People outside of the real estate market often make the mistake of assuming that real estate agents and REALTORS are the same things. They believe that since REALTORS and agents both help people buy and sell homes that their training and professional responsibilities are similar if not identical.
In fact, REALTORS take on a unique role in the real estate industry, one that is not necessarily shared with real estate agents. By understanding the difference between the two, you can decide which you would prefer to hire to help you buy or sell a home.
REALTORS versus Real Estate Agents
The terms REALTOR and real estate agent are often mistakenly used interchangeably. In reality, REALTORS are more highly trained and held to a higher ethical industry standard than real estate agents.
Indeed, REALTORS typically work full-time and have a vested financial interest in their businesses. They are required to be members of the National Association of REALTORS, which is actually the largest professional trade group in the U.S.
Further, REALTORS have the option of working as either brokers or agents. REALTORS who choose to work as real estate brokers are managers and operate their own brokerage agencies. They often have real estate agents working under them as commissioned-based associates. REALTORS are subjected to more intensive and lengthy professional training and must by law pay additional fees to get and maintain state-issued industry licenses.
Real estate agents, on the other hand, undergo training, albeit perhaps not as rigorous as that undertaken by REALTORS, and must by law pass a written test before being issued a state industry license. Agents typically work as associates under a broker or brokerage firm.
It should be noted, however, that some states like Illinois have done away with the real estate salesperson license and instead now requires that agents take additional testing to become brokers. Newly licensed brokers in these states can then work as REALTORS or as broker associates for a brokerage firm.
Working as a REALTOR
Another common misconception by people who are outside of the real estate industry is that REALTORS earn copious amounts of money each year while only having to work a few hours a day. In fact, REALTORS work full-time and spend dozens of hours each week helping clients either sell or buy their homes.
This common misconception comes from reality TV shows that depict prospective buyers looking at only two or three homes before finding the perfect one for which to make an offer. The offer is then accepted the first time without any negotiation from the seller. The buyers then happily move into the new home to start their lives.
In reality, buyers rarely find the perfect home to purchase in the first few days if not the first few weeks of their search. They typically spend about 12 weeks looking for the ideal home before making an offer that opens negotiations between them and the seller. It can take up to 30 days if not longer to actually close on a house.
During that entire time, the REALTOR does not get paid regardless of whether he or she is representing the seller or the buyer. If the deal falls through and the either party backs out of the transaction, the REALTOR goes without a paycheck. Likewise, if the buyer decides not to purchase a home right now or the listing does not sell, the REALTOR is not paid for his or her time and effort.
REALTORS work on commission and rely on both the buyer and seller to uphold his or her end of the proverbial bargain during the transaction. In essence, working as a REALTOR relies on having both faith and trust that each transaction will close successfully.
If the sale closes and the house is sold or purchased, the proceeds for the transaction actually goes to the brokerage firm first. From this money, a check for the REALTOR is cut. The money that the REALTOR gets paid has brokerage fees deducted from it. The remainder is what the REALTOR recoups in commission for the purchase or sale of the house.
The commission for each sale typically does not add up to be millions of dollars each year. In fact, a study showed in 2013 that the average REALTOR earned just over $47,000 on an annual basis. From that yearly sum, the REALTOR then had to pay his or her own state and federal taxes, taxes for Social Security, and cover expenses for health insurance.
REALTORS are highly trained real estate professionals who hold unique roles in the industry. They are often more specialized than licensed real estate agents. They also are held to a stricter code of ethics than agents. When you want a full-time real estate pro who is devoted to your home sale or purchase, you may find it best to retain the services of a licensed REALTOR.