Do Real Estate Agents Have to Work Under a Broker?

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Real estate agents can make a lot of money, but it is not easy to become a real estate agent. You cannot simply pass the real estate test and start selling houses. Real estate agents have to work under a broker when they get their license. The requirements vary state-by-state on how long you have to work under a broker, and what you need to do to get your license. Working under a broker does not mean you have to be on a broker’s team or be their assistant. It means you have to hang your license in the office of a broker and they will oversee your activities.

What does “hang a license” in a broker’s office mean?

Each state has different classifications for what they call agents and brokers. In Colorado, any agent who does not have their employing brokers or independent brokers license is a broker associate. Some states use the wording agents and other states use different wording for each classification. I will use the term agent in this article, which will mean anyone with a real estate license who is not a broker in charge of their own office.

When someone becomes a real estate agent they have to “hang” their license in the office of a real estate broker. That broker is usually called a managing or employing broker and oversees all the agents in their office. I don’t know of any states that let new agents oversee themselves. The managing broker is responsible for every agent in their office and every agent’s actions.

In Colorado, an agent must hang their license in a managing brokers office for at least two years before they are eligible to go out on their own as a broker. Each broker has a different requirement for what each licensee is responsible for and what fees they pay.

What are the broker’s rules for real estate agents?

Every broker and every office will have slightly different rules for their agents. It is up to the broker to come up with the rules and decide how little or how much the agent needs to be involved in the office. Some large brokerages will require training, a certain amount of hours put in calling people, holding open houses and other tasks. Those large offices may also offer the agent leads, a mentor, office space, a secretary and other services. Other offices will require nothing from the agent and in turn offer the agent no services either. There are all types of offices from one spectrum to the next that offer all types of different packages for agents.

How much do brokers charge real estate agents?

This again varies widely in each office depending on what the broker offers the agent. In offices where the agent has a physical office with a desk and a secretary, the fees can be very high. Our office has about 35 agents, always has at least one staff person answering the phones, an office manager and about 12 offices for agents. Our office also has a couple of community offices that agents who work at home can come in and use. To have your own private office it costs $500 a month, but if you work at home then you don’t have any desk fee. Agents also have to pay a portion of their commissions to the broker.

We have a number of packages ranging from 50/50 commission splits to no commission splits and base fee paid by the agent to the broker every year.  Not only does our broker provide staff and office space, but he provides some supplies and advertising. He has a deal with the local paper and Homes and Land Magazine for advertising and each agent gets to use a certain amount of advertising each month.

Some brokerages only have agents that work at home and they offer no services. The agent is expected to answer all calls, complete all paperwork, do all advertising and do everything themselves. Those brokerages are very cheap but offer very little in service to the agents. Many agents go this route to avoid desk fees and large commission splits to the broker.

What is a commission split on real estate deals?

When you sell a house as a real estate agent, you are paid a commission, which is a percentage of the purchase price. There are no set commissions, but we will use 3 percent as a figure for each side of a commission as an example. That means the listing agent who represented the seller and the selling agent who represented the buyer each get 3 percent of the purchase price when the home sells. If you represent the seller on a home that sells for $200,000, then the agent would get $6,000 if the commission was 3 percent for each side. However, the commission is not paid directly to the real estate agent, it is paid to the managing broker of that agent. The broker then decides how that commission will be paid to the agent. The agreement the agent has with the broker will determine the amount if any of the commission split.

Some brokerages will offer a 50/50 commission split with new agents because those agents need a lot of training, help, and guidance. Brokerages may offer a sliding scale for the number of homes you sell in a year. If an agent sells 50 homes, they get a 90/10 split, if they sell 25 homes they get a 75/25 split, etc. Some brokerages may vary the splits based on who the client is for the real estate agent. If the broker refers a client to the agent, they may only pay 30 percent of the commission, but if the agent sells to one of their own clients they may get 80 percent of the commission.

There are many different scenarios for commissions splits and some no service brokerages will offer 100% commission splits to the agents and only charge base monthly fees. Again these companies do not offer any services and the agent is pretty much on their own to figure everything out.

What would I suggest for new real estate agents looking to find a broker?

This is tricky because everyone has different goals and different reasons for getting the real estate license. For people who want to be full-time agents and make that their career, I highly suggest choosing an office with a mentor and training program. That training and experience will more than make up for the extra costs and lower commission splits.  The ideal situation may be to join a successful agent or broker’s team who will pay you as an assistant while you learn from them. If you are an investor who only wants to use their license for their own deals, you may not want a training program that takes up your time. I would look for an office that offers high commission splits with no hourly requirements, but still offers training. As a new agent, you are going to need some training and guidance even if you only work your own deals. There is a ton to learn about real estate and it is not easy to figure out all the paperwork and requirements. I would stay away from the no service brokerages until you have a solid idea of what you are doing and know the basics.

Conclusion

There are many things to consider before becoming a real estate agent. You must take classes, pass a test, and find a broker before you can get your license. Getting your license is only the first step in actually selling houses. I think it is a good thing that agents must work under brokers for a couple of years. If agents are smart, they will choose to work under a broker that offers the best training and will show them how to sell houses.

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40 thoughts on “Do Real Estate Agents Have to Work Under a Broker?”

  1. Very informative. As always, your site is very helpful for those interested in making it big in the world of real estate.

    • Thank you again

  2. Hey I liked the article but disagree with you on the base fee brokerages. Equity Real Estate charges $559.00 per transaction and offers more services than KW.

    • What services do they offer that Keller Williams does not>?

  3. Do I still need to hang my license with an employing broker if I intend to only be my own agent in my own investment purchases?

    • Yes

  4. Can I start my own business when still working to another Broker ?

    • That depends on your state laws. In Colorado you cannot start another brokerage while working under a different broker.

  5. Hey.. me and my cousin are planning to come up with a joint estate agent.. is that possible? Do we need two licence? We want to come up with one company name jointly.. how can we go about it?

    • You would both need licenses to most real estate activity and work with a broker until you are eligible to get your own brokers license.

  6. hi
    I have been an agent for 4 years. I just got my broker license and want to be independent from a brokerage. How do I do this? I am not interested in hiring agents i want to be independent. Please advice
    Thanks

    • Check with your state requirements for being an independent broker.

  7. Hey, can i start my own real state company without license and hire broker,?

    • You can own a company, but you could not work as an agent in it

  8. How about for a newly licensed agent who needs another few years (kids to be in kindergarten) before starting work? How would I keep my license during that time before starting work? Do the brokerages that ask nothing and offer nothing let people in my situation hang their licenses and be inactive?
    Thanks,
    Marie in Colorado

    • You can put your license on ice for a couple years as well if you don’t want to sell anything for those couple of years.

  9. can two agents work together?

    • Yes, but they still need to work under a broker

  10. Yes I think some real estate agents have to work under a broker.

    • They do

      • Hi,Mark how u doing
        I need your help
        I will start to work next week in Real Estate
        Broker position \
        Coz I didn`t understand about 50% commission what if I `ll sell for 1000.000$
        my commission is 500.000$ ????
        Plz let me know

        • Yes, if that is the split you agreed to with your broker.

  11. 2 agents. Each have a PA (LLC). Both work under same broker. Can one of them accept full commission from a sale, and include it in sales in her PA (LLC), but then split it 50/50 with the other agent, who helped out with the sale, and pay her out of her PA (LLC)? Is this kosher, or are they required to get a direct split from the Broker? Sorry if dumb question, but I’m not a RE agent. I’m her Accountant.

    • I think that would depend on the agreement they have with the broker. Some brokers would probably allow it if the full commission is going through the brokerage first before it is split.

    • Is 2 years a good experience time for going for my brokers license?

      • If you know what you are adoing

  12. Can a PA real estate agent hang their license with a Florida broker while managing their property in PA?

    • No

  13. Hiring a real estate broker would be very beneficial specially to those who needs on managing their assets. Thanks for the info.

  14. Hello Mark,

    This article was a great read and I was hoping you could answer a quick question for me. I was wondering if there are any brokers that you had in mind for the real estate investor with a real estate license? I am planning on getting my real estate license in early 2018 and was looking for expert advice for choosing the right broker. Also, do broker commissions apply to wholesale deals?

    Thank you for your time!

    • They are all different in every area. Commission do not apply to wholesale deals if they are done right.

  15. I will be taking the real estate class in NC in the next couple of months. I really enjoyed this article. Thanks

    • Thank you and Good luck!

  16. Hi
    I am this person you describe — …..”an investor who only wants to use their license for their own deals, you may not want a training program that takes up your time. I would look for an office that offers high commission splits with no hourly requirements, but still offers training. As a new agent you are going to need some training and guidance even if you only work your own deals.”

    Question – Can you help me to identify a few brokers in the Philadelphia / Bucks County Pennsylvania area that are respective of the above scenario you describe ~ so that I may contract with them to sign for my real estate license ?

    thank you
    pj

    • Hey PJ, that is something that each person would need to do in their own area. It takes a lot of time sorting through brokers to find the best option.

  17. Hello can I start my own real state business without a broker?

    • Not if you are a real estate agent or are going to become one.

  18. Mark,

    Thanks for the informative and well-timed read for my personal circumstances. Outside my 9-5 desk job, I’ve maintained my CA salespersons license active for the past 10 years. It is currently non-broker affiliated. I have come across a transaction in which I am assisting family with the sale of a single family residence. I have a broker friend who will be executing the transaction as a dual agent to both sides of the party. What’s the best way for me to get paid on this deal? Simple as properly registering with broker through CA DRE and get 1099d? Or not get involved in the negotiation and get paid through escrow as a referral fee? Note, commission will be north of 30k so I’m assuming that’s above a given referral fee threshold. At this point, all I’ve done is brought the opportunity to my friend’s (broker’s) attention and he has a ready and willing buyer. Hope this makes sense.

    • I would check with state laws

  19. Enjoyed studying this, very good stuff, thanks.

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