New Jersey Real Estate Salesperson · Practice of Real Estate
Brokerage Operations
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In 30 seconds
A brokerage is a business run by a broker who supervises every licensee affiliated with it and answers for their work. The distinction most often tested is the broker versus the salesperson: both are licensed, but only the broker may hold trust funds, take listings, and pay or receive compensation.
Why this matters
The exam keeps asking who is allowed to hold the money, sign the listing, pay the commission, and run the ad, and the answer is almost always the broker, not the salesperson.
The college version
In normal terms
- The broker owns the brokerage, supervises all associate licensees, holds client money in a separate trust account, and is the only party who pays or receives commissions.
- Associate licensees are usually independent contractors for tax purposes, yet the broker must still supervise their real estate work.
- In practice this means office procedures, recordkeeping, referral fees, unlicensed assistants, and team names all run through the broker.
Concepts in this outline
- Broker supervision — the broker's duty to oversee every licensee's real estate work, review documents, set procedures, and answer for the office's conduct.
- Associate licensees — salespersons and broker-salespersons affiliated with a broker; they act only through that broker and receive compensation only from that broker.
- Independent contractor versus employee concepts — most licensees are independent contractors for tax purposes under a written agreement with commission pay, yet the broker must still supervise them.
- Office procedures — the broker's written policies for handling listings, offers, deposits, files, and disclosures so every licensee follows the same steps.
- Recordkeeping — the broker keeps transaction files, contracts, and trust-account records for the retention period the law requires, available for regulator inspection.
- Trust funds — client money the broker holds in a separate account; commingling mixes it with firm money, conversion spends it, both prohibited (see Topic 15).
- Advertising — every ad runs under the broker's name; a licensee never advertises independently (see Topic 10).
- Commission agreements — compensation is negotiable and set between the broker and the client, never fixed by an association, a board, or office custom (see Topic 10).
- Referral fees — payment for sending a client may pass only between brokers or licensees, never to an unlicensed person.
- Unlicensed assistants — may do clerical and administrative tasks but may never negotiate, show property alone, or discuss terms (see Topic 16).
- Teams and trade names — groups and business names must be registered or approved and must always advertise under the supervising broker's name.
Eli explains
The same idea, in plain words
Explain it like I’m 10
Think of a brokerage as a ship. The broker is the captain, and every salesperson and broker-salesperson aboard is an associate licensee who works only under that captain. The captain's duty is broker supervision: reviewing contracts, setting office procedures, and keeping records of every transaction as long as the law requires.
Most associate licensees are independent contractors, not employees. Under federal tax rules a licensee with a written agreement and commission-based pay is a statutory non-employee, yet supervision never stops, because license law demands it regardless of the tax label.
Client deposits are trust funds, kept in the broker's separate account. Mixing them with firm money is commingling; spending them is conversion, far more serious (see Topic 15).
Commission agreements are negotiable between broker and client, never set by an association or office habit (see Topic 10). Referral fees pass only between licensees, never to an unlicensed person. Unlicensed assistants do clerical work but never negotiate or show property alone (see Topic 16). Teams and trade names must be approved and advertised under the broker (see Topic 10).
Worked example
Priya, a salesperson at a Morristown brokerage, lists a Cherry Hill colonial. The listing is written in the broker's name, not hers. When the buyers hand her a deposit check, she brings it straight to broker Tom, who deposits it in the firm's trust account. The sellers ask Priya to lower the commission; she explains it is negotiable and Tom agrees to a new figure in writing. A friend who is not licensed sends the buyers to Priya and asks for a thank-you fee; Tom says no, because referral fees go only to licensees. Priya's unlicensed assistant prints the flyers, and the ad for "Team Priya" carries the brokerage name above hers.
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