What is the difference between a real estate agent and a real estate broker like Compass Realty? In basic terms, a broker is an umbrella that encompasses and oversees real estate agents. A broker is essentially just an agent that has to ability to manage their own business and ensure that real estate transactions are carried out correctly and lawfully.
They can either work independently or hire real estate agents to work under them. If real estate is a ladder then home buyers and sellers are at the bottom moving up to agents and then brokers are at the top with both a brokering and an agency license.
A broker can: move money in and out of escrow accounts, hire agents to work for them, and mediate conflict in legal disputes. They can work on their own as a brokerage or work for a third-party business to handle their real estate transactions. A real estate agent must “hang their license” with a real estate broker who will assume legal responsibility for the agent should any disputes or legal issues arise – they ensure that their transactions are compliant with both state and federal laws.
A broker must: hold a brokers license as well as a real estate agent license, hold their agency license for a predetermined amount of time (specified by the state they work in), be over the age of 21 and reside in the state in which they are trying to acquire their brokerage license. They must also take a minimum number of hours of broker education, pass their state’s licensing exam, and be free of any criminal convictions.
Types of real estate brokers
When referring to an individual person working as a broker (rather than a brokerage firm) there are three different types:
Principal/designated broker – a real estate broker will employ a principal broker who will then be responsible for all the operations and transactions that run through that brokerage firm. They ensure all agents are working in agreement with the laws of the state and all transactions are legally and financially compliant with zero fraud being committed. Every brokerage firm must employ a principal broker for its office at all times.
Managing broker – the managing broker handles day-to-day operations of the brokerage such as HR functions rather than the more transactional work of the principal broker. They will handle all the licensing issues of the broker’s agents like onboarding, training, and mentoring new agents and facilitating continued educational opportunities for agents as well. Some principal/designated brokers are also managing brokers.
Associate brokers – in larger brokerages the principal broker will employ salespersons and associate brokers to help with their workload. These people will act as the broker’s agent when conducting real estate transactions. They are often called broker associates, broker-salesperson, or an affiliate broker. Associates will often be employed as independent contractors, but they may only work with one broker or brokerage at a time and cannot be employed by multiple firms at a time.
