You’re ready to buy or sell a home, and you need a real estate agent to help. No, wait. You need a REALTOR®. No, a real estate agent. Well, maybe you should use a REALTOR® . . .
What’s the difference between a REALTOR® and a real estate agent anyway?
They have so much in common that most people think they’re the same. But the truth is, they really are different. We’ll walk you through what they have in common and what’s different about a REALTOR® versus a real estate agent, so you can choose the one you want to work with.
Let’s get started!
REALTOR® vs. Real Estate Agent: What’s the Difference?
While people commonly refer to real estate agents as “realtors,” the truth is that the term REALTOR® is part of a trademarked brand name—not a profession.
REALTORS® are real estate agents who have joined a membership known as the National Association of REALTORS® (NAR).1 The NAR provides agents with tools and resources to grow their businesses.
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So all REALTORS® are real estate agents, but not all real estate agents are REALTORS®. In other words, asking for a “realtor” when you mean a “real estate agent” is a lot like asking for a “Kleenex” when you really mean a “tissue.”
There. Now you can take this fun fact and correct people who use it wrong at dinner parties.
That’s the difference between the words. Now what about the people behind them?
What Is a Real Estate Agent?
A real estate agent is someone who is licensed by the state to help other people buy, sell or rent property.
Real estate agents have to take required classes and pass a state exam that shows they know their stuff when it comes to housing laws, purchases and sales. Then they have to keep their license up to date by taking more classes and renewing it every couple of years. (In other words, being a real estate agent is a lot of work—and that’s before they even help any clients!)
Besides maintaining their state certifications, real estate agents have to carry out their fiduciary responsibility. That’s just a fancy way of saying they have to act in the best interests of their client. Here’s how that works:
- They have to tell you everything they know about the house—even if it’s going to cost them the sale. So if you’re buying, your agent can’t trick you into buying a dump. And if you’re selling, your agent has to share any info that could affect the asking price. They also have to tell you if the buyer wants to flip or subdivide the property, so you can stop the sale if you don’t want to see the family land chopped into pieces by some developer.
- They have to actually give the buyer’s purchase offer to the seller. (Yeah, we know. It’s crazy they had to make a rule about this!) The agent can’t just pretend the offer got “lost” if they think it’s too low, too high, or if they’re trying to talk the buyer or seller out of the sale.
- They can only share your identity with the other party and their agent—so they can’t just go blabbing all over town that they work for you. They also have to pipe down about anything that could hurt their client in negotiations. So if they know you have $300,000 to spend but you only offered $250,000, they can’t spill the beans about your extra savings.
- They can’t represent both the buyer and the seller in the same sale, unless they notify you both and you agree it’s okay. (Representing people on both sides of the same transaction is a conflict of interests, and it can create huge legal headaches for the agent.)
Fiduciary responsibility sets the standard of ethical behavior that real estate agents have to follow. And if your agent doesn’t uphold those standards, you can sue the pants off of them.
But beyond that, real estate agents don’t have to uphold any other requirements. That means they can treat clients and other real estate agents however they want. They can be rude, pressure you to do what they think you should (even if it’s not what you want), suck at returning phone calls, or do pretty much anything else—as long as they don’t break any of those fiduciary rules.
Of course, most real estate agents act like professionals, since nobody wants to work with a jerk. It’s just that nobody’s going to make them behave.
How Does a Real Estate Agent Get Paid?
Real estate agents work on commission. When their clients buy or sell a home or commercial property, a percentage of the sales price is set aside to pay the agents—usually about 6%. Then the buyer’s agent and the seller’s agent split that amount, getting 3% each.
For example, the commission on a $300,000 sale is $18,000. The two agents will split this and get $9,000 each. If they’re working alone, they get to keep that whole amount. It covers their business costs and their paycheck.
If they’re working for a firm, then the real estate agent has to give the firm a cut—up to about half of what they made. In that case, the agent from our example would get to keep around $4,500.
What Is a REALTOR®?
Before someone can become a REALTOR®, they have to become a licensed real estate agent. They go through the same classes and take the same exams. And of course, they have to stay up to snuff on their licensing and education—just like any other agent.
They also have to meet some extra requirements to become a REALTOR®, like:
- Have a valid, active real estate license.
- Actively work in the real estate business.
- Don’t have a record of official sanctions for unprofessional conduct.
- Don’t have a recent or pending bankruptcy.
Real estate agents who meet those requirements can join their local chapter of the NAR. Becoming an NAR member is what makes them a REALTOR®.
Joining the NAR does cost some money. As of 2021, REALTORS® had to pay $150 a year for their membership, plus a few other fees.2 In return, the NAR gives them access to tools, resources and data that help them do their jobs better. The NAR also trains REALTORS® on its Code of Ethics.
What Is the Code of Ethics?
The Code of Ethics & Professional Standards is a document that sets rules for how REALTORS® should treat clients and deal with conflicts with other REALTORS®. Basically, it cranks up the dial on the normal fiduciary responsibilities and holds REALTORS® to an ultra high standard.
There are a lot of rules in the Code of Ethics, but the gist is that REALTORS® will treat their clients and other agents fairly and honestly. And every REALTOR® has to pass a test to make sure they know the Code of Ethics inside and out.
The Code of Ethics is a big reason why REALTORS® have such a good reputation. It’s like a signal to potential clients that says, “Hey! We care about doing the right thing over here. We’ll look out for you!”
Some people might prefer to work with a REALTOR® instead of a real estate agent because they know they’re being held to a certain moral standard. That said, you can find plenty of good real estate agents who hold themselves to a standard that’s just as high—or even higher.
How Do REALTORS® Get Paid?
REALTORS® get paid just like any other real estate agent: on commission. And just like other agents, that commission is usually about 6% of the sale price. That 6% still gets split between the two agents, giving them 3% each.
From that 3%, each agent will pay their firm and any other fees. Those things can take up to around half of the REALTOR’S® commission, leaving them with about 1.5% of the total.
(Remember our example? A 1.5% commission on a $300,000 sale equals $4,500.)
What Are the Benefits of a REALTOR® vs. a Real Estate Agent?
There are definite perks to working with (or being) a REALTOR®. But that doesn’t always make them a better choice than a real estate agent. Let’s find out why.
Benefits for the Client
We hate to burst your bubble, but if you think REALTORS® work some crazy special magic that real estate agents don’t have, you’re wrong.
They do all the same tasks as real estate agents during the buying and selling process. They’re both experts in the real estate industry, and they both have access to the Multiple Listing Service (MLS), which is one of the best property listing databases around. That means they can both help you buy or sell property.
The biggest benefit for clients is that REALTORS® get lots of extra training and tools to help them do their jobs better—and they get those things from a good, reputable organization. So if you’re big into name brands or if you’re comparing them to just any ol’ real estate agent, then yes, working with a REALTOR® is probably a better choice.
But don’t overlook a real estate agent’s qualifications just because the sign out front doesn’t say REALTOR®. Real estate agents can also take extra training or buy extra tools to help them serve their clients well. And they can join other good, reputable memberships and organizations—like our Endorsed Local Providers (ELP) program.
So when it comes to working with a REALTOR® versus a real estate agent, it really depends on the individual you hire. You may find a great REALTOR® who makes the most of the program. Or you may find a great real estate agent who has other training and is just as good as that fancy brand-name REALTOR®.
That’s why it’s so important to interview several real estate professionals, so you can choose the right agent to meet your needs.
Benefits for the REALTOR®
More bubble bursting: The biggest benefit of being a REALTOR® is actually for the REALTOR® themselves, not the client.
Many real estate agents join the program because they know the NAR has a good reputation and they’ll get more business when people see that they’re part of an exclusive club.
Plus, the NAR has lots of ties to Washington (D.C., that is). It lobbies politicians and pulls political strings to get the government to pass laws that benefit its agents and clients. So it can be worth paying for the membership to get those perks.
A lot of real estate agents also become REALTORS® because running a one-person real estate business is really stinkin’ hard. They want the protection and help of a big, well-established agency to grow their business and do their best. And hey, who can blame them? Becoming a REALTOR® can be a great career move for a real estate agent!
Should I Work With a REALTOR® or a Real Estate Agent?
That is 100% up to you. Like we said, there are really good REALTORS® out there . . . and there are real estate agents who are just as good.
We care less about a person’s title and more about making sure you work with someone who puts your needs first. That’s why we created the Endorsed Local Providers (ELP) program.
ELPs are a group of experienced REALTORS® and real estate agents we vet and coach to make sure they always serve you with excellence. And they’re top performers in their areas. In fact, they’re so good we’d send our own moms to them (and a lot of us have). That’s why we call them RamseyTrusted.
Whether they’re a REALTOR® or a real estate agent, a RamseyTrusted ELP will put your needs first—period.
Frequently Asked Questions
Are Real Estate Agent Fees Included in Closing Costs?
Yes, real estate agent fees are included in home closing costs. The commission fees are typically 6% of the home price. This commission is split in half—3% for the seller’s agent and 3% for the buyer’s agent. It’s common for the seller to pay for both agent commissions. In other words, working with an agent is usually free for the buyer—woo-hoo!
How Do You Ask Someone to Be Your Real Estate Agent?
Most real estate agents are easily reached by phone, email or programs like our Endorsed Local Providers (ELP). Our program makes it super simple to find real estate agents who are RamseyTrusted and are highly qualified to serve you with excellence. All you have to do is share some info about your home purchase or home sale, and then we’ll send you top agents in your area who you can trust. Hop on a call to ask the agents a few interview questions so you can choose the one you like best.
Can You Change Real Estate Agents?
Yes, in most cases, you can switch real estate agents. The only time this gets tricky is if you’ve signed an agreement to work with the agent for a period of time. If the time period hasn’t ended yet and you changed real estate agents, that’d violate the agreement. But if you have a really good reason for ending the agreement early, talk it out with the agent. A good agent will likely let you break the contract in order to maintain a solid reputation in the community.
Can You Negotiate a Real Estate Agent Commission?
Yes, you’re allowed to negotiate the real estate agent commission. Keep in mind, commission fees are usually 6% of the home price. This commission is split in half—3% for the seller’s agent and 3% for the buyer’s agent. Both agents do a ton of work to help you successfully close on a home. So if you’re going to try and knock them down in price, make sure you do your research and have a specific reason why. Also, if you sign any legal documents agreeing to pay your agent a specific amount, you’ll likely be held to that amount. So make sure you ask any questions you have about the commission before you sign anything.
What Can You Expect From a Real Estate Agent?
Simply put, real estate agents help you buy or sell a house. The best ones work in real estate every single day as their full-time job. If you’re selling your home, a seller’s agent (also known as a listing agent) should help you with a bunch of things, like deciding on the right price for your home, arranging for a home inspection and guiding you on what to fix, identifying how to stage your home for buyers, creating a marketing strategy to find buyers, helping you pick the right offer, negotiating the best deal, and walking you through the closing paperwork.
If you’re buying a house, a buyer’s agent should help you find a home for sale in your price range, research neighborhoods for best fit, attend open houses and showings, make a competitive offer within your budget, negotiate the contract, handle the home inspection, and gather all the paperwork due on closing day.