Approximately 32% of all real estate license holders in the U.S. as of 2023 were brokers and associate brokers. If we lean on elementary school math, understanding that the remaining 68% of licenses belonged to agents, we would have an 8:17 ratio. That means for every eight brokers, there are 17 real estate agents.
With brokers seeming like such rare real estate commodities, do agents need to rely on them? Can you be a real estate agent without a broker? The answer is no. Real estate agents need brokers to take up their rank in the real estate community. In some states, real estate agents cannot even obtain a license without a sponsoring broker backing them.
Wondering why the interdependence? This article will delve into why you cannot be an agent without a broker. We will explore the relationship between real estate agents and brokers, how to find the right broker for you, and how you can upgrade your license to join this elite group. So, let’s embark on this journey together.
Why Do Real Estate Agents Have to Work Under a Broker?
Real estate agents and brokers are legally tied at the hip. The requirement for real estate agents to work under a broker is steeped in both legal and ethical considerations.
Think of the very definition of a real estate agent: a professional licensed to work under a broker. This essentially means brokers sponsor agent licensing. Without this arrangement, agents cannot participate in real estate transactions, show homes, or even receive referral fees.
The second reason agents need brokers is all about the money. Commissions never flow directly into an individual agent’s accounts. This is considered illegal.
Instead, buyers deposit money into dedicated real estate trust accounts overseen by brokers. Brokers then appropriately pay earned commissions according to the agent’s set percentage split arrangements. This guarantees ethical financial accounting.
Beyond enabling licensure and commission structures, brokers provide mentorship, training programs, marketing support, networking contacts, listing opportunities, and administrative assistance to representing agents. Especially for newer agents, the broker/agent affiliation provides education to properly navigate initial deals.
While they may handle clients and listings more independently once established, agents affiliated under sponsors continue benefiting from the name brand and resources of their chosen real estate firm. An agent cannot legally or ethically transact real estate sales solo without authorized broker supervision.
The Role of Brokers
Brokers play a pivotal role in helping agents draft their success stories. Think of this group as the Mr. Miyagis of real estate. They bring their years of mastery to the table, propelling agents to build profitable businesses.
Support Real Estate Agents
They are entrusted with providing agents with indispensable tools, resources, and support that move their business forward. This arsenal is not just limited to tangible assets. It also encompasses continuous education, coaching, and feedback aimed at honing an agent’s skills and enhancing performance.
Regulatory Compliance
Compliance forms one more cornerstone of a broker’s responsibilities. It involves ensuring adherence to ethical standards along with legal regulations governing real estate practice, an essential step towards maintaining industry credibility.
Before contracts reach clients or other parties engaged in transactions, brokers review the documents, ensuring accuracy. This is a critical task considering its potential impact on deal outcomes.
How to Find the Right Broker
Choosing which sponsoring broker to ally with jumpstarts your success trajectory. My tip? Vet options wisely.
Step 1: Know Your Needs
Reflect on your real estate goals, lifestyle needs, strengths, weaknesses, and ideal support resources. These self-realizations will help you target firms that best fuel your growth.
Do you have a sector you’d like to specialize in? Perhaps you see yourself as a luxury real estate agent selling million-dollar homes to A-listers, or you want to help businesses find their ideal locations. Regardless of your career dream, you will want to find a broker poised to help you realize it.
For instance, if you have your heart set on luxury, then a Coldwell and Banker firm would be a great place to hang your license.
Step 2: Interview Brokers
Next, interview multiple brokerages, asking questions explaining the company vision, tools provided, commission splits, culture dynamics, and leadership accessibility. Weigh offerings against your personal benchmarks.
A few questions to consider asking a broker:
What are the company’s commission splits?
Do you cap commission?
What is the agent turnover rate?
What training do you provide to agents?
How long have you been in the industry
Are you involved in the community, and how?
At this point, don’t settle for vague answers. Run every response against your own personal preferences. A standout broker-agent relationship must align with mutual wants.
Step 3: Dig into the Past
Dig into online reviews detailing current/past agent experiences at each establishment. Understand the full picture instead of just marketing messaging.
Also, compare national brands against localized independents. While bigger names boast slick tools, smaller offices could better nurture emerging talent.
Ultimately, your broker pick should sync with specialized assistance wanted, income desires, flexibility requirements, and values resonance. They will heavily shape your trajectory, so embrace the hunt for finding that perfect real estate home that grows your passion into industry success.
How to Become a Real Estate Broker
After a couple of years in the industry, you can scale to the next peak of your career and become a broker. Here is how:
Fulfill Pre-licensing Requirements
The journey begins with understanding and fulfilling the licensing requirements specific to your state.
This often involves completing additional education, such as advanced property law, finance, and brokerage management courses, which build upon what you learned as a real estate agent.
Let’s consider the state of Maryland. In Little America, to be an agent, you must complete 135 hours of pre-licensing education.
We have an in-depth guide on pre-licensing education, what it is, and what real estate agents can expect right here.
Experience Demands
Experience is another crucial component of this process. One must spend some years working under an established broker before they are eligible to apply for their own license.
It’s like learning how to fly by first being a co-pilot. You observe, learn from mistakes without dire consequences and gradually develop confidence.
However, experience requirements differ from state to state. For example, in the Empire State, agents must spend at least two years as real estate agents before applying for a broker license.
But in California, aspiring brokers can take the broker exam straight out of college. This is provided they are degree holders from an accredited college/university.
The degree major must be closely aligned with real estate.
Pass the Broker Exam
Once these prerequisites are met, it’s time for the final hurdle: passing the state exam. Here’s where all that accumulated knowledge gets put to test!
Don’t fret though; consistent revision using resources provided during your coursework can make this less daunting.
It Is Time for Take Off
Upon securing your license comes the exciting part, starting your own brokerage firm! You’re essentially stepping into entrepreneurship, so get ready for your share of challenges and rewards ahead.
A good start would be formulating a business plan that outlines goals, strategies for achieving them, and contingency plans should things not go as expected. Building relationships with other professionals in related fields like mortgage brokers or home inspectors could also prove beneficial down the line.
Benefits of Becoming a Broker
Now, let’s talk about why you’d want to embark on this journey at all. Here are a couple of reasons you should upscale:
Increased Responsibility and Earning Potential
Becoming a broker brings along increased responsibility. But think of it more as having greater control over operations rather than just added stressors!
You’ll have higher income potential because, instead of earning commissions only on sales you make personally, you’ll earn off every sale made by agents under your watch too.
Increased Flexibility
As an independent broker running his/her own firm, one has far greater flexibility when it comes to decision-making or setting work schedules compared to being an agent tied down by rules set forth by someone else.
So, if you’re someone who values autonomy and is ready for a challenging yet rewarding career move, becoming a real estate broker could be your next big leap!
The Agent-Broker Alliance is Non-negotiable
Being a real estate agent is an exciting career path, but it’s important to remember that brokers play a crucial role in this journey. They provide the legal and ethical foundation for agents to operate within the industry. Not only do they handle financial matters like commissions, but they also offer invaluable mentorship and resources.
Next Steps: Ready to get started on your real estate journey? Remember these steps
1. Understand why you need a broker; as an agent, learn why you need a broker.
2. Identify what type of support you need: thoroughly vet potential brokers before choosing one.
3. Upscale your license: consider whether or not becoming a broker yourself is something you’d want down the line.
We hope this article has been informative! If there’s anything else you’d like us to cover about being an agent or working with/without brokers, drop us a comment below!
