Buying or selling a home is one of the biggest financial decisions that any consumer can make, and one of the most challenging. For this reason, 9 in 10 home buyers and sellers work with a real estate agent to help them navigate the process. Of course, agents are just the first piece of the puzzle: behind every real estate agent is a real estate broker.
As real estate agents typically work under brokerages, we can say that real estate brokers are the foundation of the industry. Apart from the typical real estate agents’ duties, they also assume a handful of other responsibilities: they hire real estate agents for whose operations they assume legal responsibility and make sure that all the transactions are correctly coordinated and lawful. As employers, brokers have to train and mentor agents who work for them and provide them with every tool necessary to perform their duties, that is: technology, network, marketing and, of course, listings. In return, they take a portion of their agents’ earnings, either via commission splits or a flat fee.
Becoming a real estate broker isn’t easy and it comes with a lot of legal responsibilities, for which they must have more education and experience than the agents they manage. Why then take on this additional stress and become a broker?Well, it can really be lucrative. According to Glassdoor, the median real estate broker salary in the United States (as of December 2021) was $120,229 a year: $89,681 in base pay, and $30,547 in additional pay. As a broker, you don’t have to split your earned commission with anyone and on top of that, if you have agents working under you are entitled to a share of their deals. So how do we get there?
How to Become a Real Estate Broker with No Experience?
In order to become a real estate broker, you will have to research the regulations of your state. In most states you will need to have a valid real estate agent license and two or three years of practical experience and pass the brokerage exam. Although taking a course will not always be required, enrolling in one will work in your favor.There are some regulations that apply to every US state. First of them is that you must be a legal U.S. resident (though not necessarily a citizen) in order to become a real estate broker. Every state also has a minimum age to practice real estate as a broker. This ranges from 18-21 years of age. Another important regulation is that you should have no criminal record.
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What Do I Need to Become a Broker?
Creating a business plan is a crucial component of starting any self-employed career. It will require some upfront investments such as covering transportation costs and technology (a smartphone, a laptop etc.). It’s good to make some decisions long before you take off on your new journey. For example, if you decide on renting an office space, estimating the cost of rent, furniture and hardware will definitely help you have a smooth start and stay afloat for the following months. While planning your spendings, you have to keep in mind the fact that most up and coming brokers have negative cash flow for the first several months. It means that they have to rely on their savings before they (or their agents) close the first deal.
Being a broker most likely will mean for you managing agents. That will require having team management skills and even stronger communication skills than you needed as an agent. Some of us are natural born managers, while others will need to work on their team leading skills.
Frequently Asked Questions About Becoming a Real Estate Broker
In order to provide you with comprehensive information on how to become a real estate broker, we have researched the most commonly asked questions asked by those who are interested in starting their own brokerage. Read on to get a complete view on the steps!
What education is required to become a real estate broker?
Every state has different requirements. Most of the states require completing a broker course or getting a degree that includes necessary subjects to pass the broker exam. Before enrolling in a course, remember to check whether it is officially approved. Most of the courses will cover key topics such as:
Real estate law
Real estate finance
Real estate practice
Real estate accounting
Property management
What kinds of computer skills will I need as a real estate broker? Since being a broker requires an analytical approach, it will be profitable for you to be able to use spreadsheets such as Microsoft Excel or Google Sheets for calculations and analyses. If your goal is to reach younger Millennials and Gen Zers through social media (who are likely to make their purchasing decisions based on what they have seen on Facebook, Instagram and TikTok), as well as create your own personal brand, some working knowledge on reading and interpreting Meta Business Suite analytics might work for you, as well as working knowledge of simple and free graphic design tools as Canva to create your own imagery.
What is the difference between real estate agents and real estate brokers?
Like agents, real estate brokers are licensed to help people buy and sell homes, land, and commercial properties. This includes listing and marketing properties for sale and arranging showings, as well as determining the needs of prospective buyers. Unlike real estate agents, brokers have an additional license that enables them to own a real estate firm and hire other agents to work for them. In many states, a broker license also allows brokers to own and operate property management companies, which maintain and lease rental properties.
Generally speaking, there are two basic types of real estate brokers:
Broker-Owner. By law, every real estate agent and firm must be overseen by a broker-owner. The broker-owner may be directly involved in day-to-day operations, or take a more hands-off approach to the business. Either way, he or she is legally responsible for all transactions the agents in their brokerage close.
Associate Broker. Rather than owning a firm, some agents who earn a broker license choose to work under a broker-owner. These associate brokers (or broker associates) may continue dealing with clients and transactions, or step back from sales and focus on things like management, technology, or training.
Where can I take real estate courses?
You likely have a few options when it comes to enrolling in a real estate broker education course. In fact, you may be able to complete your required coursework online. When evaluating a real estate broker school, make sure the curriculum is approved by your state’s real estate commissioner or other state authority.
Online programs Several national online education providers offer virtual real estate courses for broker applicants, including:
Community colleges If you’d prefer to attend classes in person, many 2-year community colleges offer the basic courses for obtaining a real estate broker license, with the added bonus of being closeby.
Universities Many 4-year universities also offer courses for prospective real estate brokers. While these programs can be expensive, they typically offer a wider range of options and electives than community colleges.
Local real estate schools Depending on your state, you’ll likely find at least a few small, private real estate broker schools offering in-person or online courses. Check with current brokers in your area for their local recommendations.
Taking the Real Estate Broker Exam
Once you’ve met all the above requirements, you can apply to take your state’s real estate broker exam by submitting the relevant forms and documentation. While every state’s real estate broker exam is different, they primarily consist of 100 or more multiple-choice questions on a range of topics. Take a look at some of the major subject areas that may be covered, along with sample questions:
Real Estate Terminology
A trust deed may also be referred to as which of the following?
A deed of reconveyance
A deed of trust
A deed of sale
A deed in lieu of foreclosure
A financial institution who refuses to provide a loan to a Latino family for a home in a predominantly white area may be guilty of:
Subrogation
Redlining
Blockbusting
Steering
Property Ownership & Land Use
Which of the following would not be considered real property?
A watercourse
Minerals that are unextracted
A leasehold estate in a residential property
An easement appurtenant
If, prior to a foreclosure sale, A property owner pays his entire debt, court costs, legal fees, and interest on the property, he is exercising his:
right of stay of homestead foreclosure
rights of estoppel
rights of certiorari
right of redemption
Real Estate Contracts
A listing agreement that creates the greatest amount of protection for the broker is an:
Exclusive Agency
Exclusive Right to Sell
Exclusive Brokerage
Exclusive Agreement
By California law, how many days does a landlord have to return the security deposit to the tenant after the tenant vacates a rental property?
5 days
15 days
21 days
30 days
Real Estate Law & Practice
Which of the following is not a member of a protected class?
A 62-year-old retiree
A 30-year-old who is divorced
A person with a disability
A person receiving government assistance
In New York, a real estate agent must save any records related to transaction he or she was involved with for:
1 year
3 years
5 years
7 years
Real Estate Finance
The profit realized from the sale of real estate held for 3 years is:
Long-term capital gains
General capital gains
Gross income
Short-term capital gains
Steve owns 12 acres of land and wants to develop a residential complex containing 24 single family homes. What type of mortgage will permit him to pay it off as he sells each home?
PMI
Pledged Account
Open-End
Blanket
Property Valuation
What is the value of a duplex income property with rent at $1600 per month per unit, a vacancy factor of 8% of gross rent, yearly operating expenses of $8,123, and net earnings representing an 11% return on the investment?
$210,000
$247,318
$321,163
$349,090
Lanie owns a home in the mountains. If the home’s appraised market value is $370,000 and the loan balance is $110,000, what is the loan-to-value ratio?
30%
25%
10%
40%
Depending on the length of your local broker exam, examinees have anywhere from 2-5 hours to complete the test. Generally, you’ll need a score of 75% or higher to pass.
Preparing for your broker exam will depend on which state you’re taking it in. Most states offer handbooks, study guides, or other resources that provide an overview of the exam content. You can also find practice tests with additional sample exam questions like this one on various test preparation websites.
Once you’ve passed your exam, you’re ready to become a real estate broker! All you have to do is submit your application and any other relevant paperwork to your state licensing board.
Relocating to a New State as a Real Estate Broker
If you’re already working as a real estate broker, you may want to do business in a different state. Maybe you live on a state border, are moving, or want to practice your craft where you vacation. Whatever the case, practicing in your new state will depend on two factors: license portability and reciprocity.
License Portability
Most states allow out-of-state real estate brokers to conduct some business using their existing broker licenses. However, there are some restrictions.
Some states, including Colorado, Washington, and Alabama, allow out-of-state brokers to operate within their borders provided that they sign a co-brokerage agreement with a local firm.
Other states, including Massachusetts, Illinois, and Minnesota, only allow out-of-state brokers to conduct business remotely. This means you can send clients to view listings, submit offers, and negotiate transactions, so long as you do it from your licensing state.
Finally, six states—Kentucky, Missouri, Nebraska, New Jersey, Pennsylvania, and Utah—don’t allow out-of-state brokers to conduct any business within their borders.
Reciprocity
Portability restrictions can be tricky. If you’re unable to work effectively with an out-of-state license, reciprocity may be the answer. Many states have reciprocity agreements, which allow real estate brokers from other states to more easily earn their in-state license.
Reciprocity agreements vary widely from place to place. Georgia, for instance, accepts broker licenses from any other state, provided that the applicant passes a background check.
Other states’ reciprocity agreements waive pre-licensure coursework, but require brokers from reciprocal states to pass all or a portion of their local broker exam. These include Alaska, Delaware, and Maine.
Finally, some states, like California, do not have reciprocity agreements with any other states. That means a broker relocating to these states must meet all the same requirements and submit all the same paperwork as an in-state applicant. Depending your existing license, that could involve spending some time as an agent, or taking more courses to meet different education requirements.
4 Tips for Starting Your Own Brokerage
Now that you’ve earned your real estate broker license, you can consider what you’d like to do with it.
As we’ve discussed, you may choose to align yourself with an existing firm as an associate broker—but if you’re looking to start your own real estate brokerage, here are some tips for getting off to a strong start.
Know What You’re In For
Starting your own brokerage won’t be easy. While an established firm can help you generate business through name recognition and a healthy referral network, you’ll have to build your new brand from scratch.
In addition, you’ll also have to build your list of clients from the ground up, as well as recruit, hire, and manage any agents or staff you’ll need to serve them. All that hard work begs a question: why are you starting your own brokerage? If your only reason is the opportunity to be your own boss, you may want to reconsider.
Start with a Business Plan
A clear plan is essential when starting any business. Studies show that companies that have a business plan are twice as likely to secure loans and funding and 75 percent more likely to experience growth.
Before you dive into your new brokerage, take a step back and analyze the landscape with a real estate business plan that answers the following questions:
What do your competitors do better than other firms? How will you compete with them?
What’s missing from your market?Which audiences or areas are underserved?
Why have your clients churned in the past? How do you plan to address this?
What measurable goals do you want to accomplish with your new brokerage?
What is your unique selling point?
This last question is perhaps the most important—after all, you’ll need to give consumers a compelling reason to work with you instead of more established brokerages.
Rather than create a “one-size-fits-all” brokerage, consider building a brokerage that specializes in a particular niche, whether it’s a certain property type (e.g. condominiums), transaction type (foreclosures), or target client (seniors).
Once you know the answers to the questions above, you can begin crunching numbers to assess the financial side of your new brokerage.
How much will it cost to start your business?
Is the niche you’ve chosen financially viable? Will you be able to drive enough leads and transactions to support and grow your business?
Given what you’ve learned about your market and niche, how long will it take you to start turning a profit?
Finally, write up an executive summary that incorporates everything you’ve learned. Your executive summary should pitch your vision for your new company, and include your mission statement and core values. Take your time and be thorough: this document will inform every decision you make for your brokerage, from hiring to marketing.
If you plan on hiring agents to work directly with your clients, you’ll need to decide how to compensate them.
There are three basic compensation models:
Commission Split
The broker takes a portion of their agents’ sales commissions from every transaction. Used by 70 percent of brokerages, this is the most common compensation model in the U.S. and Canada. Many brokerages set a fixed commission split for all of their agents. Others have a variable structure in which more productive agents get to keep more of their commission. While commission split percentages vary from brokerage to brokerage, 50/50 and 60/40 (in favor of the agent) are the most common.
Flat Fee
Rather than splitting commissions, brokers may allow agents to keep 100% of their commissions and instead charge them a flat fee, sometimes known as a “desk fee.” While desk fees take many forms, they typically consist of one or more recurring monthly payments which cover access to technology, office space, transaction management services, and other broker-provided benefits.
Salary
Finally, some brokers opt to pay their agents a fixed annual salary. These brokers may take a lower commission from each sale, or charge sellers a fixed amount for a variety of a la carte services, including adding a listing to the local MLS. Though there a few big-name examples like Redfin operate this way, the salary model only accounts for a small fraction of brokerages.
Whatever model you choose, ensure that your agents are incentivized to work hard and stay with your brokerage.
Invest in Technology
More than ever, the best real estate brokerages are built on the foundation of modern technology. Without it, you’ll have trouble not only managing the day-to-day of your business, but also recruiting and retaining talented agents.
As you start your own brokerage, invest some time and money in building an efficient set of digital tools that includes:
Transaction management software to help you and your clients securely share financial information and sign electronic documents Examples: dotloop, DocuSign, SkySlope
A real estate broker website to market your brokerage and capture leads
Create a Marketing Strategy
Now it’s time to spread the word about your new real estate brokerage. Just as you did with your business plan, it’s important to think through and document a comprehensive strategy for marketing your brokerage in order to get the best results.
A winning marketing strategy isn’t just about broadcasting to as many people as possible: it’s about reaching your target audience with well-timed messages that drive qualified leads. Let’s look at some of the tools and channels you should be using to make that happen.
SEO
With the vast majority of homebuyers beginning their search online, visibility in search engines like Google is key to getting noticed. SEO, or search engine optimization, is a set of practices that can help your brokerage rank more highly in Google results for the terms your target audience is searching.
From keyword research, to on-page optimization, to website architecture and more, SEO has many components. To learn more about how to optimize your brokerage’s online presence for search engines, check out Placester’s Ultimate Real Estate SEO Guide.
CONTENT MARKETING
Of course, the ability to reach more homebuyers and sellers won’t generate results for your brokerage unless you have something of value to share with them. Content marketing can help you build trust and establish you brokerage as local experts by creating relevant and informative blog and video content to share with your target audience.
Content marketing is one of the most talked-about marketing tactics today, and with good reason: 72 percent of marketers say content marketing increases engagement and the number of leads their companies receive. Additionally, small businesses that maintain blogs get 126 percent more leads than small businesses that don’t.
SOCIAL MEDIA
With 91 percent of real estate agents using social media to some extent, chances are you already have a presence on at least one social network (most likely Facebook). Social media is even more important for a new brokerage because it helps you leverage your existing network and connections to find new clients.
When it comes to using social media to promote your brokerage, you should begin by creating a Facebook Business Page. You can learn more about building an effective Facebook page at our Academy post: Generate Real Estate Leads from Your Facebook Business Page.
DIGITAL ADVERTISING
As you build up your brand new brokerage, you’ll likely need some help expanding your reach. Digital advertising can help you increase your footprint, driving awareness of your brokerage among a wider audience than organic search and social media alone.
While there are various platforms for advertising your brokerage online, the best places to start are Google and Facebook. These platforms offer advanced targeting to ensure that your ads are shown to only the most relevant and qualified users, along with tools to help you build and track campaigns.
OPEN HOUSES
Once you have a few listings under your belt, you can begin promoting your brokerage via open houses. While they may seem like an old-fashioned tactic, open houses are a great way for new brokerages to engage their communities. From lawn signs, to flyers, to conversations with visitors, open houses offer an easy way to demonstrate your brand in person.
Need help running your next open house? Check out our Academy post for expert tips and professional sign-in sheet templates.
Build Your Real Estate Broker Website with Placester
According to The National Association of REALTORS®, 95 percent of consumers use the internet at some point during their home search, with 44 percent of consumers turning to the web as their first step. That’s why your real estate broker website is one of the most valuable tool for promoting your business and building relationships with potential clients.
From your business card, to your Facebook page, to your Zillow profile, all roads lead back to your broker website. For many prospects, your website is their last touchpoint with your brand before they decide to contact you—which means that it can make or break a potential client relationship.
With that in mind, Placester’s real estate broker websites help you put your best foot forward through professional designs, the most up-to-date property data, and advanced tools to help you connect with visitors.
Becoming a broker is definitely a whole new experience even if you’ve been in the real estate business for many years. It takes time and consistency to build your network and your team. Before venturing into this new adventure, you will definitely need to do extensive research on the market and your state’s regulations when it comes to the ways in which you will obtain your license.
We wish you the best of luck on pursuing your career in brokerage!
Let us help you along the way!
According to The National Association of REALTORS®, 95 percent of consumers use the internet at some point during their home search, with 44 percent of consumers turning to the web as their first step. That’s why your real estate broker website is one of the most valuable tools for promoting your business and building relationships with potential clients. Building online presence takes time and dedication, but we will make the process effortless for you. Our team of experts will build your and your agents’ brands & websites, making sure that are in line with the best SEO practices and your individual needs. All of that to make you stand out from the competition and let you focus on your day to day tasks. On top of that, our Agent Manager software will make your everyday life easier, helping you manage your back office, agents' website, roster, profile, on-boarding, and more—in one place.! Give it a try and book the Office Builder demo today.
Published on
May 25, 2020
(Last updated on
June 22, 2023
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