When it comes to the world of buying and selling homes, the term “REALTOR®” carries both prestige and trust.

People often confuse real estate agents and REALTORS® as being easily interchangeable titles, but what you might not know is there are a number of very important differences that separate the two – so what is the difference between a REALTOR® and a real estate agent?

What Exactly is a Real Estate Agent?

A real estate agent is anyone who has a professional license to help people buy, sell, or rent any form of real estate. To obtain a real estate license, states require that individuals take pre-licensing training. These prerequisites can vary greatly between states.

The Bureau of Labor Statistics states that real estate licensing applicants must complete between 30 to 90 hours of classroom instruction from an accredited college, university or technical school, depending on the state.

Applicants must also pass an exam that covers national as well as state and local real estate law, standards and practices. All real estate agents also must pay an annual fee and renew their license on a yearly or semi-yearly basis, depending on the state.

Once agents have passed their exams, the individuals can proudly call themselves real estate agents and can begin working with anyone looking to buy, sell or rent property.

What Does REALTOR® Mean?

Every REALTOR® is a real estate agent, but not all agents are REALTORS®. A REALTOR® is a licensed real estate salesperson who is a member of the National Association of Realtors (NAR), which has more than 1 million members across the country.

What is the NAR?

The NAR has existed for more than a century, being established on May 12, 1908 in Chicago and was originally founded as the National Association of Real Estate Exchanges.

In 1916, the National Association of Real Estate Exchange’s name was changed to The National Association of Real Estate Boards (NAREB). Also in 1916, Charles N. Chadbourn, a past president of the Minneapolis Real Estate Board, devised the term “REALTOR,” which served to identify real estate professionals who are members of the National Association and subscribers to its strict Code of Ethics.

The terms REALTORS® and REALTOR® were registered with the United States Patent and Trademark Office in 1949, and 1950, respectively. The name of the National Association of Real Estate Boards was changed to the National Association of REALTORS® in 1972, with the block “R” logo being adopted in 1973.

The Association became the largest trade association in the United States in the early 1970s, with over 400,000 members. The National Association of REALTORS® now has over 1 million members, in 54 state associations and more than 1,300 local associations.

Can anyone join the NAR?

The NAR requires members to hold a currently valid real estate license and have no record of any official sanctions involving unprofessional conduct as well as having no recent or pending bankruptcy. Anyone who is willing to go through the extra steps can become an officially recognized REALTOR® with the NAR.

Current members of the NAR are required to take an online course designed as a refresher to ethics every four years. Membership in a local real estate board or association requires an annual fee, which serves to cover membership dues for the NAR and any state-level real estate associations.

REALTORS® must adhere to a strict 17-rule code of ethics to be recognized with by the NAR. Each code is legally binding, and a member breaking any part of the code likely results in legal action and the loss of the right to practice as a REALTOR®.

This strict Code of Ethics was designed to protect homebuyers and ensure continued professionalism in real estate negotiations.

Are There Different Types of REALTORS®?

So you already know there is a difference between a real estate agent and a REALTOR®, but you may be wondering if all REALTORS® do the same thing.

A REALTOR® can be either a broker, or an agent. Brokers will typically act as managers. They run agencies and have agents working under them as salespeople. Brokers might own a real estate brokerage or manage a franchise operation, and they are required take additional courses and pay additional fees to maintain their state-issued broker license.

An agent acts as a salesperson selling on the 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.

Real estate agent handing homebuyers their new house keys.

What about different kinds of agents?

There are several types of agents, which act in different capacities to help those looking to buy property.

  • Listing Agent – A listing agent is a real estate agent who serves as a representative of a home seller, they help home sellers with a wide range of tasks which range from recommending home improvements, to pricing and hosting open houses of the home. Listing agents also oversee the home inspection process and closing procedures.

    Typically, listing agents don’t receive payment unless a home gets sold. If it does, the typical agent commission is 5% to 6% of the price of the home but a listing agent’s fee can vary.
  • Buyer’s Agent – A buyer’s agents represents home buyers and serves to assist them through all steps of the home-buying process, including finding the right home, and negotiating offers.

    Typically the seller of a home usually pays the commission for both the seller’s agent and the buyer’s agent from the listing agent’s fee.
  • Rental Agent – Many real estate professionals also help people not only find homes, but also properties to rent. But what these agents do depends on the location and the agent.

    A rental agent will sometimes guide a prospective renter’s search from the very start, helping them find the right neighborhood, apartment size, and price range. Rental agents will also typically help renters signing paperwork after finding the perfect property.

    Rental agents may also represent landlords to help them find tenants—but the fee an agent will charge a landlord can vary based off of the market they work in.
House for sale.

What about different kinds of brokers?

There are three types of real estate brokers, each with subtle differences in the role they perform.

  • Managing Broker – Managing brokers oversee the day-to-day operation of the office environment and often play a role in the hiring and training of new agents, and managing staff
  • Associate Broker – Sometimes called a broker associate, broker-salesperson, or affiliate broker. Associate brokers have a broker’s license but are working under a managing broker.
  • Principal or Designated Broker – Every real estate office has a principal/designated broker. They serve to oversee all licensed real estate agents at the firm and make sure all agents are operating in compliance with state and national real estate law.

    Like real estate agents, principal brokers get paid on commission—taking a cut of the commissions of the sales agents they supervise.

What a Regular Day Looks Like for a Real Estate Professional

The real estate business is a commission-only enterprise. That could mean an agent may work with a buyer for months without ever making a commission—sometimes deals fall though and not every listing will sell. It’s a business that runs completely on faith and trust.

Many people have an idea that a REALTOR® or real estate agent may only work a few hours a day, and will make millions of dollars per year – this is a myth.

According to the NAR a typical buyer will search for 10-12 weeks and look at approximately 10 properties before finding the right home. On average they wait 30 days to close, with the REALTOR® or real estate agent only being paid once the deal has been finalized.

If the buyer changes their mind and decides to sign another lease—or not to buy, the agent will not be compensated.

It’s important to also remember that agents work for brokers. The commission check is payable to the brokerage which in turn will cut a check to both the listing agent and the selling agent. Both agents also must pay a percentage of their earnings to their broker.

Is the pay worth it?

At the end of the day for many who are interested in making a career change, the most important question is salary.

Income Data From the NAR shows us that the gross median income of REALTORS® — earned from real estate activities — was $39,800 in 2017. That is a slight decrease from the average of $42,500 in 2016.

Individuals licensed as sales agents reported a median income of $29,440, a decrease from $33,750 reported in 2016.  Income in the real estate sector is typically related directly to experience. REALTORS® with 16-years-or-more of experience had a median gross income of $78,850 in 2017, which is up from $78,800 in 2016. The exciting world of real estate sales can be overwhelming to those looking at entering the field.

Knowing these key differences between a REALTOR® and a real estate agent, as well as the various duties carried out by the industry professionals can make entering the competitive and often demanding market much simpler.