A Guide for Your Clients

Do your clients realize that the words “REALTOR®” and “real estate agent” aren’t the same thing?

Most consumers are not aware, but as an industry professional, you know there are important distinctions between the terms. While most people will use both terms to mean the same thing, that isn’t correct. A real estate agent can also be a REALTOR®, but that isn’t always the case. Many interchange the words “broker,” “agent” and “REALTOR®,” as if they are the same. They are not!

Lots of folks also don’t realize there is a difference between a real estate agent and a real estate broker, as well. Have a look at the resource at Maximum Real Estate Exposure for a complete explanation.

Now, let’s analyze how a REALTOR® differs from a real estate agent.

Simply, a real estate agent is anyone with a license to assist people in buying and selling property. It could be either residential or commercial, and they could be working as a broker or sales associate.

The rules for becoming a real estate agent vary between states, but typically involve classroom study followed by examinations. In these classes, applicants will learn about both state and national laws they will need to follow in their career. These will be provided by an accredited training facility, college or university.

Once they have passed their final exam, they will be allowed to operate as a real estate agent legally. They will also need to make sure they pay annual licensing fees and complete any other state requirements. This can include further courses to allow them to renew their license, called continuing education courses.

How Is a REALTOR® Different?
The word “REALTOR®” is a trademarked term, and one of the most prominent by the biggest trade association in the United States, the National Association of REALTORS® (NAR). NAR was founded in 1908 in Chicago, initially under the name the National Association of Real Estate Exchanges.

The fledgling association started with just 120 members, and today, they have over 1.4 million. In 1916, the term REALTOR® was proposed by a vice president of the organization to differentiate their members as following their code of ethics.

The association decided to trademark and copyright the word “REALTORS®” in 1949. They did the same with “Realtor” the following year. They changed the name of the association to include the word “REALTORS®” in 1972.

They have faced some legal challenges over the word, claiming it is a generic term that shouldn’t be a trademark. As you might expect, they vigorously defend their trademark, winning many cases.

What Are the Benefits of Using a REALTOR®?
NAR has a Code of Ethics that holds members to higher standards than typical real estate agents. The Code lays out the responsibilities of every REALTOR®, which fosters more professionalism among members.

Every new member is required to attend training courses that set out how they should treat their customers, as well as other REALTORS®. Every so often, members are required to complete more training as part of their ongoing membership duties.

REALTORS® are committed to treating everyone in the home-buying process honestly and fairly. They are held accountable by other REALTORS®, as well as their local association, to make sure they stick to the rules and the Code of Ethics. Using a REALTOR® means that you will benefit from these commitments to get a better service when buying or selling a property.

Who Can Become a REALTOR®?
Not only real estate agents can join NAR. It is also open to brokers, appraisers, property managers and any other professionals in the industry. The first step to joining NAR is to become a member of one of their local associations. There are 1,400 of these across the country, and they require an application fee and approval from the board of directors to join.

Members of local associations can then join the NAR as long as they hold a current real estate license and are active in the business. They also need to not have a record of bankruptcy or sanctions for unprofessional conduct.

For a real estate firm, NAR requires that a principal member of the business needs to join before anyone else is accepted as a member. The principal could be a partner in the firm, major shareholder or a manager. One of them will then act as the main REALTOR® for the business, responsible for all the obligations and duties of membership.

When an applicant is accepted into the association, there is a membership fee of $150. Part of this fee is used by the association to fund their lobbying PAC, which is the largest direct contributor to federal candidates. This powerful organization pushes to advance legislative benefits for the industry and its members.

How Does a Real Estate Broker Differ From an Agent or REALTOR®?
The most significant difference between a real estate agent, REALTOR® and a broker is having a real estate brokerage license. Getting your broker license is done at the state level. In order to get your broker license, you must have been working as an agent for a minimum of two years. Also, you must take classes and pass an exam.

Typically, but not always, a real estate broker will have sales associates that work under them. The broker oversees the daily interactions between the agents working under them, along with the clients they serve.

Real estate brokers are often problem-solvers for the agents they employ. It is possible a broker could participate in helping clients to buy and sell homes. Some brokers, however, choose not to compete with their agents for business.

Outside of management, one of the most significant responsibilities of a real estate broker is to be accountable for a buyer’s earnest money deposit funds. Buyers usually will be required to put monies in escrow to solidify a transaction and prove to a seller they are sincere about moving forward. A real estate broker must account for these funds at closing.

At times, a real estate transaction will fall through. Brokers are often put in a position where both the buyer and seller will want the earnest money. Who gets to keep the earnest money is usually decided by an arbitrator or a court of competent jurisdiction when there is a disagreement among the parties. Real estate brokers often take the brunt of one party being extremely upset they don’t get to keep the deposit.

Final Thoughts
When buying or selling a home, it is essential for consumers to understand the differences between an agent, REALTOR® and broker. The selection of the “right” agent is a critical exercise when buying or selling a home. Choosing the right person for the job will be a significant factor is their satisfaction, so they should always spend the time doing a proper amount of due diligence.

Also, understand there are differences between buyer’s agents and seller’s agents. While many agents do both, each facet of the business has different skillsets.

Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.