What is a Realtor, and do I need one?
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 in all capital letters as REALTOR — is a licensed real estate professional who is also a member of the National Association of Realtors trade organization. There are more than 1.5 million Realtors in the U.S. 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.
What’s the difference between a Realtor and a real estate agent?
All real estate agents are licensed to help buy and sell properties. They undergo many hours of training and educational courses and must pass a state exam to obtain their license. A Realtor is an agent who, in addition to all that, is also a dues-paying member of the National Association of Realtors (NAR). 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 certain 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.
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 between 5 and 6 percent of the sale price, with half going to the buyer’s agent and half to the seller’s agent. Also historically, the full cost for both agents’ commissions has long been covered by the seller. However, as part of a federal lawsuit settlement in early 2024, the Realtor commission structure will soon change. As of August 2024, buyers may be responsible for paying their own agent directly.
Regardless of whether their commission is paid by buyer or seller, Realtors may be required to 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.
Do you need a Realtor?
No. Homebuyers and sellers are not required to work with a Realtor — here are some common alternatives.
Use a non-Realtor agent or broker
There are many real estate agents and brokers who may not be affiliated with NAR but are still fully licensed and qualified. Any fully accredited agent or broker will be able to provide valuable expertise throughout the buying or selling process.
Buy or sell on your own
It’s perfectly possible to buy a house without a Realtor. And some homeowners take the for sale by owner route, often abbreviated to FSBO. According to the most recent data from NAR, 7 percent of homes were sold directly by their owner in 2023. While doing it yourself does eliminate the listing agent’s commission, it can also eliminate some of the profit potential: NAR data shows that FSBO homes tend to sell for less than traditionally listed ones.
But if you’re thinking about either 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 legal disclosures and contracts. This can be a bit overwhelming, and with so much money on the line, a mistake can be costly.
Use an iBuyer or cash homebuyer
Instead of dealing with agents, open houses and negotiations, some homeowners forego the traditional listing process altogether and sell directly to iBuyers, which use online algorithms to give you an instant cash offer. There are also many other types of homebuying companies that will make quick cash offers. These options are fast and convenient, but they come at a cost: Since they typically aim to flip houses for resale, they will likely offer you a lower price than you could otherwise get.
How to find a Realtor
Now that you know what a Realtor is, how do you connect with one? 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, this is one of the biggest financial decisions of your life, so you’ll want to find the best agent for your individual needs.
Start by asking friends, family, colleagues and neighbors for recommendations. And don’t just take their word for it: 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.
FAQs
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Not necessarily. All real estate agents, whether they are Realtors or not, are fully licensed professionals whose job is to guide you through the homebuying or selling process. The fact that someone has chosen not to become a National Association of Realtors member does not affect their skill or expertise.
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Commissions are negotiable, but traditionally, the real estate agents involved in a transaction each receive between 2.5 and 3 percent of a home’s final sale price. For a $400,000 home sale, a 2.5 percent commission comes to $10,000. Both commissions have historically been paid by the seller, meaning they pay the buyer’s agent as well as their own. However, as part of a recent lawsuit settlement, buyers may soon be responsible for paying their own agents. When this goes into effect, in August 2024, the amounts may become even more negotiable. Agents earn their commission whether they are Realtors or not.
