So what's the difference between a realtoror,
a real estate agent and a real estate broker?
These terms often get thrown around interchangeably,
but they actually have pretty distinct differences between each other.
Let's start with the term realtor.
A realtor is a real estate professional who's an active member of something called
the National Association of Realtors, NAR for short.
It's an organization that fosters and promotes best practices within the real estate industry.
You do not have to become a realtor in order to hold a real estate license,
but you do have to hold a real estate license in orderto become a realtor.
In fact, at the time of this recording, I'm describing myself here.
I personally hold my real estate license for the state of Indiana,
but I'm not currently a member of the National Association of Realtors.
One of the major benefits to joining the NAR
is that it gives you access to something called
the Multiple Listing Service or MLS for short,
which is a database of regional properties that have sold in the past,
or that are currently on the market for sale.
And therefore, most people who get their real estate license
also become realtors.
In commercial real estate, it's a little bit different though.
Access to the MLS is not as essential because a lot of the deals that happen
happen off-market or through relationships
or through alternative databases like CoStar.
It's more common to find people who are licensed, but not realtors
on the commercial side of real estate.
The National Association of Realtors breaksup each state into different regions
and each region has its own local chapter.
In order to access the MLS for a particular region,
a person would have to subscribe to that regional chapter of the NAR.
To do so a person has to pay annual membership fees,
attend the ongoing education
and agree to uphold certain standards of professionalism.
So with that out of the way, let's not talk about the difference
between a real estate agent and a real estate broker.
The term real estate agent can actually mean different things
depending on what state you're in.
Certain states run their real estate licensing on a two-tier credential system
where on the lower tier, you have something called the real estate salesperson
who people commonly refer to as real estate agent.
And on the higher tier, you have something called the real estate broker.
In this two-tier system
each designation requires an entirely different set of tests and licensing,
but the broker designation is also requiring two years of experience as a sales person.
And say, it's with this two-tier system,
you have to get your sales person license first,
hold that license actively for at least two years.
And then you can start the process to obtain your broker's license, if you want.
In order for the salesperson to conduct business legally in real estate,
they have to "hang" their license under a real estate broker
and pay them a portion of their commission.
The reason behind this is that it's assumed
that a broker is more experienced than the salesperson
and they will oversee their activities
and ensure that they're not making any mistakes or causing problems.
Typically the broker will provide ongoing resources like guidance, education
and business advice to the salesperson
and their compensation for that is a portion of the sales person's commission.
So to recap in states with this two-tier system,
our real estate professional that holds
their salesperson's license is commonly referred to as a real estate agent.
Whereas someone who holds a real estate broker's license
is simply called a real estate broker.
Now, in other states, this two-tier system is still somewhat in effect,
but there's only one standardized license in all of real estate,
namely the real estate brokers license
In these states, no one holds a salesperson's license at all.
They only hold a broker's license.
The way these states distinguish between
the less-experienced broker who still has to hang their license
and share a portion of their commissions legally.
And the more experienced broker is by requiring the more experienced broker
to hold an active license for at least two years,
and then take a class that certifies them
as a managing broker.
So when in these states you have brokers and managing brokers,
and here's where things might get a little confusing.
Most people in the states refer to non-managing brokers as real estate agents,
and then refer to managing brokers as brokers.
Regardless of what state you're in
probably the easiest way to remember the difference between an agent and a broker
is to think of a real estate agent as a professional
who primarily does business just for themselves.
Whereas a broker normally runs a real estate brokerage firm.
The real estate broker is normally more experienced and serves more
in a management role compared to the agent
who primarily focuses on sales.
To wrap this all up,
there is actually one exception to what I've mentioned here.
In commercial real estate, most real estate professionals
are universally referred to as brokers,
regardless if they hold a sales person's license or not.
They simply distinguish between the two-tiers
by calling one-tier a broker, and one-tier a managing broker.
I hope this video at least cleared some things up for you.
And if you found it helpful,
I think you're going to like this one next on the screen here as well.
Go ahead and check it out and I'll see you there.