First-time house buyers have an exciting time ahead of them as they search for the ideal place to call home. Yet the world of real estate and property ownership can be daunting to understand. This is especially the case when it comes to the different professionals that one is exposed to in the purchasing process. From real estate agents, brokers and Realtors, although these titles may seem similar and have similar functions, there are important differences to keep in mind. To get some clarity on the issue, keep reading.
What is a Real Estate Agent?
A real estate agent is a person who has a specific set of licensing, education and professional skills to help individuals purchase, sell or rent a property. So, what does a real estate agent do? They are responsible for a number of things, not least of which include: getting offers from buyers to present to sellers, presenting offers and counteroffers to sellers, addressing any queries either of the parties may have, helping clients fill out all the necessary paperwork and deal with some of the legalities of the sale-purchase process, help with home inspections, home staging, moving and ultimately, getting the parties ready for the closing date.
So far so good, but this is where it gets a bit more complex. There are several sub-categories of real estate agents and these are:
- Listing agent: this agent is considered a representative of the seller or homeowner. They negotiate purchase prices with buyers in order to get the maximum value for the seller.
- Buyer’s agent: this type of agent is a representative of property buyers. Their main role is to help the buyer find the right home at a price that falls within the client’s budget.
- Dual agent: representing both the buyer and the seller in one transaction that deals with real estate.
- Transaction agent: this agent comes into play when a home buyer does not necessarily employ the services of a real estate agent. In this case, the listing agent helps to prepare and write the offer for them.
How do estate agents get paid?
Real estate agents earn their bread and butter through commissions on every property sold. However, since they work under brokers, the fees they receive will be split with the listing agent, listing broker, buyer’s agent and buyer’s broker.
Here’s an example of this. Some sources put the average estate agent fee for a sole agency contract at 1.18%+VAT. If you were to include VAT, that would lead to a commission percentage of 1.42%. Therefore, if your asking price is £275,000 and you sell for this amount while agreeing to the agent’s fee (which can in some cases be negotiated), you as the seller will be paying the agent £3,905. This figure will then be split between the parties mentioned above, in terms of the internal agreement they have established between themselves.
A tip to bear in mind at this point is to ensure that all marketing materials of your property such as photographs and viewings are included in the commission percentage previously agreed upon. Also worth bearing in mind is that in some cases, it is possible to negotiate an agent’s commission.
What is a Real Estate Broker?
Next, we come to the second piece of the puzzle in the real estate business and that’s the real estate broker. If you’re wondering what does a broker do, we break it down for you. Essentially, a broker is also a licensed real estate agent, but they have completed more stringent educational and professional requirements. For example, a broker will have passed more tests and will also be required to have a certain level of experience working as a real estate agent before they’re able to use the title of broker. The responsibilities of a broker are numerous. While they also help facilitate transactions between buyers and sellers on the property market, brokers can also work independently in a brokerage as well as run one on their own. This gives them more freedom to grow their career path and establish their own real estate business by hiring estate agents to work for them if they choose. Once again, there are several categories of brokers which are explained in more detail below:
- Designated real estate brokers: this individual is responsible for all the agents working under them. They carry all the legal responsibilities for these agents and each of the transactions that each agent completes. They are also known as broker-owners.
- Managing estate agents and brokers: much like the name implies, this type of broker deals with management. What do they manage? In short, all the daily operations of the brokerage.
- Associate real estate brokers: although these professionals have upgraded their real estate license to become brokers, they are not responsible for management tasks and responsibilities or operational aspects of running the brokerage firm.
How do brokers get paid?
Since brokers are usually the parties which manage agents, they’re able to earn more commissions based on the fact that they have several agents working under them. This means that the sale each agent closes will lead to a commission for the broker. However, as an example, a managing broker will also have to factor in fees such as office rental costs, equipment, salaries of other staff, stationery, legal matters and more. This means that although they get paid from several sources, their expenses are higher and these expenses are not, in general, carried by the estate agents.
What is a Realtor?
A Realtor is a property professional who has completed certain levels of training, and has achieved the necessary educational and professional requirements for working in real estate. However, they are also specially licensed by the National Association of Realtors (NAR) in the United States, which also requires that they abide by a certain code of ethics and holds them to higher professional standards than both a real estate agent and a broker.
Now that the basics have been covered, it’s time to look at what does a Realtor do? Their professional duties and responsibilities fall very much within the scope of a real estate agent and broker as they can work as estate agents, too. However, there is more prestige associated with this title because of the additional licensing and certifications they’ve been required to abide by. They also pay the NAR a fee to join them, an annual membership fee as well as take a test every four years to ensure that their knowledge base is constantly up-to-date.
How do Realtors get paid?
Whether an estate agent or a broker, Realtors also work on a commission that’s split between the parties involved. This split can be a 50/50 or a 60/40 split, depending on the internal agreement between them.
Clarifying the Differences
Given that some of the main differentiating characteristics have been outlined, it’s also important to compare and contrast these. For example, what is a real estate agent vs broker or real estate broker vs agent? The main differences arise when it comes to the educational requirements that each party is required to have under their belt. The real estate agent exam is less strenuous, for example, when compared to a broker’s exam. In addition, brokers are typically required to have a certain number of years of experience under their belt to become such, as well as the more stringent testing that they undergo. A possible reason for this is that since a broker will be capable of running their own brokerage of estate agents, they need to have much more thorough knowledge of the business, industry, management, legalities, etc.
There are also significant differences between a Realtor vs real estate agent. One of the greatest ones is the fact that a Realtor is registered with the NAR. This gives them a much wider scope of operations than an estate agent. While they may act as estate agents, they are also required to comply with the NAR’s Code of Ethics, placing more responsibilities on them as professionals. One of the benefits of being a member of the NAR is the fact that it provides access to real estate market data and transaction management services.
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