Broker vs agent: are the two terms interchangeable? And what is a real estate salesperson?
Jacqueline Kyo Thomas
What's the difference between a broker and an agent? And what is a real estate salesperson? Below, we'll give you the answer. And if you're wondering which real estate career path is better for you, we'll tackle that, too.
Just looking for a quick answer? Here's the tl;dr: if you are just starting out as a real estate agent you need to get a salesperson license. Every real estate agent must start out as a salesperson. After you have several years of experience as an agent, you can upgrade your salesperson license to a broker license.
Ok, let's dive in!
A real estate agent is a person that helps their clients buy, sell, or rent real estate. To be a real estate agent, you must take classes with a state approved school (that's us!), pass a state exam, and receive a state issued license called a salesperson's license. This license lets you work as a real estate agent. In most states, including Massachusetts, the salesperson license covers both residential and commercial real estate.
Every real estate agent must start out as a salesperson. In fact, most of the time when someone says "real estate agent" they're referring to a state licensed real estate salesperson. "Real estate salesperson license" is the offical term for a real estate agent license. So the terms "real estate agent" and "real estate salesperson" are usually interchangeable. They basically mean the same thing.
Once you are licensed as a salesperson you will you be able to work as a real estate agent, represent clients in real estate transactions, and earn a commission.
However, even if you're a licensed real estate salesperson, you can't just set up your own office and start making real estate deals. Instead, as a saleperson you must work for a broker.
Here's a way to think about it:
A real estate salesperson is a free agent who needs to find a team to play for. The good news is that real estate agents are usually in high demand, so it's not hard to find a 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, sellers, and renters
Meeting with buyers, sellers, and renters
Representing buyers or sellers or renters (depending on preference of speciality)
Hosting open houses for buyers and buyer's agents
Attending open houses as a buyer's agent
Researching property listings, market condition
Negotiating on price and other details of the property
Managing the purchase of a property
Networking with fellow agents at mixers
Let's discuss the advantages of getting a real estate license.
It's How You Get Started
Let's say you've read through this post and decided that your ultimate goal is to become a broker and open your own real estate business. You're dreaming big, but in order to reach your dreams, you've got to start somewhere. That somewhere is as a salesperson.
You'll have to put in the hours as a salesperson in the field before you can move on to being a 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, before you can open your own office and manage other real estate agents. Becoming a real estate salesperson is the first step in your career in real estate.
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 salesperson or broker? Here's a list of questions to help you decide:
A real estate broker is a person who has a real estate broker's license. Simple! This license is an upgraded salesperson's license that lets the broker do everything a salesperson can, plus open their own real estate brokerage and work for themself. Typically, you can't get a broker's license without several years of work experience as a licensed salesperson.
In Massachusetts a real estate agent must work as a licensed salesperson for at least three years before they can become a broker.
If you're looking to be the boss, if you truly want 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 long-term career plan.
Here's what you have to look forward to as a broker:
Open your own office
Manage real estate agents
Manage the daily operations of your business
Market the brokerage
Provide assistance, guidance, and training to agents
Keep in mind that even though an agent has taken the extra step to become a licensed broker, they don't need to open their own office. Brokers can do everything that a licensed salesperson can. They can always choose to work for another broker as an associate broker. Upgrading your salesperson license to a broker license gives you options, but it doesn't require you to do anything extra.
Let's discuss why becoming a real estate broker might be a good option.
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 brokerage, and then recruit agents to work for you. You can then either split their commission or charge desk fees. But with great power comes great responsibility: as a broker you'll be liable for everything done by the agents you hire. So you'll need to effectively manage them to be successful.
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, or don't want to deal with the hassel of managing people, you can always work for yourself and by yourself. The benefit of this arrangement is that you can work directly with clients and 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 another broker (a "broker-owner"). If you become a managing broker, you will work directly with your agents, helping them to become the best darn salespeople they can be. But you won't own the brokerage, so you won't have quite as much responsibility.
Hate doing your own taxes as a freelancer/contractor?
One of the not-so-obvious perks of becoming a broker is better managing your tax obligations. But first, a disclaimer: I'm not a lawyer or an accountant. What follows is not legal or professional advice. You should always consult with a licensed professional.
With that disclaimer in mind, here's the deal: when you become a licensed broker you no longer need to operate as an independent contractor or a freelancer. As a broker you can set up an S Corporation. S Corps don't pay taxes directly. Instead, all profits (and losses) pass through to their shareholders. With an S Corp, you can pay yourself a reasonable salary and avoid owing tons of self-employment tax on any additional profits taken as shareholder distributions. This article is a brilliant (and easy to understand) explanation of the S corporation tax strategy.
Show me the money! One of the perks of continuing your education and earning your broker license is that you get paid more. The average real estate salesperson in Massachusetts earns $84,180 per year according to Forbes, while the average broker in Boston earns $103,720 according to the Boston Business Journal. This article covers more about real estate agent earnings.
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. You can hire as many agents as you have the time to manage.
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!