What Does a Real Estate Broker/Salesperson Do?
Real estate brokers and salespeople do all of the things listed in your state’s licensing law. Although the list of activities is fairly universal across the United States, it may vary in detail from one state to the next. For exam purposes, you need to know the specific activities that require a real estate license in your state.
Typical activities that require a real estate license are
Listing a property for sale
Finding buyers for property that is for sale
Negotiating the sale or purchase of a property
Negotiating a lease on behalf of a tenant or a landlord
Representing someone in the exchange of properties
Buying or selling options on real estate
Collecting rents for more than one building owner
This list of activities is at best only a partial one. Your state law probably requires a license to perform most, if not all, of these activities; however, license requirements can include more or fewer activities, depending on the state.
A typical real estate transaction
Here is a brief and somewhat generic overview of a typical house sale involving real estate agents. The word “generic,” is used here because transactions can include state and even regional differences in some specific elements.
A house for sale
A couple decides to sell their house and enlist the services of a real estate agent. You’re one of several brokers or salespeople the couple invites to their home to hear your listing presentation and explain what services you offer. In addition, you probably advise the couple on what price they are able to get for their house.
After meeting with several agents, the couple chooses you, signing a listing agreement and agreeing to allow you to represent them as their agent in the transaction.
As the couple’s real estate agent, you begin marketing the property. In communities that have a multiple listing service (MLS), you enter their house information into a computer so that all other agents in the community can see what you’ve listed for sale.
In communities with no MLS, agents may spread the word around to other real estate agencies that they have a particular house for sale, and they may depend heavily on advertising. There may also be other formal or informal organizations or associations that permit sharing of listings so that a property gets the widest possible exposure to the market and to as many sellers as possible.
An agent across town who’s been working to find a house for another couple sees your house on the MLS and gets in touch with you, asking for more details and making sure the house still is for sale. The cross-town agent then contacts his buyers, and they agree to take a look at the house. After seeing the house, they agree to make an offer.
The way a buyer’s offer is presented varies in different communities. Sometimes the offer is made in person with the buyer’s agent present. The offer usually is made in writing with a small check from the prospective buyer that’s called a binder or earnest money.
After a deal is agreed to, often after some negotiation, a contract of sale is prepared. Exactly who prepares the contract varies by state and region. In many places, however, the seller’s real estate agent prepares the contract, sometimes filling in the blanks of a preprinted contract form, but in other places, only attorneys prepare the contract. After the contract is signed, the conditions within the contract are triggered.
A typical real estate sales contract includes a provision for the buyer to obtain mortgage financing and may have provisions for the house to be inspected by a home inspector or engineer. The contract usually includes a provision that a marketable title must be conveyed.
A marketable title means that a reasonable and proper search of the records has been conducted, showing that the title to the property has been documented from earlier owners to the current seller so that it can be conveyed without questions as to who the owner is. Title insurance also may be purchased as part of the contract process to ensure that the title is legal.
When all of the contract provisions are satisfactorily fulfilled, the buyer and seller may proceed to closing, taking the real estate agent one step closer to getting paid. Pinpointing the actual moment when a real estate agent earns a commission is a somewhat complex issue. In general, it occurs when a ready, willing, and able buyer brings an acceptable offer to the seller.
Sometimes contract provisions, such as financing, must be satisfied before for a commission can be earned. By general agreement, the commission usually is paid at the closing. When more than one broker is involved, the broker representing the seller distributes the preapproved share of the commission to the buyer’s representative. Each broker then splits a portion or percentage of the commission with the salesperson who worked the deal.
In many places, real estate agents run the show and are joined at the closing by the buyer, the seller, a representative of the bank, and sometimes an attorney. In other places, lawyers do the bulk of the work, and sometimes a representative of the title company may actually conduct the closing.
In some states, the closing is done in escrow, which means that as all the paperwork is completed, it is sent to an escrow agent. When the escrow agent gets everything in order, he or she sends checks, deeds, and any other important documents to the appropriate parties.
After the closing, the buyer completes the transaction by officially documenting the transaction by recording the deed in the local office of public records.