What is the Difference Between a Broker and Agent?

Broker vs agent: are the two terms interchangeable?

Jacqueline Kyo Thomas

Jacqueline Kyo Thomas

What's the difference between a broker and an agent? If you're confused, you've come to the right place. Below, we'll give you the answer to the existential question you've spent many sleepless nights pondering: what's the difference between real estate agent and broker? And if you're wondering which real estate career path is better for you, we'll tackle that, too.

Let's get started.

What is a Real Estate Agent?

A real estate agent is a person who buys or sells houses. Sounds simple enough, right? But, by law, not just anybody can sell houses and call themselves a real estate agent in the state of Massachusetts. To be a real estate agent, you must take classes, pass the state exam, and receive a special state issued license.

Then and only then will you be able to sell houses and represent home buyers.

However, even if you're a licensed real estate agent, you can't just set up your own office and broker real estate deals. As the verb In the previous sentence suggests, you'll need a broker for that. In fact, you must work for a broker as a real estate agent, no exceptions.

This is why real estate agents are often referred to as licensed salespeople or real estate associates.

Here's another way to think about it:

A real estate agent is a free agent who needs to find a team to play for because they can't work for themselves. The good news is that real estate agents are always in high demand, so it's not hard to find a willing team, in this case, a brokerage.

Once an agent finds a brokerage, the next task is finding clients. One of the advantages of working with a high-profile brokerage is being able to find clients more easily. Often times, leads call the brokerage and then the brokerage funnels leads to the agent. Other times, the agent must go out and hunt for clients on their own (by hosting open houses, buying billboards, and sending marketing postcards through the mail).

The day-to-day responsibilities of a real estate agent include:

  • Finding buyers and sellers

  • Meeting with buyers and sellers

  • Representing buyers or sellers (depending on preference of speciality)

  • Marketing homes

  • Hosting open houses for buyers and buyer's agents

  • Attending open houses as a buyer's agent

  • Showing homes

  • Researching property listings, market condition

  • Negotiating on price and other details of the home

  • Drawing up contracts

  • Managing the purchase of a home

  • Coordinating closings

  • Networking with fellow agents at mixers

What are the Benefits of Becoming a Real Estate Agent?

Let's discuss the advantages of getting a real estate license.

Getting Your Foot in the Door

Let's say you've read through this post and decided that your ultimate goal is to become a broker and own a real estate business. You're dreaming big, but in order to reach your dreams, you've got to start somewhere-- and that somewhere is as an agent.

Spoiler alert: you've got to put in the hours as an agent in the field before you can move on to broker. You have to know what it's like to buy or sell homes, to meet with clients, to show homes, and to coordinate closings. Becoming a real estate agent is your first step.

The benefits of being a real estate agent

Working as a Free Agent

Even though you technically work under a broker, you can still come and go as you please. You'll enjoy a great deal of autonomy as a real estate agent, much more than you would if you were tethered to a desk job.

That said, success only comes to those who hustle. Your success is largely dependent on your ability to find clients and deliver. If you're a born hustler, this is the right job for you.

Should you be a real estate agent or broker? Here's a list of questions to help you decide:

What is a Real Estate Broker?

A real estate broker is a person who negotiates real estate transactions. This person has worked as an agent for several years, and decided to continue their real estate education.

In the state of Massachusetts, a real estate agent must work for at least three years before they can test to become a broker.

If you're looking to be the boss, if you truly wish to work for yourself, or if you simply want to take advantage of a better tax arrangement, becoming a broker should be part of your five-year plan.

Here's what you have to look forward to as a broker:

  • Manage agents

  • Manage real estate transactions

  • Review contracts

  • Manage the daily operations of your business

  • Market the brokerage

  • Network

  • Recruit agents

  • Provide assistance, guidance, and continuing education to agents

Keep in mind that there are actually several different types of real estate brokers. Even though an agent has taken the extra step to become a licensed broker, he or she can still work in the field as an agent.

What are the Benefits of Becoming a Real Estate Broker?

Let's discuss why becoming a real estate broker is awesome.

Be the Boss

Who doesn't like to be their own boss? When you become a licensed broker, you can retire from active field work, open your own real estate firm, and then recruit agents to work for you. You can then either split their commission or charge desk fees.

You'll be what's known as a designated broker, or a broker owner.

Now, as the boss, you have a choice: work directly with your agents and associate brokers or, if mentoring isn't your thing, hire a managing broker to do that for you.

If you're more of a loner, you can work for yourself and by yourself. The benefit of this arrangement is that you can still work directly with clients, but you get to keep all of the commissions that you earn.

However, if being the boss or working for yourself doesn't appeal to you, consider working as managing broker. As we mentioned earlier, managing brokers often work for broker-owners. If you become a managing broker, you will work directly with agents, helping them to become the best darn salespeople this side of the Housatonic.

Tax Breaks

Hate doing your own taxes as a freelancer/contractor?

One of the not-so-obvious perks of becoming a broker is shifting your tax obligations. But first, here's a disclaimer: I'm not a lawyer or an accountant, and I don't play one on the Internet, so what follows is not legal advice, just a humble observation.

When you become a licensed broker, you no longer need to operate as a contractor or a freelancer. If you work for yourself, you can set up an S Corporation. S Corps don't pay taxes. Instead, all profits (and losses) pass through to the shareholders. With an S Corp, you can pay yourself a reasonable salary and avoid owing tons of self-employment tax. Here's a brilliant (and easy to understand) explanation of the S corporation tax strategy.

Earn more money as a broker

Earn More

Show me the money! One of the perks of continuing your education and earning your broker license is that you get paid more. According to GlassDoor.com, the average salary for real estate agents is $49,748 per year, whereas the average salary for brokers is $72,500.

Keep in mind that as an agent, you're limited to how many deals you can personally negotiate. But as a broker, you don't have those limitations.

Over to You

We'd love to hear from you. Would you like to be an agent or continue your education and work as a broker? Do you have any more questions about the difference? Drop us a note!

Oh, and don't forget to download this list of questions on whether you should be a real estate agent or broker!

Interested in getting your real estate license online?

Start your real estate classes today!