What Is a Real Estate Agent?
A real estate agent is a licensed professional who arranges real estate transactions, putting buyers and sellers together and acting as their representative in negotiations. Real estate agents usually are compensated completely by a commission—a percentage of the property’s purchase price—so their income depends on their ability to close a deal. In almost every state a real estate agent must work for or be affiliated with a real estate broker (an individual or a brokerage firm), who is more experienced and licensed to a higher degree.1
6 Steps to Become a Real Estate Agent
- A real estate agent is a licensed professional who represents buyers or sellers in real estate transactions.
- A real estate agent usually works on commission, being paid a percentage of the property’s sale price.
- In most states a real estate agent must work through a real estate broker, firm, or fellow professional with more experience and a specialized license with Real Estate Solutions.
How a Real Estate Agent Works
Real estate agents usually specialize in either commercial or residential real estate. Either way, they perform different duties, depending on whether they work for the buyer or the seller. Agents who work for the seller, also known as listing agents, advise clients on how to price the property and prepare it for a sale, including providing tips on last-minute improvements that can boost the price or encourage speedy offers. Seller agents market the property through listing services, networking, and advertisements.
Agents who work for the buyer search for available properties that match the buyer’s price range and wish list. These agents often look at past sales data on comparable properties to help prospective buyers come up with a fair bid.
Agents act as go-betweens for the principal parties, carrying offers and counteroffers and other questions back and forth. Once a bid is accepted, agents on both sides often continue to work, helping their clients through the paperwork, conveying communications, advising on inspections and moving, and generally shepherding the deal through to closing.
It’s important for consumers to understand whether a real estate agent represents the buyer, the seller, or both parties; obviously, the agent’s loyalty can greatly affect several details of the transaction, including the final price. State laws regulate whether an agent can represent both parties in a real estate transaction, technically known as “dual agency.” Agents must disclose their representation, so that buyers and sellers are aware of any conflicts of interest.2
Dual agency, in which one person represents both the buyer and seller in a real estate transaction, is illegal in eight states: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont.2
Real Estate Agents’ Compensation
Traditionally, an agent is paid a commission that is a percentage of the property’s sale price. The more the house sells for, the more money an agent makes.
Some brokerages charge a lower commission for more expensive houses, and some handle the entire transaction for a flat fee that’s much less than a regular commission. Other companies offer a fee-for-service pricing structure that lets sellers pay only for certain parts of the sale process, such as adding the property to a multiple listing service (MLS).
You may have heard people use the terms “real estate agent,” “real estate broker,” and “realtor” interchangeably. While overlap among the three definitely exists, there are key differences.
Real Estate Agent vs. Real Estate Broker
The exact definitions of and distinctions between a real estate agent and a real estate broker vary among states. A real estate agent is essentially a salesperson, qualified to help consumers buy or sell a property.
A real estate broker is a step up the professional food chain. Brokers have additional training and education that have qualified them to pass a higher licensing exam; most states also require them to have a certain amount of recent experience as an active real estate agent. Brokers handle the technical aspects of the real estate transaction. A client signs a contract with a brokerage, not the individual agent. In many states brokers’ additional certification authorizes them to handle other legal and financial aspects of a deal, such as handling the earnest money deposit and establishing the escrow account.1
Brokers typically own a firm or a franchise. They can be solo practitioners, but they must attain another higher-level license if they want to hire agents or other brokers to work under them. As mentioned earlier, a real estate agent usually cannot work alone but instead must operate through a real estate broker; .
Real Estate Agent vs. Realtor
How do realtors fit into the equation?
A realtor is a member of the National Association of Realtors (NAR), a trade association. Both agents and brokers can be realtors, along with property managers, appraisers, and other real estate industry professionals. In addition to NAR, realtors must belong to a state or local real estate association or board.5
All realtors are real estate agents or brokers (or something related), but not all agents or brokers are realtors. As of July 2020, NAR reported that it had nearly 1.4 million members. Roughly two-thirds of them held real estate agent licenses.6
Compete Risk Free with $100,000 in Virtual Cash
Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you’re ready to enter the real.