Arizona real estate brokers and agents
- What’s the difference between an Employing Broker, Designated Broker, Associate Broker, Salesperson, Sales Associate and Agent?
- And how are they all connected and paid?
Employing Broker … is a business, usually a LLC, that is licensed by the State to engage in specific real estate activities. Employing Brokers are members of the local MLS, Multiple Listing Service, for the purpose of cooperatively working to get listed properties sold. For metro-Phoenix that MLS is the Arizona Regional MLS – ARMLS
The total transaction commission is paid by escrow (see What is Escrow?) to the Employing Broker for the agent who initiates the property listing … the Listing Broker. The Listing Broker pays some of that commission to the Selling Broker based on the offer of compensation included in the MLS listing … all as explained following.
Designated Broker … the person who is licensed as a broker in the State of Arizona and is specifically responsible to the State for all real estate activities conducted by Employing Broker personnel.
This person is “the boss” of operations for the Employing Broker. The Designated Broker must review and approve all documents involved in every transaction and answer to the State for problems and complaints.
Per the Arizona Department of Real Estate, it is the Designated broker that actually represents all clients of the Employing Broker.
The Designated Broker may conduct brokerage activities and deal directly with the public, but much more commonly the Designated Broker oversees activities of others and is not involved directly with the public unless there are “problems”.
Salesperson … the designation used by the State of Arizona for an “agent” or “sales associate”
salesperson – sales associate – agent … different terms for same job
… is hired as an independent contractor by the Employing Broker to interact with the public and facilitate real estate transactions.
The Employing Broker pays compensation to the Salesperson based on an employment contract between them … universally this includes some part of each transaction commission.
“Associate” Broker … is a person who holds a fully qualified Arizona Broker license but is working simply as a Salesperson.
An Employing Broker may have hundreds of both salespersons and “associate” brokers, but only one “designated” broker.
Listing Agent and Broker … Selling Agent and Broker
- the salesperson who initiates the Listing Agreement with the property owner is the “Listing Agent”
- The salesperson who produces the buyer for the property and writes the offer Purchase Contract is the “Selling Agent”
The Listing Agreement includes many terms and conditions defining the brokerage services to be performed … by the Listing Agent on behalf of the Listing Broker … including at section 6 the commissions to be paid when and if a sale of the property is completed, both the total commission as well as the commission to be paid to the Selling Broker.
Every listing entered into ARMLS includes an offer of compensation to other Employing Brokers to produce the buyer for the property. An offer of compensation is a requirement of every MLS, but is NOT regulated in any way.
Thus, when a home sale transaction is completed, escrow owes the total commission to the Listing Broker who is obligated to split that commission with the Selling Broker, with each broker paying compensation to their respective Salespersons.
To simplify this part of the process, both Listing Brokers and Selling Brokers deliver to escrow “commission instructions” whereby all parties are paid directly by escrow the respective amounts due. The total commission paid to each broker is included on the closing statment delivered by escrow to both seller and buyer.
To participate in ARMLS, both the brokers and salespersons must be members of the National Association of REALTORS® (NAR) as well as members of a local association.
For brokers and salespersons who are not members of NAR … are not REALTORS® … none of the above discussion regarding ARMLS applies. They are the same as the general public with respect to ARMLS and must conduct business in an entirely independent structure.
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