The Americans are taking over the houses. In May 2021, sales of existing homes in the United States increased 44.6% from May 2020 and average home prices rose 23.6% during the same period, according to the National Association of Realtors. This real estate boom is due to several factors: low interest rates, low supply and high demand, because lifestyle changes are a big push to change their life situation. “We’re seeing homeowners looking to buy bigger homes and lots of first-time buyers,” says Jeff Belzer, real estate agent at Jeff Belzer & Associates at LIV Sotheby’s Realty in Ventura, Calif. The current low interest rates, Belzer adds, “open up new opportunities for people.”
If you’re ready to consider buying a home, you’ve probably heard that real estate brokers and agents can be involved in the process, among other figures such as lawyers and bankers. In this competitive market, having a real estate professional by your side can make the whole process easier and less stressful.
So who are real estate agents, real estate brokers, and real estate agents? What are they doing and do you need them to buy (or sell) a property?
This guide will help you distinguish them and find the right real estate professional to work with.
Real estate agent
A real estate agent also holds a state license, which requires fewer hours of training and a less rigorous exam than that of a broker. They can represent buyers or sellers.
Real estate brokers have a higher professional license than agents, and brokers and agents can technically be real estate agents. Whichever real estate professional you choose, interview them to make sure they will represent you well.
While a real estate agent’s license allows people to participate in the purchase or sale and earn a commission on the transaction, agents must work under the umbrella of a broker.
Real estate agents are generally not paid directly. Every time they close a deal, their commission goes to the real estate broker they work with. The broker keeps part of it but gives the agent a share, the exact value of which depends on the agreement between the agent and the broker.
There are two types of real estate agents:
- Seller’s agents help people who want to sell their homes. They give advice on how to prepare the house for sale, which may include setting it up. They promote the ad and strive to get interested buyers into the property. Then, if a buyer makes an offer, they work with the buyer’s agent – possibly presenting counterbids on the seller’s behalf – to come up with an agreed price. Once the seller accepts the offer, they continue to work with the seller until the transaction closes.
- Buyer’s agents help people when they are looking for accommodation. A good buyer’s agent takes the time to understand the specific needs of the buyer and then builds lists that meet those needs. If the buyer likes one of these homes, the buyer’s agent presents the offer to the seller’s agent. If the offer is accepted, the buyer’s agent works with the seller’s agent to finalize the transaction so that he can hand over the keys to his client.
Whether you choose a broker or an agent, take the time to commit to working with one person. “People should definitely ask their real estate professional,” Belzer says. “Under no circumstances should this person just go with someone. Good real estate professionals will want to give you a full introduction and make sure everyone is on the same page. This will make the process much smoother.
How are real estate agents paid
Real estate agents are paid on a commission basis, which means they only earn money when a deal is closed. Real estate commissions are typically five to six percent of the sale price and are paid by the seller. The commission is paid directly to the brokers involved in the transaction and divided between the seller’s broker and the buyer’s broker (if there is one). Each broker then pays their agent a share of their own commission.
Real estate broker
A real estate broker holds the highest level of real estate license. This means that they have successfully completed all of the real estate training courses specified by their state’s requirements and have passed that state’s real estate broker exam. With this license, they can work independently. (Real estate agents, on the other hand, must work under the umbrella of a broker.)
“There are top agents out there who will never get their broker’s license,” Belzer says. “But by being able to take on the responsibility of a broker, you will have more to offer. ”
There are three types of brokers:
- Independent brokers: These brokers can be in business independently. They can represent the buyer or the seller, and operate directly with their client.
- Broker management: They work in a real estate agency or brokerage house as supervisors and must meet certain additional criteria in addition to holding a broker’s license. Broker managers can represent buyers or sellers while managing their brokerage – they can also be referred to as the prime broker – or they can choose to focus on management and let their agents work with clients on behalf of the agency or of the brokerage house.
- Associated brokers: These real estate professionals have their broker license but choose to work under another broker. They can opt for this in order to have a back office to handle administrative work or a pipeline to queue leads for them. When they close a trade, the brokerage they work for takes the full commission and then pays them their share. In this role, there really isn’t much of a difference between a real estate broker and an agent. Associate brokers have the same functions – and are remunerated in the same way – as real estate agents while maintaining a higher level of license.
How are real estate brokers paid
Like realtors, brokers are paid on commission when the home is sold, with the seller footing the bill. The commission is split between the buyer’s broker and the seller’s broker. If a broker facilitated the transaction themselves, they keep their entire share of the commission. Otherwise, they give a cut to the agent who worked on the case.
Real estate agent
Realtors, associate brokers, and brokers can also be real estate agents, a qualification filed in 1949 by the National Association of Realtors, the largest real estate trade association in the United States.
In fact, most are.
“There are about 2 million [real estate] in the United States, and nearly 1.4 million of them are real estate agents, ”says Deborah Baisden, who is herself and works at Berkshire Hathaway HomeServices Towne Realty in Virginia Beach, Va., and is also vice-president of NAR for her region.
To become a real estate agent, an agent or broker must be a contributing member of the NAR and agree to abide by its code of ethics. The NAR says they are “subject to a higher ethical standard than licensed agents.”
“The code of ethics has been in place since the early 1900s and its primary purpose is to protect the consumer, ensuring they get a true picture of the property and their investment,” Baisden explains. The code spells out the fiduciary responsibility of an agent or broker to their client, the proper management of money in a real estate transaction, and the importance of accurately representing a property to potentially interested parties.
How are real estate agents paid
A real estate agent is not a role, but rather a title to indicate that a real estate agent or broker has passed the strict qualifications to become a member of the National Association of Realtors. Depending on whether a real estate agent is a real estate agent or broker, he is paid in the same way as any other real estate agent or broker.
How to find the right professional for you
Do you really need any of these numbers – agent, broker or other real estate agent – when buying or selling a home?
Most homes are sold with the help of agents or brokers, who are only paid if and when the transaction is completed. The commission for the sale of the house is generally five or six percent of the sale price, paid by the seller, and is divided equally between the representatives of the buyer and the seller.
You don’t have to hire any of them, but they certainly help you get the best experience and the best price – and avoid surprises.
“When people go through ‘for sale by owner’ or some other route not shown, the experience is really tough,” says Belzer. “Maybe things aren’t fully disclosed, or you aren’t making concessions when you should have. “
And since real estate is often the single largest financial transaction most people undertake, having knowledgeable representation in your area pays off.
“A big part of what we do is advocacy,” Baisden says.
The choice is yours. Either way, be sure to take the time to interview the real estate professionals you are considering hiring to find someone who understands your wants and needs, and who will work hard to ensure that ‘they are satisfied.