To understand what a principal broker is, we have to go back up the family tree of real estate.
You do understand all brokers can be real estate agents, but not every real estate agent can be a broker, right? That’s because, to obtain a broker’s license, the real estate agent has to attend additional broker’s classes and, in some states, have some proven experience in the real estate market.
Ok, with that in mind, you must also understand that most of the states prohibit real estate agents from working without brokerage supervision. They can do everything, but once a deal is set in place, the real estate agent will need a broker to close things properly. However, there are some individuals that do possess a broker license but still work as real estate agents under another broker. They are brokers that prefer not having the heavy costs of running an office and/or the responsibilities of having their name on the billboard.
So, finally, the Principal Broker is the fearless one who puts his name on the billboard and carry the burden of maintaining a business. The big boss. El Jefe. The Principal Broker.
Also known as managing broker or qualifying broker, the principal broker is the one with the legal authority to sign agency contracts with a home buyer or a home seller and the one who supervises all agents working on a brokerage firm. He/she is the supervisor, and sometimes the home buyer or home seller doesn't even get to meet him/her!
How does the principal broker earn a living?
Well, because his/her existence allows the real estate agent to close deals and profit from it, the principal broker normally receives an override on the sales of all the licensees working under his/her license.