Real Estate Brokers Licenses and Sales Licenses: What's the Difference?

I distinctly remember when I first thought about getting into real estate. I knew I had to be licensed, so I dove into Google. Instant confusion reigned. There were pre-licensing classes, continuing education classes, sales licensing, and broker's licensing. Further investigation pointed me to designated brokers, managing brokers, even associate brokers.

Good grief. I settled on getting a real estate broker's license. That sounded like it was the best, the most prestigious, the coolest. Who doesn't want to be the coolest?

However, with a bit more investigation, I found out that I couldn't get a real estate broker's license in my state (Arizona) until I'd been a licensed real estate sales agent for three years. Yet I had friends in other states that could get a broker's license on day one.

Like I said, confusion reigned. Perhaps you're a new agent, and as equally confused as I was. Let's break down this licensing thing so it makes some sense.

The real estate sales license

The basic real estate license (in most states) is the real estate sales license. While requirements vary from state to state, generally you must complete a certain number of classroom hours (in a sanctioned real estate school) and pass a two-part proctored exam on state and national real estate matters. Class and exam topics consist of local and national real estate vocabulary, laws and practices. Surprising to many is that most sales licensing courses and exams also include a significant amount of math. Not heavy-duty algebra or calculus, just basic arithmetic. No worries though, real estate schools are very good at preparing you for state and national exams — that's their purpose.

The real estate broker's license

Like the sales license, specific requirements for getting a real estate broker's license vary from state to state. Some states have tenure requirements (you must be licensed as a sales agent for a specified period of time) that have to be met before you can take broker classes and sit for the exam, and some states don't have a sales license level and start all agents with a broker's license. Typically additional class hours are required, over and above those required for sales licensing.

Why get a broker's license?

In almost every state, agents with a real estate sales license are required to 'hang their license' under a real estate broker. This works just fine for the vast majority of real estate agents because many want nothing to do with running a real estate brokerage. They just want to sell real estate and let the broker worry about the liability, risks, and management of a real estate brokerage.

If you do want to run your own brokerage, even as a sole proprietor, then you have to get a broker's license. We'll save the pros and cons of running a real estate brokerage for another post.

Another reason to get a broker's license is for the education it provides. While all states require some form of continuing education to keep your real estate license active, the additional training that 'broker school' offers can be valuable. There is also some prestige associated with being a broker, even if you don't own or operate a brokerage. Broker is one of the few designations that consumers understand and relate to. It can be a marketing advantage — some people would rather work with a 'broker' than a 'sales associate.'

Associate broker, designated broker, managing broker, oh my!

What is the deal with all of these various broker titles? Again, it's state dependent, but generally speaking, an associate broker usually has very little actual broker duties. The title is typically given to sales agents that get their broker's license but continue to hang that license under a designated or managing broker. It's the designated/managing broker that has the duties and responsibilities of running the day-to-day brokerage operations.

Reciprocity

Finally, a word about reciprocity. Reci-what? Webster defines reciprocity as 'a situation or relationship in which two people or groups agree to do something similar for each other, to allow each other to have the same rights.'

Reciprocity comes into play when you have a real estate license in one state and decide to get a license in another state. This probably isn't a common occurrence in large states, but if you live near the border of two states, or work within an area of nearby small states, you might need to be licensed in two (or more) states.

States that allow reciprocity typically give you credit for your current license, which can greatly reduce the classroom and testing requirements for additional licensing. Often a state will accept your national-level classes and testing and only require you to take state-specific classes and the state exam.

So there you have it — a brief explanation of the differences between a sales license and a real estate broker's license. Coming soon, the pros and cons of a real estate sales career versus a real estate broker's career!

Important: Qualifications for a real estate sales license or broker's license vary from state to state, so make sure you understand those for your state. For specific rules and regulations per state, search Google for 'your state real estate licensing requirements' or 'your state department of real estate.'