There are many potential paths to building a highly lucrative career in luxury real estate, including the role of a real estate broker.
Real estate—and luxury real estate, in particular—can prove to be a lucrative career. With hard work and attaining the knowledge and expertise clients expect of their agents, you could easily realize an annual six-figure income.
And that’s just as an agent. What about the real estate broker?
Let’s take a look at the next rung up on the real estate ladder and examine just how lucrative becoming a real estate broker can be—and what it takes to get there.
Difference Between a Real Estate Agent and a Real Estate Broker
It may be elementary for some, but the terms agent and broker are often used interchangeably when describing a real estate professional, especially for newcomers entering the industry. Yes, both deals in real estate and top performers are well compensated, but considerable differences exist between each role and the income they command.
A real estate agent is a professional that assists clients in the buying or selling of property. They can serve as a buyer’s agent, listing agent, or both. Whether it’s a home, commercial space, or plot of land, an agent’s primary role is guiding a client through the acquisition or sales process. Every state has different guidelines, but you must take a requisite number of educational hours and pass that state’s licensing exam to become a real estate agent.
A real estate broker expands the role of a real estate agent through a broader understanding of general real estate practices. The expanded knowledge is most evident in the amount of pre-licensing training required by a broker versus an agent.
For example, to be a real estate agent in California, you’ll need 135-credit hours of real estate licensing education; you’ll need 360 hours if you want to be a broker. In New York, it’s 75 hours for an agent and an additional 45 hours for a broker. In Florida, it’s 63 and 72 hours, respectively.
Much of that training explores in far greater detail the business and legal side of real estate. Plus, in the majority of states, in addition to other state-specific requirements, to become a broker, you must first have served as a real estate agent for a set period, typically from two to four years.
Of course, with that additional education comes greater career flexibility and higher pay. That’s where you’ll find perhaps the biggest distinction between agent and broker—brokers can decide to have agents work for them (or work alone, if they so choose).
Types of Brokers
Within the residential real estate sector, there are several levels of brokers. The broker duties you take on will largely determine your income range. The roles and titles may vary slightly from state to state, but overall, the three major broker categories include:
Designated Broker: Also referred to as a broker-owner, this individual serves as either the brokerage owner or carries a controlling interest in the brokerage firm—regardless of its size. The designated broker could be working on their own or employ a team of managing brokers, associate brokers, and real estate agents.
Managing Broker: Based on how a brokerage is organized, a managing broker most often oversees the firm’s daily operations. In many larger firms, there may be several managing brokers who supervise a team of agents and support staff. They may also continue transacting real estate if they choose..
Associate Broker: An associate broker carries a broker license but works under a managing broker and does not oversee other real estate agents. The associate broker role is technically an agent with the additional education to possess the broker distinction. You may also see this type of broker referred to as an affiliate broker, broker-associate, or broker salesperson.
Broker Income
As with many professions, broker income is not a set number. What a broker makes is driven by two main factors—experience and location. A third factor, property type, also plays a part in overall compensation, as transacting high-level luxury real estate comes with greater rewards. But it’s worth noting that a diligent, hard-working broker can garner just as much income from conventional transactions as those working with upscale properties.
Based on information compiled by the National Association of Realtors (NAR) in their 2019 member profile survey (which pulls data from 2018), the median income for a broker-owner ranged from $86,100 to $105,100. For a managing broker, median income ranged from $88,200 to $93.200. Associate brokers, working in a strict sales capacity, had a median income of $61,000.
For comparison, the same NAR report lists the median salary for a real estate agent at $31,900.
At first glance, that seems a huge disparity. However, it’s worth noting those agent numbers encompass all experience levels—newly minted agents to multi-year veterans. It’s also worth factoring in commitment to the role, as many agents only pursue real estate as a part-time job. Then there is the disparity of transacting properties in different parts of the country.
Even with those considerations accounted for, a broker’s license will result in higher pay in almost every circumstance. Then, the three primary factors can drive that income even higher.
Experience
In terms of experience, a seasoned managing broker is reaping the rewards of having a team of agents working under them, in addition to other paying duties they may perform within a brokerage. They might also continue working directly with clients, a common practice for many professionals even after receiving their broker license.
To further highlight the experience gap, the NAR report shows that amongst all realtors—brokers and agents—those with more than 16 years of experience had a median income of $71,000. Those with less than two years generated an income of $9,300. Again, in the majority of states, you’re unable to transition to a broker until working first as a real estate agent.
For most any profession, the more experience you have, the higher your income will be. It’s also true for real estate professionals. However, attaining your broker’s license can jumpstart your earnings potential after just a handful of years in the business versus remaining a real estate agent.
Location
Experience may play the most critical role in your broker salary, but location often reflects the most substantial discrepancy in pay from one broker to the next. According to Payscale.com, the average real estate broker salary nationally is $55,897.
In New York City, that number jumps to an average of $70,000; in Los Angeles, it’s $68,000. Smaller, secondary markets, such as Portland, Oregon, which stands at an average broker salary of $54,496, will see a considerably lower average income.
Of course, there are outliers across the country. Each market possesses its own set of variables that determine what a broker can make. Case in point, two relatively hot real estate markets in Washington, D.C. and Miami, Florida offer average broker compensation at opposite ends of the pay scale: $106,250 and $60,000, respectively. And whether you opt to set up your own brokerage or work for one with its own compensation policies will significantly impact your annual salary.
Property Type
The final factor in determining income as a real estate broker involves the type of property you center your business around. Using the standard 6% commission figure and employing some quick math tells you all you need to know about the benefits of zeroing in on certain property types:
- A house sold for $200,000 generates a 6% sales commission of $12,000.
- A house sold for $300,000 generates a 6% sales commission of $18,000.
- A house sold for $2,000,000 generates a 6% sales commission of $120,000.
Some variables can sway those numbers in either direction—prior negotiated flat commission fee, commission split between agents or agent and broker, or marketing and brokerage expenses—but you get the idea.
Whether you work with conventional housing or target the higher stakes of luxury real estate, both require a distinctive set of skills and diligence to be successful. For example, you and the agents working for you might have to move 10 homes at the $200,000 level to equal one sale at $2 million, but conditions such as a hot relocation market can result in those $200,000 to $300,000 homes being an easier sell versus finding the right buyer for a luxury property.
When identifying specific income goals as a broker, you must factor in all of the variables. How you focus your talents within a brokerage is just as important as where you ply your craft and the property types in which you choose to specialize.
Ultimately, though, the most critical element to increasing your broker income is experience—through continuing education and expanding your hands-on industry knowledge. As noted at the top of this post, real estate can prove a lucrative business for those who work hard and have an ever-expanding level of expertise.