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When you’re looking to sell or buy a house, you’ll see a range of titles attached to the professionals who can help you navigate the process: agent, associate, broker, Realtor. While all of these individuals should be able to offer guidance, it’s important to understand what it means when you see “Realtor” next to someone’s name.
What is a Realtor? A definition
A Realtor — with a capital R, also often written with all capital letters as REALTOR — is a licensed real estate professional who is also a member of the National Association of Realtors (NAR) trade organization. The word is trademarked, hence the capital; you might also see a registered trademark symbol next to it. It is certainly possible to be a fully licensed real estate agent or broker who is not a member of NAR, but they are not called Realtors.
How many Realtors are there?
As of April 2023, NAR membership numbered 1,537,418. So there are more than 1.5 million Realtors in the U.S.
How do Realtors make money?
Realtors facilitate real estate transactions for clients who are buying and selling homes. They work on a commission model, meaning that they earn a percentage of what a property sells for. Historically, those commissions have typically added up to about 6 percent, with 3 percent going to the buyer’s agent and 3 percent to the seller’s agent, and they are covered by the seller. However, commission amounts are often negotiable.
Realtors may also pay a portion of their earnings to their brokerage, along with a range of other expenses. These can include marketing, membership dues for various organizations, access to the local multiple listing service (MLS) and other business costs.
What’s the difference between a Realtor and a real estate agent?
A Realtor is a real estate agent, but the titles are not identical. All real estate agents are licensed to help buy and sell properties via educational courses and passing a state exam. A Realtor has done all that and is, in addition, a member of the National Association of Realtors. Joining the organization indicates that they have passed its course requirements and have agreed to follow its bylaws and code of ethics, among other factors.
What is the Realtor code of ethics?
Real estate transactions involve large sums of money. And while each agent’s job responsibilities may differ, all Realtors agree to the same code of ethics. It’s a lengthy document that holds anyone with the Realtor designation to a high standard of professionalism and integrity. It also aims to protect consumers. Tenets of the code include:
- Never mislead an owner about the market value of a property
- Never lie about potential savings and benefits of working with them
- Submit offers and counter-offers objectively and as quickly as possible
- Fully disclose compensation amounts
- Offer equal professional services to customers regardless of race, color, religion, sex, disability, familial status, national origin, sexual orientation or gender identity
- Use honest and truthful advertising
- Never make false or misleading statements about other real estate professionals, their businesses or their business practices
Do you need a Realtor?
Homebuyers and sellers are not required to work with a Realtor, or with any agent at all. Here are some common alternatives.
Use a real estate agent or broker
There are many qualified real estate agents and brokers who may not be affiliated with NAR but still hold all of the same other qualifications. As long as they’re fully licensed, both agents and brokers can provide valuable expertise throughout the buying or selling process.
Buy or sell it yourself
Some homeowners take the FSBO — for sale by owner — route. According to the most recent data from NAR, 10 percent of homes are sold directly by their owner. While doing it yourself does eliminate the listing agent’s commission, it can also eliminate some of the profit potential: FSBO homes tend to sell for less than traditionally listed ones. In 2021, the typical FSBO home sold for about $225,000, while those sold with an agent pulled in $330,000, the association says.
It’s also possible to buy a house without a Realtor. But if you’re thinking about this option, be prepared for a lot of work. You’ll need to do all the negotiating yourself and deal with a mountain of paperwork, including complex disclosures and legal contracts, which can a bit overwhelming.
Use an iBuyer or cash homebuyer
Instead of dealing with open houses and traditional showings, some homeowners sell directly to iBuyers, such as Opendoor and Offerpad, which use online algorithms to give you an instant offer. It’s convenient, but it also comes at a cost: Since iBuyers typically aim to flip houses for resale, they will likely offer you a lower price so they can increase their profits. There are also other types of homebuying companies that will make quick cash offers.
Finding a Realtor doesn’t have to be hard. After all, you probably see billboards and for-sale signs with names and contact information all the time. However, you shouldn’t hire just anyone to help with one of the biggest financial decisions of your life. You’ll want to find the best Realtor for your individual needs.
Start by asking friends, family, colleagues and neighbors for recommendations. Don’t just take their word for it, though: Make sure you interview a few different candidates to get a sense of how they will approach your house hunting or selling needs. The better you click with your Realtor, the better an experience your transaction will be.
Not necessarily. Like Realtors, real estate agents are fully licensed professionals who use their expertise to guide you through the homebuying or selling process. The fact that they have chosen not to become a National Association of Realtors member does not affect their qualifications or experience.
Real estate agents generally receive between 5 percent and 6 percent of a home’s final sale price. That amount is typically split evenly between the buyer’s agent and the seller’s agent, so each one would earn between 2.5 and 3 percent. An agent may (or may not) have to pay a percentage of their commission to their brokerage. Agents earn their commission whether they are Realtors or not.