The vast majority of buyers and sellers in New York City use a real estate broker for their transactions. Or do they use a real estate agent? Realtor? Brokerage? These terms are often thrown around interchangeably but represent different parts of the real estate industry and each is a slightly different type of real estate professional. Understanding the distinctions is also important for anyone buying or selling who wants to understand who is paying whom and what they can do to minimize the commissions paid.
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Every brokerage - that is, the actual company - has one broker. It doesn’t matter if it’s one of the largest firms in the market or a one person show. The “principal broker” holds the actual broker license for the firm and all of the firm’s real estate agents work under that license. To further complicate things, agents are also called “salespersons” and the license they receive from the state is a salesperson license. For this article, we will use “agents” as that is what they’re typically called.
Every real estate agent and real estate broker start out as an agent. It is only after gathering the required experience that an agent can become a broker. An agent must work in real estate for two years, execute a minimum amount of transactions, take the 45 hours course and passed the final broker license exam to become a broker. You may also hear or see the term “associate broker”. This is used for a real estate agent that has become a real estate broker but is not the one principal broker that holds the firm’s license.
Agents, associate brokers, and even principal brokers work with clients day to day. However, unlike an agent, a broker can work independently. An agent can only work under a broker and does not have the right to directly enter contracts with clients. All listing agreements are entered into by the broker - an agent does not have the ability to independently enter into a listing agreement. Likewise, all payments are made to the broker who then gives the agent on the deal his or her commission. Typically on each deal, there is one buyer’s agent and one listing agent.
A buyer’s agent or buyer’s broker represents the buyer in real estate transactions. Buyer agency is defined as: “A principal agent relationship in which the broker is the agent for a buyer, with fiduciary responsibilities to the buyer”. What does that mean? The buyer’s agent works on behalf of the buyer to negotiate the best possible deal for the buyer. The buyer’s agent’s loyalty is to the buyer and only to the buyer. They’re like your ringman - looking out for your best interests, identifying potential problems with the property and negotiating to get you the best deal on the best possible terms.
A buyer’s agent is paid via the commission that is offered by the listing broker. This is an advertised amount available to any agent who brings a buyer. As a result, buyers do not pay for their agent. If a buyer goes directly to the listing agent, the listing agent will keep the entire commission - the portion intended for them as well as the commission they planned on paying to the buyer’s agent. For that reason, it rarely makes sense not to use a buyer’s agent.
A listing agent or seller’s agent is the real estate agent that represents the seller. Listing agents list homes for sale on the regional Multiple Listing Service (MLS) or REBNY Listing Service (RLS) in New York City. Just like the buyer’s agent, the listing agent is required to do their best to sell the client's home at the best possible price and on the best possible terms. Unlike the buyer’s agent, a listing agent is paid directly by the seller.
Typical selling duties carried out by a listing agent include setting an asking price, preparing the home for showings, and marketing a seller's home. An effective seller's agent arranges for showings of the home and answers any questions about the listing. In addition, a listing agent screens potential buyers to ensure they're serious and then negotiates for the best sales price on behalf of the client.
Realtor is also a term that is commonly used to identify real estate agents. In order to identify as a Realtor, an agent must be a member of the National Association of Realtors (NAR). The term “Realtor” is actually a trademark of NAR. NAR is the largest trade association in the U.S., with more than 1.2 million members.
The biggest distinction between a NAR member and an unaffiliated agent is that Realtors agree to follow a set of ethics guidelines aimed at ensuring the integrity of the agent and protecting clients. In NYC, it is rare to find a Realtor as most agents work for member firms of the Real Estate Board of New York (REBNY) which has its own Co-Brokerage Agreement and Code of Ethics.
Sellers usually understand their relationship with their agent and broker since they’re the ones paying. For buyers, it’s most important to understand that by engaging a buyer’s agent, you are essentially leveling the playing field at no cost. Whether that person is actually an agent, associate broker or principal broker will not affect your representation. Yoreevo encourages you to ask for a commission rebate regardless of the agent but making sure you have one is the most important step.