Brokerage
Definition and meaning of Brokerage in real estate.
Brokerage is a licensed business entity or firm that employs real estate brokers and sales agents to facilitate transactions between buyers and sellers of real property.
In more detail
When a client hires an agent to buy or sell a home, the legal agreement is actually made with the brokerage, not the individual agent. The brokerage provides essential resources, including marketing tools, legal support, errors and omissions insurance, and administrative services to its agents.
In return, the brokerage receives a portion of the commission earned from completed transactions, splitting the fee with the representing agent. Brokerages can range from small local boutique firms to large national franchises. They are heavily regulated by state laws to protect consumers from financial misconduct.
Key facts
| Category | Buying & Selling |
|---|---|
| Primary function | Facilitating real estate transactions and managing legal compliance |
| Income source | Commission splits and transactional fees |
| Regulatory oversight | State licensing boards and real estate commissions |
After closing the sale of their house, the home sellers pay the contractually agreed-upon commission to the listing brokerage, which then distributes the shares to the cooperating agents.
Frequently asked questions
Why must real estate agents work for a brokerage?
State laws typically require newly licensed agents to work under the supervision of a managing broker to ensure regulatory compliance and consumer protection.
Can a client fire a brokerage?
Clients can terminate their agreement with a brokerage, but they must follow the cancellation terms outlined in their listing or buyer representation contract.