Navigating the complex world of real estate can be daunting, especially when it comes to understanding the roles of the professionals involved. Perhaps the most common point of confusion is the difference between a Realtor and a real estate agent.
While these terms are often used interchangeably, they represent distinct qualifications. This article clarifies the Realtor vs. real estate agent question to help you make informed decisions in your real estate transactions.
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Realtor vs real estate agent
The terms “real estate agent” and “Realtor” have distinct meanings and differences:
- Real estate agent:
- A real estate agent is a professional who is licensed to assist people in buying, selling, or renting properties in their particular state. The requirements for becoming a real estate agent vary by state but typically include completing a certain number of hours of real estate coursework, passing a background check, and passing an exam.
- Real estate agents can represent buyers, sellers, or both and may work in various capacities, including residential, commercial, rental, or industrial real estate.
- Realtor:
- A Realtor is an active member of the National Association of Realtors (NAR). To become a Realtor, a real estate agent or broker must join NAR and adhere to its strict Code of Ethics and Standards of Practice.
- The term “Realtor” is a trademarked designation, and not all real estate agents are Realtors. Only those who are NAR members can use the title.
- Realtors have access to additional resources and tools provided by NAR, which can benefit their clients. This includes access to professional development opportunities and various marketing tools. Membership may also be bundled with access to local multiple listing services (MLSs).
In summary, while all Realtors are real estate professionals, not all real estate agents and brokers are Realtors. The main difference lies in NAR membership and adherence to its ethical guidelines.
What do real estate agents and Realtors do?
Real estate agents have a wide array of responsibilities. They evaluate property list prices, advertise listings, negotiate and close deals, and guide clients throughout the entire purchasing or selling process. They must have a deep understanding of the local real estate market and provide clients with key information on a variety of topics, including market conditions, prices, mortgages, and legal requirements.
The daily life of a real estate agent can be a whirlwind of activity, from hosting open houses and making cold calls to meeting clients, negotiating contracts, and filling out paperwork — lots of paperwork.
At the end of the day, an agent’s goal is to ensure their clients’ real estate transactions are successful, whether that means helping them find their dream home or selling their property at an acceptable price.
If agents are Realtors, they must also do the following in order to remain members in good standing:
- Maintain a valid real estate license: Members must remain licensed and continue to actively engage in real estate as a business.
- Undertake ethics training: Every NAR member is required to complete a Code of Ethics training course every three years.
- Pay dues: Annual membership dues must be paid to both the local association and NAR.
- Comply with governing policies: Members are also expected to follow all NAR policies, including its bylaws, governance rules, and any updates or revisions to the Code of Ethics.
Many members also serve on local, state, and national boards; help advise on rules and governance changes; and attend annual conferences.
How real estate agents are paid
Generally speaking, agents and brokers make a living through commission, but the way these payments are made depends on the role.
Broker splits
All real estate agents work under a supervising real estate broker. The commission earned is often split between the agent and their broker. The brokerage split can vary based on the agreement between the agent and the broker, commonly ranging from a 50-50 split to more favorable splits for the agent, such as 70-30 or 80-20.
For more, we have a breakdown of the average real estate agent salaries for each state.
What makes up a real estate commission
The primary source of income for real estate agents is the commission they receive on the sale of a property. This commission is usually a percentage of the property’s selling price.
Standard commission rates can vary but are currently around 5% to 6% of the sale price. Traditionally, this total commission is split between the buyer’s agent and the seller’s agent.
However, following the NAR class action settlement, several important changes took effect. As of August 17, 2024, the common practice of listing the offer of compensation between brokers (also known as cooperative compensation) in the MLS is no longer allowed. While brokers can still offer cooperative compensation, they must do so outside of the MLS, negotiating compensation directly.
This change is designed to provide more clarity around commission structures and ensure that all compensation is openly negotiated between parties. This marks a significant transformation in how real estate transactions are handled and necessitates new buyer’s agent compensation models.
Buyer’s agent comp strategies
Get three buy-side compensation structures that will appeal to clients while protecting your paycheck. We also include templates with sample language you can use to amend your current buyer’s agreement.
Why join NAR?
Founded in 1908, NAR is America’s largest trade association, with more than 1.5 million members. It stands as a symbol of professionalism and integrity in the real estate industry.
Here are some reasons why a real estate agent might want to join NAR and become a Realtor:
- Realtors are aligned with a respected organization that has a reputation for upholding high ethical standards. For consumers, working with a Realtor can offer an extra layer of confidence and trust in their agent’s competence and ethical conduct.
- NAR offers its members a wealth of resources, including educational opportunities, access to research and data, and networking events. This can give Realtors a competitive edge, helping them stay informed, up to date, and connected in the industry.
- As a powerful advocate for real estate professionals and property owners, NAR gives agents a voice in shaping the industry’s future via the organization’s lobbying on important policy issues related to real estate.
What is NAR’s Code of Ethics?
The association’s Code of Ethics is the North Star guiding Realtors in their professional conduct, and it’s what sets them apart from other real estate agents. It was first adopted in 1913 and has been amended and updated over the years to reflect changes in the industry and society. The code is written with a clear purpose: to elevate the standards of real estate practice and ensure fair, ethical treatment for all parties involved in a property transaction.
Realtors must regularly complete ethics training and reacquaint themselves with the code to ensure that these principles remain front and center in their practice. The Code of Ethics consists of 17 articles, each defining a different standard of conduct and professionalism. These articles are grouped into the following three categories:
- Duties to clients and customers
- Duties to the public
- Duties to Realtors
In essence, the Code of Ethics represents the commitment Realtors make to operate in their clients’ best interests with integrity, competency, and transparency. It’s a roadmap for professional behavior that builds trust between Realtors and their clients, and it’s a significant part of what gives the title “Realtor” its weight and distinction.
Violations can result in various penalties, depending on the severity of the violation and the findings of the local association’s professional standards committee, which typically handles such cases. Potential penalties include:
- Fines
- Mandatory education
- Suspension or termination of membership
- Reprimand or censure
- Probation
Each case is handled based on its specific circumstances, and the process typically involves a hearing where evidence is presented and reviewed by a professional standards committee. Appeals may also be available depending on the situation.
Is the word Realtor always capitalized?
The word “Realtor” was coined by NAR in 1916 to identify its members and distinguish them from non-member real estate professionals. Because Realtor is a registered trademark, it’s always capitalized — similar to brand names like Nike or Apple. It signifies that the individual is not just a licensed real estate professional, but a member of NAR who abides by its strict Code of Ethics.
How to become a Realtor
Anyone interested in becoming an NAR member must already be a licensed real estate agent or appraiser. This means they’ve completed their state’s education requirements, passed the licensing exam, and are legally authorized to practice real estate. Once licensed, an agent can apply to become a member of NAR by first joining their local association.
NAR membership dues
NAR dues cover membership in local, state, and national Realtor associations. The funds from membership dues support a wide range of initiatives aimed at serving Realtors and advancing the real estate industry. This includes lobbying efforts on behalf of real estate interests at the national, state, and local levels, and research into housing trends.
In 2024, annual dues came to $154, but a special assessment covering a consumer ad campaign brought the total up to $201 per Realtor. You can find a full breakdown of how NAR uses membership dues here.
NAR in 2024
NAR has faced significant headwinds in the past few years. In 2023, President Kenny Parcell resigned amid a barrage of sexual harassment complaints. Additionally, numerous class action lawsuits claimed that the trade organization was complicit in antitrust violations by requiring cooperative compensation.
As noted in the compensation section above, the jury in the now infamous Sitzer-Burnett case agreed with these allegations, which resulted in NAR negotiating a large settlement that was implemented in August 2024.
The settlement stipulates the following:
- Offers of compensation cannot be presented in the MLS
- Buyer’s agents must have their clients sign a buyer agency agreement prior to showing them properties for sale (something that was already required in 18 states)
- NAR will pay $418 million over approximately four years
These changes released the association and its members, local affiliates, MLSs, and any member-run brokerages with residential transaction volume below $2 million in 2022 from further liability. NAR said it will not change membership dues for 2025 despite the large settlement payment.
The association continues to deny any wrongdoing, maintaining that cooperative compensation and association policies benefit buyers and sellers. NAR contends that the traditional model, where buyer’s agents’ commissions were paid via the proceeds of the sale, promotes access to property ownership, particularly for lower- and middle-income buyers who can have a difficult enough time saving for a down payment.
Over the past few months, Luxury Presence has facilitated several discussions about the impact of these monumental shifts in the industry with some of its most prominent and successful thought leaders.
Real estate professionals, Realtors + Luxury Presence
Whether you’re an agent, Realtor, or both, Luxury Presence is here to help you grow your business. We offer a full platform of design and marketing solutions that can help you build your brand and attract more clients. To learn more, schedule a free demo with our team.
