Real estate is filled with jargon. It all begins with the unclear naming conventions for the person helping you buy, sell, or rent your home: the real estate agent.
A real estate agent has a license from the state to support you on real estate transactions. In some markets there are other names for agents. The most frequent are real estate salesperson and real estate broker. The seller, buyer, or renter is the client of the agent. An agent is usually only working with one side of the transaction (buyer or seller). In rare instances of dual agency, an agent may represent the buyer and seller.
The real estate agent works at a real estate brokerage. This arrangement is almost always required by state law. The typical term used is that an agent hangs their license at the brokerage.
A brokerage collects all payments, called commissions, from clients. The brokerage then distributes commissions (after brokerage fees) back to their agents. The fee the brokerage takes from the agent is called the split. In most markets, an agent can’t collect commission payments directly from clients. As a result, the flow of money is almost always from the client to the brokerage to the agent.
A managing broker oversees the operations and practices of a brokerage. They are responsible by law for the actions of the agents working at their brokerage. There is only one managing broker per brokerage. But there may be many brokers at a brokerage who are not managing brokers. Often, the name for these non-managing brokers is associate broker.
A managing broker is not always an owner of the brokerage. Most states prevent managing brokers from overseeing more than one brokerage.
You will often notice a few agents working together as part of the “[Agent Last Name] Team”. Agents sometimes work together as part of agent teams to pool resources. These teams include unlicensed people who focus on marketing, operations, and administrative work. That said, all agents on a team are still employed by their brokerage. Unlicensed members are sometimes employed by the separate team entity.
A Realtor is a member of the National Association of Realtors (NAR). Think of NAR as a trade organization for real estate agents. NAR usually charges an annual national and local payment. Agents also must take some coursework for ethics. An agent with a license is not a Realtor without joining NAR. Most active agents are Realtors. Agents who are less active may not find membership in NAR to be worthwhile.
Getting licensed is a straightforward process and less class time than you think.
The process to get licensed is pretty simple. States have a 60-120 hours education requirement through an approved school. Many of these courses are online with a proctored exam. After coursework, there is a state real estate exam. This is almost always in-person at a test center. Agents also have to complete continuing education every few years. Usually, this is 6-12 hours of online or in-person class.
There are two notable exceptions to license requirements. Attorneys and people with real estate degrees from traditional colleges are often exempt. In some states, they may still have to take the state exam.
Becoming a managing broker requires more education and another exam. There is often an extra requirement of experience too. Usually, a managing broker candidate must have years of experience as an agent. They also must have supported a certain number of transactions.
In summary, becoming an agent may sound really burdensome. But the process is an online course (usually $150-$250) and an in-person exam.
However, a real estate license doesn’t make you a great agent. It only means you are legally allowed to support real estate transactions. You still need to find a brokerage to practice real estate and then build your own business. Most agents don’t make it more than a year or two in the industry. Real estate licensing prepares agents for terms/laws not on how to succeed in the business. This is why the average agent makes under $10,000 each of their first two years in business.
There are many schools that offer online education to complete their licensing. As a frame of reference, here are three examples for their NY real estate courses: