Real Estate Agent vs. Realtor vs. Broker – What’s the Difference??

So what's the difference
between a realtoror, a real estate agent and
a real estate broker? These terms often get thrown
around interchangeably, but they actually have pretty distinct
differences between each other. Let's start with the term realtor. A realtor is a real estate professional who's
an active member of something called the National Association of Realtors,
NAR for short. It's an organization that fosters and promotes
best practices within the real estate industry. You do not have to become a realtor
in order to hold a real estate license, but you do have to hold a real estate
license in orderto become a realtor. In fact, at the time of this recording,
I'm describing myself here. I personally hold my real estate
license for the state of Indiana, but I'm not currently a member of the
National Association of Realtors.

One of the major benefits
to joining the NAR is that it gives you access
to something called the Multiple Listing Service
or MLS for short, which is a database of regional
properties that have sold in the past, or that are currently on
the market for sale. And therefore, most people who
get their real estate license also become realtors. In commercial real estate,
it's a little bit different though. Access to the MLS is not as essential
because a lot of the deals that happen happen off-market or through relationships or through alternative databases like CoStar. It's more common to find people
who are licensed, but not realtors on the commercial side of real estate. The National Association of Realtors
breaksup each state into different regions and each region has its own local chapter. In order to access the MLS
for a particular region, a person would have to subscribe to that
regional chapter of the NAR. To do so a person has to pay
annual membership fees, attend the ongoing education and agree to uphold certain
standards of professionalism. So with that out of the way,
let's not talk about the difference between a real estate agent
and a real estate broker.

The term real estate agent can
actually mean different things depending on what state you're in. Certain states run their real estate
licensing on a two-tier credential system where on the lower tier, you have something
called the real estate salesperson who people commonly refer to
as real estate agent. And on the higher tier, you have
something called the real estate broker. In this two-tier system each designation requires an entirely
different set of tests and licensing, but the broker designation is also requiring
two years of experience as a sales person. And say, it's with this two-tier system, you have to get your sales
person license first, hold that license actively
for at least two years. And then you can start the process to
obtain your broker's license, if you want. In order for the salesperson to conduct
business legally in real estate, they have to "hang" their
license under a real estate broker and pay them a portion
of their commission. The reason behind this is
that it's assumed that a broker is more experienced
than the salesperson and they will oversee their activities and ensure that they're not making
any mistakes or causing problems.

Typically the broker will provide ongoing
resources like guidance, education and business advice to the salesperson and their compensation for that is a portion
of the sales person's commission. So to recap in states with
this two-tier system, our real estate professional that holds their salesperson's license is commonly
referred to as a real estate agent. Whereas someone who holds
a real estate broker's license is simply called a real estate broker. Now, in other states, this two-tier
system is still somewhat in effect, but there's only one standardized
license in all of real estate, namely the real estate brokers license In these states, no one holds
a salesperson's license at all. They only hold a broker's license. The way these states distinguish between the less-experienced broker
who still has to hang their license and share a portion of
their commissions legally. And the more experienced broker is
by requiring the more experienced broker to hold an active license
for at least two years, and then take a class that certifies them as a managing broker.

So when in these states you have
brokers and managing brokers, and here's where things
might get a little confusing. Most people in the states refer to
non-managing brokers as real estate agents, and then refer to managing
brokers as brokers. Regardless of what state you're in probably the easiest way to remember the difference between an agent and a broker is to think of a real estate
agent as a professional who primarily does business
just for themselves. Whereas a broker normally runs
a real estate brokerage firm. The real estate broker is normally
more experienced and serves more in a management role
compared to the agent who primarily focuses on sales. To wrap this all up, there is actually one exception
to what I've mentioned here. In commercial real estate, most
real estate professionals are universally referred to as brokers, regardless if they hold
a sales person's license or not. They simply distinguish
between the two-tiers by calling one-tier a broker,
and one-tier a managing broker. I hope this video at least cleared
some things up for you.

And if you found it helpful, I think you're going to like this one
next on the screen here as well. Go ahead and check it out
and I'll see you there..

As found on YouTube

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