The real estate business works differently than the traditional business, and it is not easily explained. Clients are often unclear or confused about how the brokerage/broker/agent relationship works. Hopefully this will help to explain how the business works. At some point in everyone’s lives they are involved in the world of real estate, so the more you know about it the better prepared you will be.
Breakdown of the Real Estate Business Model
Brokerage
Every agent has to be registered with a brokerage. This brokerage is run by a broker(s). Each agent must sign an independent contract with a brokerage in order to do business. When you are working with an agent you should think of them simply as a representative for the brokerage. All business, including funds, is run through this business entity.
Some brokerages are independent of a national franchise; i.e. Luke & Leia Real Estate Service. Others choose to acquire a brokerage with a national franchise; i.e. RE/MAX, Century 21, Keller Williams, and Coldwell Banker. In this case a broker would open a brokerage under the franchise name and add additional verbiage to name the brokerage; i.e. RE/MAX Galactic Enterprises.
Broker
The broker is the owner of the brokerage. While they run the business they do not fill a “traditional boss” role. They will schedule trainings, host events, motivate agents, disperse information, and give great advice. They don’t track hours, manage projects, or dictate agent’s actions. At the base level a broker is an agent’s legal guide, the person who makes sure that the agents are following all of the laws and guidelines. At a higher level a broker will be an agent’s business guide and advise them in all aspects of their business.
Agent
An agent is an independent contractor that represents their brokerage. The agents must pay dues to the brokerage. The agent is registered under the National Association of Realtors (NAR), and is regulated by both NAR and their local association of realtors. The agent is responsible for representing and advising their client. The independent contractor aspect gives agents the power to make their own hours, choose their work location, and dictate their marketing and finance strategies.
That is the basic break down of the real estate business model. Hopefully, this will help you to have a better understanding of how real estate businesses function.
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Provided to you by Tabby Russell Rivera, Buyers Agent for Nick & Cindy Davis RE/MAX Premier Group.