Real estate is a dynamic and highly competitive sector that rewards good management, communication, and negotiation skills. There’s nothing different from most businesses out there up to this point.
Yet, at a closer look, it’s easy to see that the real estate niche’s business model and internal structure are quite different.
First, you’ll notice there are three main layers of professionals: real estate agents, realtors, and brokers. While all of them can help customers buy and sell property, each professional has their own role in the business structure.
Agents, Realtors, and Brokers – What’s the Difference?
Real estate agents are the ones most people see in the field, promoting listings, looking for customers, and working hard to intermediate transactions. However, they can’t do this job by themselves since they are not allowed to handle the actual transaction or close the deal.
Realtors can be either agents or brokers who are members of the NAR (National Association of Realtors). In this position, they must comply with NAR’s strict Code of Ethics.
Lastly, brokers are real estate agents with additional training and licensing who can (legally) handle transactions and close deals. Their main job is to support real estate agents’ efforts and provide them with things they need (such as office space, access to various tools, assistants, and more).
How Does a Real Estate Brokerage Work?
It’s important to know that real estate agents are independent contractors who work on commission. This means they’ll only get paid after closing a deal; they don’t receive a salary from the brokerage. In fact, the brokerage takes a cut of the agent’s commission for the support it provides.
In short, if you open a business that handles real estate, it means you’ve started a brokerage business, and you can take agents who are not licensed as brokers under your wing. Considering the revenue structure, it’s in your best interest (as a broker) to find skilled agents interested in growing their client base.
However, it’s not easy to attract highly trained agents (they know their value). For this, brokerages must provide a series of support services such as:
- Training – being a good real estate agent means you are constantly learning new things in an effort to improve. This means you need access to educational resources, training courses, and advanced tools such as the MLS (Multiple Listing Service). Brokerages often provide agents with free access to classes and resources to ensure everyone is updated with the latest practices.
- Networking events – the professional social circle of an agent needs to be wide and diverse. Yet, it’s challenging to find time to enlist to all sorts of events when you’re working hard to find customers simultaneously. That’s why agents prefer brokerages that help them network and promote their brand.
- Tech support – project management tools, websites, social media management, and other tech-oriented activities make a huge difference in the life of an agent. When you’re working with several customers at once, it’s easy to lose track of appointments, meetings, and open houses without proper support.
While the main job of a broker is to make sure their agents have all they need, they can also work with buyers and sellers. Since they have more liberties than agents do, brokers can see a deal from start to end and can help customers with more sensitive issues.
Also, if they work with a seller, brokers can help determine the market value of properties and make sure buyers see it by listing the property and promoting it.
While most people who invest in real estate don’t usually deal with brokerages, it is a part of the real estate business model that can’t be ignored. It’s also a great way to step down from being an agent whenever you don’t feel like doing field work anymore.