokerage who represents a buyer in a real estate transaction|
|Sponsoring broker||A broker licensed to hire and supervise other agents|
May refer to an individual broker or the brokerage as a whole
|Transaction broker||A real estate agent who arranges a transaction between a buyer and seller without representing either party|