A REALTOR® is a licensed real estate salesperson who belongs to the National Association of REALTORS®, the largest trade group in the country.
Every agent is not a REALTOR®, but most are. If you’re unsure, you can ask your agent if they’re a licensed REALTOR®.
REALTORS® are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.
Some REALTORS® are brokers, while some are agents. Unfortunately, people use the term interchangeably: there are some differences.
Brokers are usually managers. They run an agency and have agents working under them as salespeople. They might own a real estate brokerage or manage a franchise operation. They must take additional courses and pay additional fees to maintain their state-issued broker license.
An agent, on the other hand, is a salesperson selling on behalf of the broker.
Agents are also state licensed and must pass a written test before legally acting as a real estate agent. Each state has its own licensing laws and standards.
Some states—like Illinois—have eliminated the real estate salesperson license and mandate all agents take additional course work and pass another test to become brokers. They are broker associates still selling under a managing broker.
The Typical REALTOR®
There is a stereotype of the typical REALTOR® that must be dispelled: the stereotypical agent works a few hours a day and makes millions of dollars a year. Reality TV shows perpetuate this myth.
On television, buyers find the perfect house after visiting just three homes—and write an offer that is accepted immediately. The next thing you know, they’re moving in!
Nothing could be further from the truth.
The typical buyer searches with a REALTOR® for about 12 weeks and looks at about 10 properties before selecting a home, according to the National Association of REALTORS®. They then wait about 30 days—on average—or the deal to close. The agent is only paid once the deal closes.
If the buyer decides to sign another lease—or not to buy—that agent is not compensated. The same is true of listings. If the listing does not sell, the agent is not paid.
The average agent earned $47,700 in 2013, according to the National Association of REALTORS® Member Profile 2014.
Selling real estate is a commission-only business. That means an agent can work with a buyer for months without ever making a commission—because deals fall though and not every listing sells. It’s a business run on trust and faith.
Also, many people see the commission check at the closing table and have no idea how that money is split. They think their agent walks away with all of it—that’s just not true.
Remember, agents work for brokers. The commission check is made payable to the brokerage which then cuts a check to the listing agent and the selling agent. Both agents also must pay a percentage of their earnings to their broker.
Generally, agents also are responsible for paying their own federal and state income taxes, social security tax, and health insurance.