What’s the difference between a realtor and a broker?
The world of real estate can be confusing for both buyers and sellers, especially when it comes to understanding the different roles that professionals in the industry play. Two of the most commonly used, and often misunderstood, terms are realtor and broker. While both realtors and brokers are involved in real estate transactions, their responsibilities, qualifications, and affiliations differ in important ways.
This article will help you understand the difference between a realtor and a broker, including what each does, how they are licensed, and how their roles impact real estate transactions.
1. Understanding the Basics: Realtor vs. Broker
To grasp the difference between a realtor and a broker, it’s essential to break down the key aspects of each role.
What is a Realtor?
A realtor is a licensed real estate professional who is a member of the National Association of Realtors (NAR). The NAR is the largest trade association in the United States, and its members include not only real estate agents but also brokers, appraisers, property managers, and other industry professionals.
The title of realtor comes with specific ethical standards and obligations, as members must adhere to the NAR’s Code of Ethics, which sets out rules governing fair treatment, honesty, and integrity in real estate transactions. Being a realtor means more than just having a real estate license—it involves membership in the NAR and a commitment to following these professional guidelines.
Key Characteristics of a Realtor:
- Membership in NAR: All realtors are required to be members of the National Association of Realtors. This membership is optional for real estate professionals, so not all agents or brokers are realtors.
- Adherence to a Code of Ethics: Realtors are bound by the NAR’s Code of Ethics, which establishes strict guidelines on how they should conduct themselves in all real estate transactions. These guidelines focus on honesty, transparency, and acting in the best interest of clients.
- Title and Branding: Only NAR members can legally use the term “realtor.” It is a trademarked designation and is used to distinguish NAR members from other real estate professionals.
What is a Broker?
A real estate broker is a professional who has completed advanced training and passed state-level exams that qualify them to operate independently or manage other real estate agents. Unlike real estate agents, brokers can work on their own or oversee a team of agents working under them.
Real estate brokers are generally more experienced than agents and have a deeper understanding of real estate laws, regulations, and practices. There are different types of brokers, depending on the level of authority and responsibility they hold within a real estate firm.
Key Characteristics of a Broker:
- Licensing Requirements: A broker must obtain a higher-level real estate license than a real estate agent, which involves additional coursework, training, and a more comprehensive exam.
- Ability to Manage Real Estate Agents: Brokers can manage and oversee real estate agents. Agents must work under a broker, as they are not allowed to operate independently.
- Types of Brokers: There are three types of brokers:
- Principal/Designated Broker: This is the broker who owns or manages the real estate firm and is responsible for all transactions that take place within the firm.
- Managing Broker: A broker who manages the day-to-day operations of the firm, including overseeing agents.
- Associate Broker: A licensed broker who chooses to work under another broker, usually for greater flexibility in their role.
2. Differences in Licensing and Education
The differences between a realtor and a broker begin with the education and licensing requirements.
Realtor Licensing and Education
To become a realtor, one must first be a licensed real estate agent or broker. The requirements for becoming a real estate agent vary by state but typically include:
- Pre-licensing coursework: Most states require aspiring real estate agents to complete 60 to 120 hours of pre-licensing coursework, which covers topics like property law, real estate principles, and contracts.
- Passing a state exam: After completing coursework, the candidate must pass a state-administered exam that tests their knowledge of real estate practices and law.
- Joining NAR: Once licensed, an agent can choose to join the National Association of Realtors to become a realtor. This requires membership dues and agreement to follow the NAR’s Code of Ethics.
Once a licensed real estate agent becomes a realtor, they must complete ongoing continuing education to stay up-to-date on industry changes and maintain their NAR membership.
Broker Licensing and Education
Becoming a broker requires more advanced education and experience than becoming a real estate agent. The specific requirements vary by state, but they typically include:
- Experience as a licensed agent: Most states require individuals to work as a licensed real estate agent for a minimum number of years (usually 2 to 4 years) before becoming eligible to apply for a broker’s license.
- Additional coursework: Brokers must complete additional coursework beyond what is required for a real estate agent. This coursework covers more complex topics, such as real estate law, property management, contracts, and business practices.
- Broker exam: After completing the required education, candidates must pass a state-administered broker’s exam, which is more rigorous than the real estate agent exam.
- Broker license: Upon passing the exam, individuals receive a broker’s license, which allows them to operate independently or manage a team of agents.
3. Responsibilities and Scope of Work
Another key difference between a realtor and a broker lies in their scope of responsibilities and the roles they play in real estate transactions.
Responsibilities of a Realtor
Realtors, whether they are agents or brokers, typically focus on helping clients buy, sell, or rent properties. The exact duties of a realtor will depend on whether they are representing buyers or sellers, but they typically include:
- Representing buyers or sellers: Realtors work with clients to either buy or sell homes. They advise clients on market conditions, price homes, negotiate offers, and help close deals.
- Listing properties: For sellers, realtors handle the process of listing homes for sale, which includes taking photos, writing descriptions, and posting listings on multiple listing services (MLS).
- Guiding clients through transactions: Realtors help clients navigate the complexities of real estate transactions, including reviewing contracts, negotiating offers, and managing closing paperwork.
- Ethical responsibility: As members of NAR, realtors are bound to conduct their business with honesty, transparency, and integrity, which may set them apart from non-realtor agents.
Responsibilities of a Broker
A broker’s responsibilities depend on whether they are an independent broker, a managing broker, or a principal broker. While brokers can perform all the tasks that realtors do, their roles often include additional duties related to managing or overseeing real estate operations.
- Supervising agents: Brokers who own or manage real estate firms are responsible for overseeing the activities of their agents, ensuring they are compliant with state laws and ethical practices.
- Running the business: Principal brokers are responsible for the business side of real estate, including handling the firm’s finances, marketing strategies, legal compliance, and recruitment of new agents.
- Handling complex transactions: Brokers often handle more complicated or high-value transactions due to their higher level of experience and knowledge.
- Liability: Brokers carry a higher level of legal and financial liability than agents, as they are ultimately responsible for the transactions carried out under their license.
4. Legal and Ethical Responsibilities
The legal and ethical responsibilities of realtors and brokers also differ, particularly when it comes to compliance and fiduciary duties.
Legal Responsibilities of a Realtor
Realtors are bound by state licensing laws and must adhere to all applicable real estate regulations. In addition to these legal requirements, realtors who are members of NAR must abide by the NAR Code of Ethics, which goes above and beyond state laws in terms of ethical behavior. This code outlines standards for:
- Honesty in transactions
- Fair treatment of clients and other professionals
- Full disclosure of relevant information
- Protection of client confidentiality
Failure to follow these standards can result in disciplinary action by the NAR, including suspension or loss of membership.
Legal Responsibilities of a Broker
Brokers have legal liability for the actions of any real estate agents working under them. They are responsible for ensuring that agents comply with all state and federal regulations, including disclosure requirements, contract law, and fair housing practices.
- Supervisory role: Brokers must make sure that their agents are conducting business legally and ethically. If an agent violates any laws or codes, the broker could also be held accountable.
- Managing contracts and transactions: Brokers are responsible for reviewing and approving all contracts and ensuring that all aspects of a transaction are legally compliant.
- Handling disputes: Brokers may also be called upon to mediate disputes between agents, clients, or other parties in a real estate transaction.
5. Real Estate Agents vs. Realtors vs. Brokers
It’s important to note that all realtors are real estate agents or brokers, but not all real estate agents or brokers are realtors. This distinction can cause confusion, but it’s important to remember that:
- Real Estate Agent: A licensed individual who helps people buy, sell, or rent real estate but may not be a member of NAR.
- Realtor: A licensed real estate professional (agent or broker) who is a member of NAR and adheres to its Code of Ethics.
- Broker: A real estate professional who has additional training and licensing, allowing them to operate independently or manage a real estate firm.
Conclusion: Understanding the Differences
While both realtors and brokers are key players in the real estate industry, the distinction between the two lies in their levels of expertise, licensing, and responsibilities. Realtors are real estate professionals who adhere to a higher ethical standard set by the National Association of Realtors, while brokers have advanced licensing that allows them to manage other agents and operate independently.
When choosing a real estate professional, it’s important to understand these differences to ensure you work with someone who has the qualifications and experience that align with your needs. If you’re looking for someone to manage a complex real estate transaction or supervise other agents, a broker may be the best fit. If you want someone who follows a strict ethical code and can guide you through buying or selling a home, working with a realtor may be the right choice.
