Key differences between a property broker and a brokerage firm


Read on to find if you should pick an individual agent or a brokerage firm to help you buy/sell your property

In a vast property market, it may sometimes not be possible to buy or sell a property without a property broker, real estate agent or a realty advisor, helping you with the same. In this case, should you pick an individual agent or a brokerage firm to do the job for you? We try to find some answers, by looking at the advantages that each offers.

 

Key differences between a property broker and a brokerage firm

 

Operations

A property broker, in most cases, runs a one-man show or has a small team to assist him in his business. Considering that it is a small team, a property broker will generally have his business in specific localities of the city. In fact, in cities like Delhi and Mumbai, one will find property brokers who deal with specific housing projects only. A brokerage firm, on the other hand, runs large operations, which could be countrywide or even spread across multiple geographies (the latter is especially true in case of brokerage business engaged in the commercial real estate segment).

See also: Tips to find the right real estate broker

 

Commission/ brokerage charge

Both parties operate on the concept of commission. When they help a buyer and seller get in touch with each other and the two parties decide to engage in the transaction, each one has to pay a certain percentage of the property value as fee to the broker or brokerage firm.

In India, individual property brokers typically ask the buyer and the seller to pay 2% of the deal value as their commission, also referred to as brokerage charge. This means, for enabling a property deal of Rs 1 crore, the agent would earn Rs 1 lakh from the buyer and Rs 1 lakh from the seller. While it is not common, some property agents might also ask for a flat fee, if they help you sell/purchase your dream abode.

On the point of commission, the same is also true of brokerages. However, because of their sheer size and potential to generate profits, brokerage firms are much better placed and often attract buyers and sellers by way of offering discounts and waivers. In order to expand their business and user base, property brokerage firms often launch discount offers for their clients. Even though not much waiver is provided on the original commission charge, the brokerage firms offer the client several associated services for free, as part of the package.

While these are the standard charges in case of residential realty, commercial property deals involve much higher brokerage charges, depending on the parties involved, the ticket size and the location of the property.

 

RERA registration for real estate agents

Before the enforcement of the Real Estate (Regulation and Development) Act of 2016, individual agents and brokerage firms did not have to register themselves with any authority. This resulted in home buyers running from pillar to post to seek relief, if an agent/brokerage firm were to cheat, dupe or ill treat them. Since the implementation of RERA, it is mandatory for all real estate brokers to register themselves with the respective real estate authorities in their states. The grievance resolution has also become much easier for buyers/sellers now. Hence, buyers and sellers must pick registered agents/brokerages, to steer clear of any unpleasant situation pertaining to the transaction and to rest assured that the broker/brokerage would be responsible to compensate them in case of any wrongdoings.

See also: Everything real estate agents need to know about the RERA

 

Training for real estate agents

In the west, one has to undergo training to become a real estate agent or broker. This is not the case, in India. Anyone interested in the business can run such an operation, as long as they are registered with their state’s RERA. Before the RERA came into effect, no formality whatsoever was required to launch a business for an individual broker. Even now, some people run this as a part-time business, along with their regular jobs without any RERA registration. Buyers and sellers are advised to steer clear of such agents.

In case of brokerage firms, they have to operate within the rules applicable to any enterprise. The RERA registration is now an additional formality that they have to comply with. While formal training is not a must, brokerage firms pump in huge investments in training and making their staff better equipped, to sell the products.

 

Services offered by property agents

By virtue of running a large business, a brokerage firm is able to help you find a property not only in one city but across the country. It also is able to offer a variety of assisted services, typically providing end-to-end solutions to the clients.

They also have tie-ups with builders and can help the buyer get a better deal. In fact, some builders launch projects through exclusive tie-ups with brokerage firms and buying a property in that particular project is possible, only if you were to seek the services of the said brokerage firm.

Most brokerage firms have ties with banks, which makes getting your home loan application approved much easier. Also, they help you understand what home loan product could be the best for you, depending on your personal needs.

They also invest in technologies that make property inspection, payment, etc., much easier. They also have a large legal team to deal with the paperwork.

Moreover, a brokerage business’ website may attract buyers, sellers and individual brokers. This means a buyer has a huge variety of properties to pick from.

An individual broker on the other hand may or may not have any tie up with banks or developers or lawyers, depending on the kind of operation he runs. So, when you deal with them, you will have to take care of all those aspects of the purchase on your own.

However, an individual broker who has been running a business in a particular locality for several years, would know the area like the back of his hand. He will also be in touch with the local people, who may or may not have listed their properties on online channels. An individual broker may be better equipped to tell you about the pros and cons of a locality. Since there are a limited number of options available in this case, the buyer will not have to go through a complex selection process either.

 

Broker vs brokerage

IndividualFirm
Small operationsLarge operations
Little scope for discountWide scope for discount
RERA registration is a mustRERA registration is a must
Small database and reachHuge database and reach
Limited home loan, legal work assistanceEnd-to-end support
Limited options to pick fromWide variety to pick from
Area expertiseLimited area expertise
Scope for negotiation on pricingScope for negotiation on pricing

 

FAQs

How much commission do brokers in India charge?

Typically, brokers in India charge 2% of deal value as commission.

Is the brokerage for commercial property higher?

Yes, the brokerage for commercial property is higher than that of residential property.

Is RERA registration compulsory for individual property brokers?

The Real Estate (Regulation and Development) Act (RERA) makes it mandatory for individual brokers and brokerage firms to register themselves with the state real estate regulatory authorities.

 

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