First Time Home Buyers Guide, Real Estate Agent or Real Estate Broker? Most first-time home buyers know they need one … but which one do they need? Is one better than the other? Is there a difference? And how does a “REALTOR®” fit into the picture?
The veracity is, all three are different kinds of real estate agents. It can sound subtle … or like a distinction without a difference. But the difference does matter.
If you’re on the market for your first home, it’s easy to become confused. Buying real estate is a complex process. You don’t want to miss any of the details, so it helps to have a general understanding of the cast of characters you will interact with on the road to the closing table.
Let’s break down the difference between “real estate agent” and “real estate broker” once and for all.
What is a Real Estate Broker?
A real estate broker is a kind of real estate agent. Someone that is licensed by the government in their state to act as a professional go-between for real estate transactions (sales, leases, etc.) The license is usually issued by a bureau within the state government devoted to real estate, the “Department of Real Estate,” perhaps, or the “Real Estate Commission.”
A real estate broker, however, is a bit unique. Real estate brokers are licensed to do business independently. Essentially, they are licensed to be the boss, also known as the principal.
Each state has different requirements to become a real estate broker. Usually this involves higher education and/or a certain number of years with a lower license, plus extra education and passing of a state exam.
A broker is authorized not only to work alone, but to sponsor other real estate agents. This includes “real estate sales agents” as we will discuss below. Usually they do so in exchange for a percentage of the commissions earned by that sponsored sales agent, perhaps a flat fee and/or desk fee.
Although the broker is listed as the agent of record on your transaction, you probably won’t work directly with the broker and may not even meet the broker. You will probably work with a real estate sales agent sponsored under the broker’s license. However, if you do end up with a licensed broker as your agent, you know that your agent more than likely has experience, expertise, and business savvy. You don’t get to be a broker without those qualities.
First Time Home Buyer – Broker
As a first-time homebuyer, you should also note that an entity, for example, a DBA, corporation, or LLC, can be licensed as a real estate broker, if the owner or managing member of the entity is a licensed real estate broker.
Two agents under the same broker might represent both sides of the transaction, the seller and the buyer. The broker should be prudent for the actions of both agents, if the broker represents both the buyer and the seller. On paper, this may seem a bit odd, but the agent should still be prudent and do due diligence. It’s called “dual agency.” It must be disclosed and/or handled delicately. Some jurisdictions don’t allow dual agency, but in practice it may be able to be worked out.
Real estate brokers are the ones in charge of a real estate agency. They are empowered to transact alone and responsible for the actions of every agent they sponsor.
What is a Real Estate Agent?
When we talk about a “real estate agent,” we are usually shortening the term “real estate sales agent” (or “real estate salesperson”). This is the official designation as handed down by state real estate commissions.
Just like a broker, a real estate sales agent is licensed by the state bureau after completing education requirements and passing an exam. This is the license available to most first-time real estate agents.
While the license authorizes them to facilitate real estate transactions, it does not authorize them to do it alone. The real estate agent should be sponsored by a broker. That broker is listed as the “agent of record” and is ultimately responsible for the transaction.
In addition, another important rule that applies to real estate sales agents is that they must identify their broker in all marketing collateral. If you see a real estate agent smiling from a billboard, a bench ad, a website banner, a flier, or a social media ad, inspect it closely. You will always find the name of the broker identified. (Remember, an entity can also be a licensed broker, so the “broker” could be the brand name of the agency.)
First Time Homebuyer – Real Estate Agent
Some real estate sales agents have years of experience, but others are brand new. First-time homebuyers might be wary to work with an inexperienced (or experienced) real estate agent. But take heart, new real estate agents usually enjoy close mentorship and support from their brokers, since the broker is responsible for their actions. New real estate agents can be excellent, personable, tenacious advocates, especially for first-time home buyers. Real estate agents are business development professionals who represent the brand of their sponsoring broker.
Where does “REALTOR®” fit in?
All REALTORs® are real estate agents, but not all real estate agents are REALTORs®.
The Board of REALTORs® is not a state or government agency—it is a private professional organization, like a trade union. They may have their own rules and code of ethics, over and above the state licensing requirements.
Any real estate agent who wants to join a board of REALTORs® must apply, go through orientation, and pay the requisite dues. The name is trademarked—it is understood that an agent can not call themselves a REALTOR® unless they join the board, even if they are a state-licensed agent.
The local Board of REALTORs® usually controls the local “multiple listing service” (MLS). This is the hub for listing and collaboration on most home sales and many leases. Any real estate agent who wants to transact home sales has a strong incentive to join the board of REALTORs®. Without doing so, they could be left out of the loop on the local inventory of homes for sale, and may not have access to valuable collaboration with other agents.
First Time Homebuyer – REALTORs®
Both real estate brokers and real estate sales agents can become REALTORs®. As a first-time home buyer, pay attention to whether or not your agent is a REALTOR® . REALTORs® often have access to more inventory through the MLS.
The real estate agents and/or brokers who want to transact home sales might also join the Board of REALTORs®, a national union for real estate agents, to have access to the MLS. All three are real estate agents, with a fiduciary duty to serve your interests as the client.
First Time Homebuyer – Mortgage Quote
The first time homebuyer may not have the cash to fund the purchase of a new home. They may want to obtain a quick mortgage quote first to see if they pre-qualify for a mortgage. In addition, one can better understanding of the fees and a rough idea of what the mortgage payment might be.
The real estate professional more than likely will want the first time homebuyer to obtain a pre-qualification or a pre-approval first, prior to the real estate professional showing properties. ncen.com can help you with the mortgage quote process. We have access to top lenders, so you don’t have to shop around as time goes by. We are a boutique mortgage brokerage firm that tries to provide a luxury experience for each prospect, and we walk you through the mortgage loan process.
***Please note the above is not considered advice. The article is meant for educational purposes only, as the above article is that of our opinion.