How to Become a Real Estate Broker
By Colin Ryan
About Agent Basics
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.
Real estate brokers are the foundation of the industry. They manage the day-to-day of running a firm, providing support to agents in the form of technology, marketing, mentoring, 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. Because of their added responsibilities, brokers must have more education and experience than the agents they manage. Still, with hard work and dedication, anyone can become a real estate broker.
Follow this guide, and you’ll not only have a clearer understanding of how to become a real estate broker in each U.S. state, but also a road-map to help you hit the ground running once you earn a license.
- What Does a Real Estate Broker Actually Do?
- 5 Reasons to Get Your Real Estate Broker License
- Becoming Eligible for a Real Estate Broker License
- Getting You Real Estate Broker Education
- Taking the Real Estate Broker Exam
- Relocating to a New State as a Real Estate Broker
- 4 Tips for Starting Your Own Brokerage
- Build Your Real Estate Broker Website with Placester
Ready to find out if you have what it takes to become a real estate broker? Let’s get started.
What Does a Real Estate Broker Actually Do?
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.
5 Reasons to Get Your Real Estate Broker License
In many ways, the perks of earning a real estate broker license are similar to those of getting an agent license: flexible hours, good pay, the opportunity to work with people, etc. But becoming a real estate broker has several added benefits that can take your career to the next level.
#1. Stable Growth
Despite the expansion of technology in the real estate industry, real estate brokers will remain vital to the process of buying and selling a home for years to come. According to the Bureau of Labor Statistics, employment of real estate brokers in the U.S. is expected to grow about five percent by 2026.
#2. Higher Employment (But Not Too High)
While real estate brokers make up a tiny fraction of the total employed population, many regions enjoy both high employment and high demand for their services.
California, for instance, ranks number one in the country in total employment of real estate brokers, yet there are just 0.33 brokers per thousand jobs. That means demand and opportunity for brokers in the region are especially high.
#3. Higher Wages
The mean annual salary of a real estate broker is $75,910. That’s over 20 percent higher than the $59,630 mean salary for agents. It’s also about a third higher than the $50,620 mean U.S. salary, putting real estate brokers in the top quarter of all professions.
Broker salaries also vary greatly by geographic location. Take Connecticut, for instance, where the mean annual salary is over $129,730.
#4. Flexibility and Control
While real estate agents have some autonomy, they still have to work under a broker, and give up a portion of every commission. Meanwhile, a real estate broker has more control over his or her business, and can work in a variety of ways. For instance, a broker can choose to work alone and keep 100 percent of their commissions.
If owning your own business isn’t a priority, you can also work as an associate broker, handling responsibilities like marketing, mentoring agents, or selling homes—at a more favorable commission split than the typical agent, of course.
#5. Better Marketability
By definition, all brokers must meet a certain level of experience and education in their field in order to earn their license. By becoming a broker, you can show prospective clients a powerful set of credentials that demonstrate a higher level of training and expertise.
Becoming Eligible for a Real Estate Broker License
The qualifications for applying for a real estate broker license vary from state to state. In general, however, you’ll need to meet the following requirements.
Age and residential status
In all states, 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, depending on your state.
Like many other professions, real estate brokers are expected to be honest and truthful. Having a felony or other criminal conviction on your record won’t necessarily disqualify you from becoming a real estate broker. However, it’s important that your application includes this information.
If you fail to disclose your criminal record, your real estate broker application may be denied.
Real estate agent license
In most places, applicants must be first licensed as a real estate sales agent in order to be eligible for a broker license. This isn’t true everywhere, however: in California, for instance, college graduates who majored or minored in real estate can bypass an agent license.
Real estate agent experience
In addition to having an agent license, most states require some work experience as an agent before you can apply for a broker license.
Most states require at least 2 years of agent experience, but some have tougher rules. Texas, for instance, requires 4 years of experience as an agent, while New York takes things a step further with a system that awards applicants “points” based on what they accomplished as an agent.
Finally, you’ll need to demonstrate that you meet your state’s education requirements for real estate brokers. Typically, this means completing college-level courses in a few key topics, which may include:
- Real estate law
- Real estate finance
- Real estate practice
- Real estate accounting
- Property management
When it comes to broker education, some states are stricter than others. Texas, for instance, requires 900 hours of coursework, while Florida requires just 72 hours. Check with your state’s licensing board for more specific information.
Getting You Real Estate Broker Education
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 virtually.
When evaluating a real estate broker school, make sure the curriculum is approved by your state’s real estate commissioner or other state authority.
Several national online education providers offer virtual real estate courses for broker applicants, including:
- Brightwood College (curriculum by Kaplan)
- Real Estate Express
- OnCourse Learning
- Allied Real Estate Schools
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.
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. Below are 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:
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 certiori
- 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?
- Pledged Account
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?
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?
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.
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.
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.
For a step-by-step guide and templates for writing an amazing real estate business plan, check out Placester’s Ultimate Guide to Creating a Real Estate Business Plan.
Choose Your Compensation Model
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:
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.
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.
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
- Lead management software to track relationships with prospects and clients
- Email marketing tools to help you automatically build and grow long-term relationships with prospects
- Lead generation platforms to get the word out about your new business
- 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.
Indeed, businesses that document their marketing strategy and processes are at least 4 times more likely to report success than businesses that don’t.
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.
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.
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.
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.
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.
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.
Every Placester broker website includes:
- Industry-leading IDX integration that covers 99% of U.S. property listings
- Customizable design templates with logos, colors, and images that can be personalized to suit your brand
- Advanced search tools for you and your visitors, including Google map search and the ability to save searches and listings
- Intelligent lead capture to help you connect with the right visitors at the right time
- Agent roster pages to promote your entire team
In addition to beautiful websites, Placester also offers a suite of advanced tools to help you market your brokerage and nurture leads, including:
- IDX agent websites to help you recruit and retain agents and market your brand consistently across your entire brokerage.
- Powerful CRM and email marketing tools with advanced lead routing to help you collaborate with your team.
- A content library featuring personalized blog posts and automatic sharing to help you market your real estate expertise
To learn more about Placester’s real estate broker websites, schedule a demo with one of our experts.
Published on March 29, 2019