What Is A Real Estate Broker? Complete Guide

Real estate brokerage professionals typically fall into three distinct categories, associate, managing, and principal/designated brokers.

Principal/Designated Broker

Real estate brokerages will typically employ a principal/designated broker who oversees all operations and transactions at their firm – they act like the CEO of their brokerage! With such great authority comes great responsibility.

Principal brokers ensure all agents comply with state real estate laws, all transactions are legal and financially compliant, and that no fraud occurs in real estate deals.

Due to the legal implications involved with each real estate transaction, every brokerage firm must always have a principal broker available within their office at all times.

Managing Broker

A managing broker holds a broker’s license and oversees the day-to-day operations of their brokerage firm, tending more towards HR functions rather than real estate transactions as would typically fall within their remit as principal broker.

An effective managing broker typically handles agent licensing requirements as well as onboarding, training, and mentoring new agents – while providing continuing education opportunities to all agents.

Some principal/designated brokers also serve as managing brokers; this practice isn’t common in the industry.

Associate Broker

Associate brokers in larger brokerages will often hire salespeople and associate brokers to help with workload. Associate brokers are sometimes also called broker associates or agent salespersons. Act on behalf of the principal broker when conducting real estate transactions.

Associate brokers tend to operate as freelance contractors; therefore they are only permitted to work for one broker or brokerage at any one time.

How Can Real Estate Brokers Affect Me

Home buyers and sellers rarely interact directly with brokers when purchasing or selling homes, typically working through real estate agents instead. Buyers or sellers build relationships directly with an agent while their broker handles legal aspects behind the scenes; most transactions don’t see or interact directly with a broker either!

Never fear meeting your agent’s broker directly if you never see him/her – their broker will likely be busy verifying paperwork behind the scenes while your agent stands ready to guide your transaction through its entirety.

How Are Real Estate Commissions Split Between Agents And Brokers? 

Real estate agents typically negotiate their commission rate up to 6% of a home’s purchase price, depending on which commission structure applies to their state of operation.

Take for instance that you list your home with a brokerage, and someone submits an offer to purchase for $200,000. Your commission fees would then total 6%: your listing broker gets three percent and any broker responsible for finding buyers will get another three.

Your agent might think they have earned themselves an astonishing $6,000 commission check, but in actuality, their commission will likely be divided among themselves and their broker.

Imagine this scenario where both agents have agreed on an 80/20 split with their broker; the listing agent has agreed on an 80/20 split while the buyer agent has 70/30. Here is how the total commission ($12,000 in this example) breaks down:

• $4,800 should go to the listing agent; 
• $1,200 should go to their broker; and, 
• $1,800 goes directly to a buyer’s broker.

Splitting commissions between agents and brokers is standard practice in real estate; commission splits cover expenses like administrative services while still earning them money for their work.

Brokers may also collect commissions when acting as personal agents; so in our example above if a broker were both broker owner and listing agent they would keep every cent of their 3% commission from selling a house for $200,000 at full asking price. Brokers also make money through other methods, including charging agents a monthly administrative service fee regardless of performance.

How Can You Become A Real Estate Broker? 

While state requirements will differ, to become a broker in most instances you must first become a licensed real estate agent for at least some period. At least 21 years old is also needed as you reside within the particular state in which applying for your brokerage license.

Broker requirements will differ by state. Educated brokers must complete at least 12 hours of broker training courses and pass state licensing exams with no criminal records to their name.