Key Takeaways
- Know the hierarchy: Agents must work under a broker, while brokers can operate independently and supervise others, so verify who is legally responsible for your transaction before you commit.
- Choose based on needs: For standard buying or selling support, an agent is usually sufficient; for complex transactions, compliance concerns, or brokerage-level decisions, work directly with a broker.
- Understand what “Realtor” means: A Realtor is any licensed agent or broker who is a member of the National Association of Realtors, look for this designation if you want added ethical standards and accountability beyond basic licensing.
It is easy to misunderstand professional roles in the real estate industry because they are usually closely related. Some of the frequently misunderstood or interchanged terms in the industry are real estate agents, real estate brokers, and realtors.
As a result, complications arise because real estate investors are confused about which real estate professional they should rely on to guide them when performing transactions that involve significance and legal consequences.
Each of these terms carries specific ethical obligations, license requirements, and a scope of authority that influences their delivery of real estate services.
In this article by Keyrenter Premier, we will examine the difference between real estate agents, brokers, and realtors. This will include a clarification on how each of them functions within the real estate environment and why these differences are important.
The Structure of the Real Estate Profession
The primary governing body for real estate professionals resides at the state level. This means that license and regulatory oversight are performed by state real estate commissions or departments. Although there may be variations in different jurisdictions, the general hierarchy of real estate professionals is the same throughout the United States.
Licensed real estate agents are at the foundational level. Immediately above them are licensed brokers. These are professionals who possess additional education and authority.
What Is a Real Estate Agent?
A real estate agent is a licensed professional who is authorized to represent sellers or buyers during real estate transactions. They act as middle persons between parties to prepare transactional documents, facilitate negotiations, and guide clients through the intricacies of selling, purchasing, or leasing properties.
An individual is required to complete the mandatory state pre-licensing education and pass the licensing examination before becoming a real estate agent. Their education usually involves coursework in local property laws, real estate ethics, contracts, and principles.
After receiving their real estate license, they must work under the supervision of a licensed real estate broker. They do not have the permission to operate independently or manage escrow funds.
Real estate agents have a wide range of responsibilities that include:
- Assisting clients with offer preparation and negotiation.
- Listing properties for sale or lease.
- Coordinating appraisals, inspections, and closing.
- Conducting property showings and open houses.
- Marketing properties to potential tenants or buyers.
Fiduciary duties that agents owe their clients usually include reasonable care, obedience, disclosure, confidentiality, and loyalty. State laws govern these duties, and they are reinforced through professional standards.
The authority of real estate agents is limited by law, even when they play vital roles in transactions. Real estate agents are mandated to operate under a broker’s license, comply with brokerage policies, and defer certain financial and legal responsibilities to their supervising broker.
Who Is a Real Estate Broker?
A real estate broker is a licensed professional who has met advanced educational and experiential requirements that exceed those of an agent. They have more authority and can supervise other agents, own brokerages, and operate independently.
An individual must first own an active real estate agent license before they can qualify to become a broker. After this, they are required to complete additional education (which varies according to states) that usually includes advanced coursework in real estate law, management, finance, and ethics.
They are also required to write and pass a separate licensing examination. In some jurisdictions, agents are required to have years of experience or complete a minimum number of transactional hours before they can be eligible for broker licensing.
There are three major types of real estate brokers:
- Designated brokers: Those who assume legal responsibilities for brokerage preparations.
- Associate brokers: Those who work under another broker, even when they hold a broker license.
- Principle or managing broker: Those who own or manage a brokerage.
Brokers are authorized to perform the following responsibilities:
- Manage or hold client trust accounts.
- Establish compliance procedures and brokerage policies.
- Hire and supervise licensed agents.
- Operate independent real estate businesses.
- Resolve disputes and oversee transaction integrity.
Brokers play a major role in regulatory compliance and risk management because they are legally responsible for the actions of their agents.
What Is a Realtor?
The term Realtors is a trademarked designation for identifying members who belong to the National Association of Realtors (NAR). It is not a license. Realtors can be brokers, associated brokers, or real estate agents, provided they keep to the organization’s ethical standards and meet membership requirements.
National Association of Realtors membership: A real estate professional must first meet the following criteria before they can become a realtor:
- Have an active real estate license.
- Join a local Realtor association that is affiliated with NAR.
- Agree to comply with NAR’s code of ethics.
- Pay membership dues.
Membership in this organization is voluntary and different from state licensing requirements.
Adherence to the NAR code of ethics is one of the defining features of realtor membership. Professional standards in this code exceed most state licensing requirements. This code of ethics emphasizes:
- Commitment to ongoing professional development.
- Respect for exclusive representation agreements.
- Avoidance of misrepresentation.
- Fair treatment of all parties.
- Transparency and honesty.
Disciplinary actions such as termination of membership, suspension, or fines are put on members who violate the code of ethics.
Final Thoughts
The difference between a real estate agent, a broker, and a realtor shows how the real estate profession is structured. Each of these roles perform specific functions that are governed by ethical, educational, and legal standards. Customers who understand this difference are equipped with adequate knowledge to confidently navigate real estate transactions and choose appropriate representation.
If you’re looking to streamline property management, partner with an expert property management company like Keyrenter Premier today.