Real Estate Agent

Mindy Jensen

In this article

What Is a Real Estate Agent?

A real estate agent arranges real estate transactions by connecting people selling real estate with people interested in buying real estate. There are two primary types of agents: listing agents, who represent the sellers, and buyer’s agents. Many real estate agents act as both listing and buyer’s agents, but rarely on the same transaction.

A listing agent handles selling property owned by their client, the seller. They offer pricing guidance and help prepare a property for sale. For residential properties, this might include what’s called staging — or adding décor and furniture. Listing agents also promote and market the property by listing the property on the Multiple Listing Service (MLS). The MLS allows buyer’s agents to see properties that are available for purchase.

The buyer’s agent represents the person interested in purchasing a property. Buyer’s agents use the MLS to find properties matching the buyer’s requirements, which might include price, location, number of bedrooms, and square footage. They also guide their clients through the purchasing process, including writing an offer and negotiating the sale terms.

Both listing and buyer’s agents work with their clients throughout the home selling and buying process. This includes managing communications during bidding, home inspections, and the sale’s closing.

How Do Real Estate Agents Make Money?

Real estate agents typically earn a commission on the sale price of a home or property. The commission is a percentage of a property’s sale price. Under this model, the more a house sells for, the more money an agent makes.

Average commissions per real estate transaction are 5 to 6 percent, split between the listing and buyer’s real estate agent so that each agent earns 2.5 to 3 percent of a home’s sale price.

But real estate agents can make money in other ways, too. Some real estate brokerages charge a lower commission for higher-priced homes and others charge a flat listing fee, which covers all the services a real estate agent provides. Just make sure any fees or commissions are stated upfront. (Check out some other signs you have a bad real estate agent.)

What’s the Difference Between a Real Estate Agent and a Broker?

You may hear people talk about real estate agents and brokers as if they’re interchangeable — but they’re not. While both agents and brokers hold professional licenses, brokers often have more experience and must pass more rigorous licensing exams, although the exact requirements vary by state. 

However, most states do require real estate agents to work under the supervision of real estate brokers in a real estate brokerage, which is typically owned by the broker. That doesn’t mean brokers can’t also work as real estate agents — many do. Agents, however, aren’t allowed to operate as brokers.

How Is a Real Estate Agent Different from a REALTOR®?

REALTOR® is a trademarked term owned by the National Association of REALTORS® (NAR). The term refers to real estate agents and brokers who are members of NAR and pass the organization’s Code of Ethics exam. To be a certified REALTOR®, agents must also meet all their state’s licensing requirements. NAR members must recertify their membership every four years.

As of July 2019, more than 1.2 million people were NAR members

Can Real Estate Agents Help Real Estate Investors?

There are several reasons real estate investors might work with real estate agents. When buying, agents can help investors evaluate a property’s potential return on investment. Real estate agents can help investors understand a home’s expected appreciation and the rent they can charge tenants.

Some agents can even help an investor decide whether to hold onto a house as a rental. Other times, it may be more advantageous for an investor to buy and then sell a property in a process called flipping.

Agents can often secure better deals on property, and because they can access the MLS, they can find more investment options for their clients. In some cases, real estate agents can even bring their clients properties before they appear on the MLS. Doing so can secure homes for lower prices.

For sellers, real estate agents can help determine when best to sell a property and advise on pricing strategies. A high price tag can prevent a property from selling. Agents can also stage and market the property listing to make it more attractive to the investor’s ideal buyer. And real estate agents can refer you to people who work with investors, such as contractors, insurance companies, and banks.

What Should I Look for in a Real Estate Agent?

Real estate investors need agents who understand real estate investment — that’s why one of the first things to check is how often an agent works with investors. A more experienced agent should have referrals or case studies from other investment property deals they negotiated.

You also want to make sure the agent knows the area in which you’re looking to invest and know the right neighborhoods for investing. They’ll be up-to-date on local news and developments that can impact real estate investing and can answer questions about schools, crime, hospitals, and more. And they should be able to answer questions about local rents and home appreciation.

Pay attention to reliability and professionalism, too. Do agents respond to your calls and emails in a reasonable timeframe? Are they on time for appointments? How fast can they organize property viewings? Answers to these questions can impact your real estate investment business.

Agents need to be skilled negotiators, too. The less an investor pays for a property, the higher their potential profit. Real estate agents with strong negotiating tactics can help investors secure profitable deals. One way to judge an agent’s negotiating ability is to ask for a list of the agent’s recent sales, then compare those transactions with other recent nearby purchases. Doing so will help you assess how well an agent negotiated their deals.

Related Terms

Fair Market Value (FMV)

Fair market value determines an asset’s value—like the appropriate purchase price for a house. Learn more about calculating fair market value here.