One of the ways to get into the real estate business is to become a broker, but what is a real estate brokerage? How different is it from being a real estate agent or a realtor? What are the accompanying duties? Get a better understanding of the real estate industry by knowing about brokerage.
WHAT IS A REAL ESTATE BROKERAGE? | KNOW THE ANSWERS – AND MORE
In This Article:
- The Difference between a Real Estate Broker, Agent, and Realtor
- Licensing and Insurance
- Brokerage Firms: The List of Duties
- Working with Real Estate Agents
- Broker Commission and Work Environment
- Bringing Value to Clients
THE DIFFERENCE BETWEEN A REAL ESTATE BROKER, AGENT, AND REALTOR
What is a real estate brokerage? Some people may say they are agents. Others may use the word “realtor.” These are different types of work.
A real estate agent must work for real estate brokers. They cannot work on their own. They also need to pass the state requirements and obtain a real estate license. In some states, an agent can be under one brokerage only.
Brokers may work for themselves, build a real estate brokerage firm, and hire real estate agents. They may also deal with other brokerage firms. But, because of the nature of their business and work, the state requirements can be tougher. For one, they need to pass the brokerage exam.
Contrary to popular belief, the term “realtor” is not generic. Only those who are members of the National Association of Realtors (NAR) can use it. The members, however, can be different professionals. These include sales agents and transaction brokers. They need to abide by the association’s code of ethics and other rules to remain.
LICENSING AND INSURANCE
The answer to “What is a real estate brokerage?” also depends on the state. The rules on real estate broker’s license can vary. In New Mexico and Colorado, for example, all real estate professionals are licensed as brokers. However, to hire other brokers or agents, you must apply for a higher-level license. The states may also specify the number of education hours and fulfill continuing education requirement.
Brokers must also have errors and omissions insurance (E&O). In the event of an error or omission by the broker or any of its agents, the client can sue. A good E&O policy will cover certain costs from a lawsuit and/or settlement.
BROKERAGE FIRMS: THE LIST OF DUTIES
A broker may work for a commercial or residential seller and/or buyer. The duties vary, depending on the type of broker you are. Most brokers are both sellers’ and buyers’ agents. When another agent or broker sells a property from a different broker or agent, the two agencies split the commission.
Some brokers may be agents. They represent both the buyer and seller, although in some states, dual agency is not legal.
A brokerage firm may be dual if:
- You are selling a property, and a buyer contacts you to show the property. You are working for both the buyer and the seller.
- Two brokers or agents from the same real estate brokerage represent the buyer and seller, respectively.
When a state does not allow dual agency, the real estate broker works as a transactional broker. They do not represent either the buyer or the seller, but facilitate the transaction through exchange and explanation of documents.
DUTIES OF A SELLER’S BROKER
A seller’s broker may have the following obligations:
- Listing properties for sale on multiple listing services (MLS) or on LoopNet
- Advertising the property on social media and other venues to attract as many potential buyers as possible
- Advising the property seller in preparing the property for pictures for the listing and showings
- Sharing the listing with other real estate professionals to get buyers to the property
- Supervising the showing, including arranging a time between the buyer’s agent or broker and the seller
- Reporting any feedback and/or results to the seller
- Submitting offers to the seller
- Aiding the seller with offer negotiation
- Executing a purchase contract between the buyer and seller
Once the buyer and seller sign the purchase contract, the seller’s broker works on behalf of the seller. These include delivering documents and explaining all the disclosures and transactions related to the sale. The broker also works with the seller through closing and ensures it goes smooth.
DUTIES OF A BUYER’S BROKER
A buyer’s broker represents the buyer of a property and provides the following services:
- Showing buyers new properties
- Locating properties for buyers that meet their needs or preferences
- Aiding the buyer in creating an offer and creating a purchase agreement
- Negotiating on behalf of the buyer, according to the buyer’s wishes
- Making sure the transaction goes smoothly once both parties have come to an agreement
- Working with the buyer on documents required for the transaction
- Assisting in conducting due diligence by coordinating inspections
WORKING WITH REAL ESTATE AGENTS
Once the brokers have agents, usually the latter take on the above responsibilities. They depend on whether they are a seller’s or buyer’s agent. Some agents will work with both sellers and buyers.
Brokers, on the other hand, supervise:
- Verifying all licenses of agents and associate brokers
- Providing additional training for agents
- Managing the staff, including the agents
- Maintaining a website for marketing
- Providing marketing resources and other services for the agents
In return, the broker gets a percentage of the agent’s commission.
BROKER COMMISSION AND WORK ENVIRONMENT
In recent years, agents usually asked for 6% commission on the sale of properties. Today, technology is changing this percentage. Brokers these days have lower overhead costs. They can run certain aspects of the business, such as marketing, online. In turn, they request lower fees from the buyers and/or sellers. Agents also receive a lower commission.
In some cases, agents work from their vehicles instead of a fancy office. This allows them to be more flexible. They can meet clients or prepare documents on the go. The arrangement further saves them money.
When an agent decides to work with a broker, the two parties will agree upon the percentage of commission the broker will receive. The latter also dictates how much time the agent needs to attend to administrative duties. These include office meetings and additional training.
BRINGING VALUE TO CLIENTS
Your clients can also define “What is a real estate brokerage?” In this case, it will be according to your firm’s value. There are different ways to increase your value:
- Reduce overhead by avoiding flashy offices and franchise fees. Instead, run the business from a smartphone and a small office.
- Consider automation. This allows you to run a smaller back-office team efficiently.
- Allow your agents to provide white-glove service by giving them a higher cut of the commission. This also helps bring in more clients. If clients see better service, they are more likely to refer your real estate brokerage to their friends and acquaintances.
- Create a mobile office by allowing agents to search listings, market themselves, complete paperwork, get support, network with each other, and communicate with clients with the use of a mobile app.
- Concentrate on branding with digital marketing. Buyers are doing more of their own footwork on the Internet. Each agent should have a branded website that ranks high on search engines. They may also need a personal app they