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June 1, 2019

Q&A: What is the Difference Between a Real Estate Agent, a Realtor and a Broker in California?

I often get asked a variety of questions from members of the public about the real estate profession, so I thought I'd start a series of Q&A blogs to address the more frequently asked questions.  In this post I'll be focusing on the difference between a real estate agent, a Realtor and a Broker.  First we shall define the terms and then go into the differences and similarities between them.

What is a Real Estate Agent?

Q&A: What is the Difference Between a Real Estate Agent, a Realtor and a Broker in California? 1A real estate agent is someone who has been licensed by the state to help people buy, sell or rent homes.  In California, they would be licensed by the California Department of Real Estate and they would hold a "Real Estate Salespersons" license.  In order to obtain this license, a considerable amount of per-licensing education (approx. 135 hours worth for California) in real estate is required, as well as passing a background check, and passing a comprehensive and difficult exam on the laws and procedures of real estate sales.

A salesperson's license does NOT allow the licensee to practice real estate on their own, instead they must be employed as an agent of a Broker, hence the term "Real Estate Agent".  A licensee may choose in California to sell residential properties, commercial buildings, businesses and used mobile homes.  They may also work in property management.  Most licensees tend to specialize in one or two aspects of the business.  For example, I specialize in residential properties, real estate investing and property management.

What is a Realtor?

NAR logoA "Realtor" is a licensee who has joined the real estate agent trade union, known as the "National Association of Realtors (NAR)" and has agreed to abide by their rules and regulations, known as the "Code of Ethics".  Membership is optional in California, however it is very common for residential agents to join as this gives them access to the local Association of Realtors, which provides ongoing trainings and professional growth opportunities for agents.  In some parts of the country, the real estate multiple listing service is owned by the association of Realtors and membership is required to obtain access.  A licensee with any level of license and who specializes in any aspect of real estate may become a Realtor.  If is common for those that work in residential real estate and property management become members.

While the term "Realtor" has become synonymous with "Real Estate Agent" in the popular lexicon of American speech, a real estate agent is NOT the same as a Realtor.

What is a Broker?

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In order to get a Real Estate Broker license in California, you must have several years of proven full-time real estate sales experience and have that experience validated by your employing Broker.  Then you have to take seven additional courses, covering topics such as ethics, principals and practice of real estate, legal aspects, finance, economics, appraisal, trust accounts, construction and then an elective course!  These take around six months or more to complete.  Then you have to apply for and pass an all day exam that is considerably more detailed and difficult than the salesperson's exam.  Because the pass rate for a Broker's exam is so low, the state doesn't even start your background check until after you pass!

A Real Estate Broker is able to work for themselves, open their own company, have a trust account for client funds, employ real estate agents or work for multiple companies at once (such as a builder and their own Brokerage).  In the state of California, a Broker is the only person able to perform real estate transactions for a third party.  Real Estate Salespersons must hang their license with an employing Broker and act as an agent of that Broker, in order to work in real estate.

What is the difference between a real estate agent and a Broker?

The main difference is that Brokers have a higher level of education, a proven track record and skill set, a higher level of responsibility, and a minimum level of full-time real estate experience in order to become a Broker.  Brokers are also able to work on their own, while an agent MUST work for a Broker.  Brokers may also open client trust accounts, perform appraisals, also known as "BPOs" or Broker Price Opinions, and a Broker may open their own office and employ others.

You say that an agent must work for a Broker, but I thought agents were independent contractors?

That my friend, is the subject of another Q&A to follow...

Click Here for more in my Q&A series of blogs


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