What Real Estate Agents Do: Roles, Rewards, and Realities

Key Takeaways:

• Real estate agents typically specialize in either residential or commercial properties, with their responsibilities dependent upon whether they are working for the buyer or seller.

• In addition to past sales data, agents who represent buyers often examine comparable area properties to help them arrive at an appropriate bid.  

• Typically, real estate agents are wholly paid by commission, which is a percentage of the property’s purchase price, so they must be able to close deals.

In the world of real estate, agents are seemingly ubiquitous. Yet many people, even some real estate investors, do not have a complete understanding of what these professionals do, how they differ from brokers and realtors, and even how to become one. 

To counter that, here is: real estate agent: everything one needs to know.

What is a Real Estate Agent?

This is a licensed professional who facilitates real estate transactions, bringing buyers and sellers together and representing them in negotiations.

Such agents typically specialize in either residential or commercial properties, with their responsibilities dependent upon whether they are working for the buyer or seller. It is key to understand the agent’s focus since their loyalties can impact aspects such as the property’s final price. Agents who represent both parties – dual agents – are regulated by state laws.

In any case, agents conduct market research, meet with clients, show properties, and generally make certain the buyer-seller transaction moves forward.

Real estate agents that represent the seller – are also called listing agents — market the properties through listing services as well as advertisements and networking. They also help their client with property pricing and get the house ready for sale. For instance, the agent may offer suggestions on quick improvements that could more expeditiously lure buyers or that can increase the price.   

On the other hand, agents who represent the buyer look for properties that align with the client’s price range and preferences. In addition to past sales data, they often examine comparable area properties to help would-be buyers arrive at an appropriate bid. 

In general, the agent acts as the “middle person” for the primary players, ferrying offers and counteroffers, and communicating back and forth. Even after an offer is accepted, both the listing agent and the buyer’s representative frequently continue to help their clients all the way through to closing. After all, there is a small mound of paperwork involved, and clients often need advice regarding issues such as moving and inspections. 

Note that real estate agents typically are wholly paid by commission, which is a percentage of the property’s purchase price. Because of that, they must be able to close deals. 

Real Estate Agent vs. Real Estate Broker

In nearly every state, a real estate agent is required to be affiliated with a real estate broker or brokerage firm.

Note that it is up to each state to define “real estate agent” and “real estate broker,” and such definitions do vary. Overall, though, a person who takes required accredited courses, passes an examination, and gains a basic real estate license, can call themselves an agent. Their essential job is to help people buy or sell property.

Brokers, meanwhile, have more training and education, and have passed a more rigorous licensing exam. They are also required by most states to have a specific amount of recent experience working as an agent. 

So, what is it that brokers do? They typically deal with the real estate transaction’s technical aspects, such as the contract, which is signed with the brokerage, rather than the individual agent. Some states allow brokers to handle other financial and legal aspects, including the buyer’s deposit and the establishment of an escrow account.

While brokers can practice alone, they usually own a firm or franchise. Going solo usually requires an additional, more advanced license to employ agents or other brokers. That differs from real estate agents, who may not work independent of a broker – except in New Mexico and Colorado. In those states, all real estate pros must be licensed as a broker.   

Real Estate Agent vs Realtor

It is true that all realtors are agents or brokers, but not all brokers or agents are realtors. The term realtor is trademarked by the trade group National Association of Realtors (NAR), which means that real estate agents registered with NAR are permitted to call themselves realtors, as can appraisers and property managers. To date, there are more than 1.5 million NAR members.

Realtors, who are expected to be field experts, have exclusive access to the multiple listing service (MLS) as well as other vast resources and a robust support network. They also pledge to honor the organization’s code of ethics, which is revised annually, and take part in continuing training and education. Every four years, members must take an online course, hew to rigid standards of practice, and belong to a state or local real estate board or association.

For these reasons, and if possible, it would likely be wise to go with a realtor over a real estate agent.  

How to Become a Real Estate Agent?

Thinking about joining the ranks of real estate agents? While requirements differ by state, there are a few key steps involved:

• Learn state requirements. Every state has requirements regarding pre-licensing classes and post-licensing requirements, exams, and eligibility, fingerprinting and background checks, continuing education, application process and fees, and more. Note that some states permit getting licensed in their state and using it in another, in reciprocal licensing agreements.
• Take a pre-licensing course. Before taking the real estate license exam, candidates must take a pre-licensing course from an accredited real estate licensing school. Such courses run about $350. Specific course requisites vary by state.
• Take the licensing exam. These computerized, multiple-choice examinations, which cost between $100 and $300, cover two parts: a U.S.-specific portion on general real estate practices and principles, and a section that covers real estate laws in one’s state.
• Get the license. After passing the exam, the applicant must turn in an application, along with fees of between $200 and $400, to the state’s real estate regulatory entity. Once the application is approved, the real estate license certificate will be mailed to the newly minted agent.

Real Estate: An Alternative Investment 

There is little wonder why real estate remains an investment stalwart. After all, there is a myriad of property investment types and possible steady secondary income tax favorability, and property appreciation, and protection from stock volatility and inflation.   

There are a number of ways to invest in real estate, including through rental properties as well as “flipping” – buying an underpriced house, renovating it cheaply, then reselling it for a profit. There is also “hacking” – occupying one’s investment property and renting out rooms. There are pros and cons for each, depending on one’s lifestyle, risk threshold, and budget for repairs.  

There are also ways to have positions in real estate without owning physical property. There is real estate private equity – generally aimed at high-net-worth individuals and institutions – and real estate investment trusts (REITs), for example. The latter opportunities, which are frequently likened to mutual funds, are especially well suited for individuals who wish to own real estate passively with no responsibility for the property itself. Offerings typically include hotels, office buildings, apartments, and retail spaces.

The leading alternative investment platform Yieldstreet, which has funded $4 billion in private-market investments with a 9.8% IRR, offers the broadest selection of alternative asset classes – essentially any asset other than stocks and bonds. In addition to opportunities in art, private credit, legal finance and more, Yieldstreet offers ways to participate in real estate as well. With Yieldstreet, you have access to private market real estate opportunities to invest in commercial real estate in primary markets and property types comprising industrial, retail, hospitality, self-storage, and multi-family.

Real estate also provides a very important added benefit – investment diversification. A portfolio made up of varying asset types can mitigate overall risk and even improve returns.    Alternative investments can be a good way to help accomplish this.

Alternative Investments and Portfolio Diversification

Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings. 

Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk. 

In some cases, this risk can be greater than that of traditional investments.

This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million.  These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.

However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. 

Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10,000.

Learn more about the ways Yieldstreet can help diversify and grow portfolios.

In Summary

While often overlooked, real estate agents are often integral to buying and selling residential or commercial property. Their unbiased expertise can provide confidence and peace of mind throughout the entire process. Just be sure to conduct due diligence and get a great one.