Real Estate Brokerage – Meaning and Functions of a Real Estate Brokerage Firm
When buying or selling real estate, you will have to work with a real estate agent to guide you through the transaction process. But the agent will have to associate or work for a real estate brokerage, which you will have to sign a contract with, and it is run by a broker. A real estate broker is an agent that has completed additional training and licensing requirements. They usually hire other real estate agents to work for them or work independently on their own.
Moreover, there are several professionals playing different roles in the real estate transaction. But a real estate brokerage is the heart or center of the transaction. However, in this article, we will provide information in detail on what is real estate brokerage, functions, brokerage commissions, how to get a real estate broker license, and any other information that will help you get a better understanding of real estate brokerage.
Difference Between a Real Estate Agent and a Broker
However, for a better understanding of what a brokerage firm is all about we will have to start from real estate agents and brokers. A real estate agent is a qualified professional who is licensed by the state to guide clients (buyers and sellers) through the process of a real estate transaction. An agent must work for and under the supervision of a broker. While a real estate broker is an agent who is highly educated and posses an in-depth knowledge of the real estate industry.
Moreover, a broker is the one that runs a real estate brokerage firm, they are usually required to have additional training and licensing qualifications in order to run the business. Brokers may work independently or open a brokerage firm and employ real estate agents to work under them. Their main duty is to oversee real estate transactions and daily operations in the brokerage firm, making sure that agents comply with state and national real estate laws.
Furthermore, there’s also a realtor who is a real estate professional that is a member of the National Association of Realtors (NAR), a trade association for professionals in the real estate industry such as property managers, appraisers, agents, brokers, etc. However, a realtor is mostly confused with a real estate agent but just like we mentioned earlier, the NAR is for professionals in the real estate industry. Therefore, the only difference between an agent and a realtor is that the latter has to meet certain requirements probably that of the NAR. Including being a member of the trade association, all realtors must adhere to its strict Code of Ethics.
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What is a Real Estate Brokerage?
A real estate brokerage otherwise known as a real estate agency is a business entity that arranges the selling, renting or management of real estate. It is usually owned and operated by a licensed broker who represents either buyers or sellers in a real estate transaction. Moreover, there are three main types of real estate brokers and their responsibility in the brokerage firm varies. They include:
- Principal brokers: These type of brokers are found in every real estate brokerage or office. Their duty is to supervise real estate agents to ensure that they comply with the state and national laws.
- Managing brokers: These brokers oversee transactions and daily operations run in the brokerage. Their responsibilities also includes hiring agents, training and managing staff that work under the real estate brokerage.
- Associate brokers: Are agents that are licensed to work as a broker, but choose to work under another broker.
Furthermore, every real estate agents earn their income through sales commission, but as the one who runs the real estate brokerage firm there are other ways a broker gets paid. Apart from the commissions brokers earn from their own deals, they also earn a share of the commissions of the agents that work under their brokerage firm. Most brokers also charge agents that work under them a monthly fee known as desk fee. The agents pay this fee whether they close a deal or not.
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Functions of a Real Estate Brokerage
However, the brokerage offers real estate services which are also known as trading services. These are the services a real estate agent or broker offers to clients (buyers and sellers). A broker or agent working for the buyer normally look for properties that fits the client’s preference and assists the buyer with any other issues until the deal is closed. While the agent or broker working for the seller also called the listing agent, determines the market value of the seller’s property, lists the property for sale, and help their client throughout the transaction process.
Moreover, here’s a general overview of the trading services offered by a real estate brokerage:
- Comparative Market Analysis (CMA), which is the estimation of a property’s value compared to similar properties that were previously sold in its area.
- Total market overview, which is an objective method to determine a property’s value.
- Real estate appraisal: Valuation of the property by the estimate of an authorized person. The real estate brokerage can offer this service only if the broker is also licensed as an appraiser. Otherwise it is offered by a real estate appraiser, who is also a professional in the industry.
- Assisting the buyer throughout the transaction process to make a purchase
- Assisting the seller throughout the transaction process to make a sale
- Marketing the property to property to potential buyers
- Preparing all the necessary paperwork FSBO (For Sale By Owner) for seller
- Property management
- Auctions property
These services and more are offered by the real estate brokerage. However, note that the aforementioned services are also changing as variety of new trends keep transforming the industry.
Real Estate Brokerage Commissions
A commission is the money a broker receives for the services provided by the real estate brokerage. However, the payment of the commission is usually possible upon the brokerage successfully finding a buyer for the property, the successful negotiation of a purchase contract or transaction between the buyer and the seller.
Moreover, real estate transactions are regulated by a law known as the law of agency. In a real estate transaction, the law of agency describes the legal relationship between a real estate professional and a client. It indicates the duties that real estate professionals owe to their clients and what the clients needs to know. Each state has its own law of agency. Furthermore, a real estate brokerage is entitled to receive their commission under common law, without regards to whether the deal is closed or not, once they find a prospective buyer to purchase the property.
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How to Get a Real Estate Broker License
Furthermore, brokers are the foundation of the real estate industry. They manage the daily operation of the brokerage firm. But becoming a broker is not an easy journey, They must have additional education and experience than the real estate agents working under them. However, in order to qualify for the real estate broker license, you will have to meet certain requirements. Although the requirements may vary from state to state, here are the general requirements one must meet:
- You must be legally residing in the United States of America.
- Also, you must meet the minimum age requirement required to practice real estate as a broker, which ranges from 18 to 21 years of age depending on your state.
- You must be licensed as a real estate agent before being eligible for the broker license
- Your criminal record information (if you have any) must be included in your application, otherwise it may be denied
- You must have at least two years experience in the real estate industry as an agent before applying for a broker license
- Also, you must meet your state ‘s education requirements for real estate broker’s license
Moreover, you are required to take your licensing course at a well accredited real estate licensing school. Also, there are several ways you can choose to fulfill your real estate broker licensing course. These options ranges from online classes, community colleges, universities, local real estate schools etc. However, we have outlined the best online real estate schools you can choose from if you want to take the courses at your own convenience. They include:
Furthermore, after you must have completed your licensing courses you can then apply for the real estate broker exam by submitting the relevant forms and documentation to your state’s real estate commission.
Top Real Estate Brokerage Companies
However, the following are the top real estate agencies or brokerage companies:
Real Estate Maximums (RE/MAX), established since 1973 and has grown to contain over 100,000 sales agents working in franchise owned offices in more than 100 countries. Moreover, it is regarded as the most productive real estate agency.
Century 21 has about 7,000 brokerage firms with 100,000 partners across the globe. It operates globally throughout Europe, Latin America, Asia and the Middle East.
In 2012, this real estate agency achieved profitability in 91% of its offices nationwide. Also it operates in over 700 markets across the globe.
Coldwell Banker was established in San Francisco in the year 1906. It has 3,000 offices in approximately 50 countries.
ERA real estate is operated by Realogy, which is the parent company of Coldwell Banker, Century 21, and Sotheby’s. It was founded in 1971 and has offices Japan, Germany, Saudi Arabia and many other countries.
Established in 1976 and has many high net worth clients. Sotheby’s has offices in many countries across the globe including South-east Asian countries like the Philippines and Thailand.
This company is regarded as one of New York City’s largest and privately owned residential real estate agency. The Corcoran group has offices in the Hamptons and South Florida. It contains over 1,900 independent agents in different offices in the country.
The Camden Property Trust are experts in managing, developing and owning multifamily residential apartments. The company owns more than 55,000 apartments across the country.
This real estate agency was established by the Meredith Corporation in 1978. It is also ranked as one of the reputable entities in the country.
Zillow.com, just as its name suggests is an online portal that provide homebuyers the tool and applications to make real estate decisions autonomously. It was established in 2005 by former Microsoft executives Rich Barton and Lloyd Frink. Zillow has a database of over 110 million homes and tools that can make it easier to rent or buy a home.
In conclusion, real estate transaction or buying and selling of a property is one of the most challenging decision one can make when it comes to finance. Therefore, 90% of buyers and sellers work with a real estate brokerage to help the negotiate the transaction process.
Moreover, in addition to the broker license, after you must have been licensed as a broker. You may choose to work as an associate broker with another brokerage firm, or set up your business firm. However, if you choose the latter, here are a few tips to for starting your own real estate brokerage firm:
- Develop a business idea: real estate is really becoming very competitive, there are chances that two or more popular brokerage firms that are already engaged in the real estate market in your area of preference. You will have consider your strengths and weaknesses, and also an area or niche that you experienced and particularly interested in to make it easier for to stand out of competition. You may decide to focus only on residential real properties, or commercial, only on property management.
- Start with a business plan: Preparing a simple business plan is essential for success as an entrepreneur. A business plan is a document that outlines the financial and operational goals you set for your business. Preparing a business plan is writting everything down in a simple way that it helps you make a strategic decision on how your business will reach those goals.
- Choose a compensation method for agents that work in your brokerage. You may decide to share the commission they earn from their deal or you charge them monthly desk fee rather than splitting their commissions.
- Invest in technology by building an efficient range of digital tools such as real estate website, email marketing tool etc.
- Prepare a sales and marketing plan.