Agent, Broker, REALTOR®?What?s the Difference?

March 31, 2009

Residential

Agent? Broker? Brokerage? Associate Broker? Managing Broker? REALTOR®?

Agent? Broker? Brokerage? Associate Broker? Managing Broker? REALTOR®?

One of the most common questions I get from people (or at least I get a quizzical look) is what?s the difference between an agent, a broker, and a REALTOR®. This usually happens when they realize I?m using the words differently. For example, ?The agent?s broker told her she had to be a Realtor® in order to keep her license with the brokerage.? Huh?

It?s not that hard. The differences come from both state license law and a registered trademark. Here?s a few brief explanations that don?t get into too much of the legal finery:

What?s a Real Estate Agent?

A real estate agent is a person who has met the requirements set by state law to act as an agent in real estate transactions. In Illinois, the Illinois Department of Financial & Professional Regulation (IDFPR) is the agency that deals with this law and makes sure everyone follows the rules.

It isn?t very hard to become an agent. You have to be 21 years old and have a high school diploma. You take a 45-hour course from an IDFPR-approved school and pass the school?s test. You then have to pass the state?s test and pay your fees to the state to get your license. Every two years you have to take continuing education from an approved school and pay for a new license. Most people find these courses and test quite easy.

An important point is agents can?t work for themselves. An agent can?t use that license unless they ?park? their license with a real estate broker. They are somewhat like an apprentice. Basically, agents have to have a boss who is a broker. Brokers act as agents? bosses and are legally responsible for what agents do.

What?s a Real Estate Broker?

Becoming a broker takes more classes and more tests. Before you can become a broker you have to have taken and passed the agent classes and exam. You then have to take another 75 hours of class from an IDFPR-approved school, pass the school?s test, and then pass the state?s test. You then apply to the state for your broker?s license.

Only brokers are allowed to charge for their services?agents are not. This is one of the reasons an agent must work for a broker. Also, only brokers can enter into contracts?again, agents can?t. This is why when you list your home with an agent, they don?t sign the contract, their broker does.

What?s a Managing Broker?

Unlike agents, brokers can work for themselves; they don?t have to have a boss. They can ?hold their own license? and don?t have to park it under anyone else. They also have the right to have agents work for them. If they do have agents working for them, they are called a managing broker. Every real estate office has to have one managing broker who is legally responsible for nearly all the actions of the agents in that office. If those agents get into trouble, it?s the managing broker who ultimately is responsible for the problems.

What?s an Associate Broker?

A lot of agents decide they want the additional prestige of the broker title, so they go through the courses and take the tests. However, they don?t want to be managing brokers; they don?t want to be the boss. They simply want the additional education and the title, but to act as an agent but have the broker title. These people are often called associate brokers by their brokerage.

What?s a Brokerage?

A brokerage is a company that has a broker?s license. Basically for a company to have a broker?s license, the owners have to be brokers and then apply for the company to get a broker?s license.

What?s a REALTOR®?

Have you noticed that there?s a ® every time I use the word REALTOR®? Have you noticed that the word is in all caps? That?s because it?s a registered trade mark of the National Association of REALTORS® (NAR) and that?s how they require it be used. I suspect you, like most non-REALTORS®, thought that the word was just a word. However, like Kleenex®, it?s a brand name. And, like Kleenex®, NAR is very protective of their trademark for fear that it will be taken away from them because of its ubiquity.

REALTORS® must be either a licensed agent or a broker and they must join the National Association of REALTORS®. Furthermore, REALTORS® have to agree to a strict code of ethics, which often holds them to a higher standards than the state law. In nearly all places in the US (including Chicago), an agent needs to be a REALTOR® in order to have access to the Multiple Listing Service (MLS), which is the database of properties that have been and are on the market.

So, that?s it, all you ever wanted to know about the lingo of the real estate world.

We’d like to thank Chris Griffith for kindly sharing today’s photo via the Creative Commons License. Thank you Chris!

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About Rod Holmes

Rod has been a broker working in Chicago since 2004. He has worked with developers, buyers, sellers, and as well as managing offices. He is currently a partner in Chicago Style SEO working primarily with real estate firms to improve their Internet marketing. Rod lived for nearly ten years in Japan where he owned a corporate training and executive coaching firm with clients including Hitachi and 3M Japan.

He lives in Lakeview with his wife and two children. He enjoys coaching and watching his kids participate in sports, cycling, camping, and traveling in general.

You can find Rod online on Twitter at @roddesu, Facebook and LinkedIn.

View all posts by Rod Holmes

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