This article and information originally appeared in Denver’s Westword, Another Average Denver Home Price Record, Up $100k in a Year on Feb. 3rd, 2021.
The best and the worst thing about being your own boss as a real estate agent is that your career path is entirely in your hands. You can give yourself a promotion or stay at the same level forever if you so choose — you can move at your own pace and determine what the next best steps are for you in your situation.
Most agents with experience know that this is both a blessing and a curse. On one hand, pretty much as soon as you’re ready to take on more responsibility, you can start taking steps to do that. But on the other hand, if you aren’t proactive about advancing your own career and giving yourself a promotion, no one else is going to do it for you.
One big way that agents can level up in the real estate business is to make the transition from an agent to a broker. It’s a big step, though, and one that comes with a commensurate increase in responsibility. How do you know you’re ready?
How long have you been an agent?
Real estate broker requirements vary from state to state, but all of them will require you to work as a licensed sales agent for somewhere between one and three years before you can even take the brokerage exam. So the first thing to do is to familiarize yourself with your state’s laws and figure out how long you need to be working as an agent at a minimum before you can become a broker.
Some agents start training for their brokerage exam as soon as they can, while others prefer never to take it and are content staying at the agent level for as long as they’re selling real estate. There is nothing wrong with that approach if it’s the right one for you! Not every agent is cut out to run a brokerage, and not every agent wants to. Knowing the level at which you’re happy and remaining there as long as you can is an act of wisdom in today’s world.
How are you doing financially?
Some real estate agents want to get their broker’s license because they think they’ll automatically be earning more money as a broker than an agent. While a broker’s earning potential is higher than an agent’s, if a broker is running a brokerage, they also have a heck of a lot more responsibility than an agent, too.
It’s easy to dream about the desk fees or commission splits multiplied by the number of agents in your brokerage and tell yourself that you could do the same thing. But you’re usually not thinking about all of the expenses that the broker has, the legal liabilities, the stress and the long nights — and the lack of a guarantee that your business is going to survive long-term, anyway.
Any career decision you make should be informed by your finances, but there are ways to earn more as a real estate agent besides applying for your broker’s license. You can try to sell more transactions in a year. You can move up in price point. You can start by referring to more business. You could even invest in some real estate yourself to make some money. If the primary reason why you want to become a broker is financial, that’s OK, but be very careful about the type of brokerage path you decide to pursue (more on that later) and make sure you have at least a few more decent reasons to make this shift.
What’s missing?
The answer to this question will be a real key to help you understand whether getting your broker’s license would be a good next step in your real estate career. Many agents are happy with where they are in real estate — they like the work, they’re good at it, they feel challenged but not overwhelmed, and they don’t feel like they have any talents or skills that are remaining largely untapped as a result of their career choice. For those agents, getting a broker’s license might be a nice-to-have addition to their tool belt, but it’s far from critical.
On the other hand, maybe you’re a natural-born manager who’s skilled at solving conflicts and organizing complicated tasks and processes. If you’ve applied your skills to every aspect of your job and you still feel like you’re being under-utilized, then you might be a good candidate for getting a broker’s license.
What type of broker do you want to be?
Before you decide whether or not to go for your broker’s license, you’ll also want to think about what kind of broker you want to be. Yes, you have options!
An associate broker is basically a sales agent who’s very experienced and can negotiate better commission splits with their brokerage. They work under another supervising broker, just like an agent. The only difference is that they are licensed to run their own real estate business if they choose. This can be a really good choice for agents who want better negotiating opportunities at their brokerage and who are primarily financially motivated.
One other thing that associates brokers can do but real estate agents cannot is to manage properties for clients. If you want to add property management to your list of services that you can offer, chances are good that you’re going to have to get your broker’s license to do it.
A managing broker manages a group of agents, and a designated broker is responsible for all of the transactions in a specific brokerage. Sometimes the designated broker is also the managing broker, and sometimes the designated broker is also the owner of the brokerage — but not always; you might find brokerages where the owner is one person, the designated broker another, and the managing broker a third.
So what exactly do designated and managing brokers do? They’re the glue that holds the brokerage together, allowing independently employed agents to act as a group. Their responsibilities are often the ones that keep the brokerage running and that dictates how successful it would be.
For example, a managing broker is responsible for recruiting new agents to the brokerage and training them, in addition to implementing ongoing training and continuing education for existing agents. Brokers must ensure that all the brokerage’s agents are compliant and that their licenses are all verified and up-to-date. They establish and manage relationships with associations and MLSs, tech vendors, and other organizations that touch the operations of the brokerage.
A managing broker also, obviously, manages the brokerage office. This means that in addition to handling the logistics of the office space, they may offer marketing and lead distribution assistance to agents, and they’re also on deck for handling any conflicts between agents, or between agents and staff at the office.
Some managing brokers continue to help clients with sales transactions, while some focus solely on brokerage operations. There’s no right or wrong way to operate; do whatever works best for you.
Do you ever want to run your own brokerage?
There are agents who think that running their own brokerage someday would be a dream come true, while others classify it more as a nightmare. If you land squarely on the “nightmare” side of the equation, then you know that an associate broker position is probably as far as you’ll aspire to climb — whereas if you really love the idea, you’ll know you need to shoot a bit higher.
Deciding to get your broker’s license is a highly individualized and personal choice. Think hard about where you are in your career and where you want to go, then ask yourself whether a broker’s license would help you get there.