All You Need to Know about Realtor

When you’re in the market to sell or buy a house, you’ll encounter various titles for professionals who can assist you: agent, associate, broker, Realtor. While all these roles provide guidance, it’s crucial to grasp the significance of “Realtor” when it appears alongside someone’s name.

What is a Realtor?

A Realtor, often stylized with a capital R or in all capital letters as REALTOR, is a licensed real estate professional who is also a member of the National Association of Realtors (NAR) trade organization. In the United States, there are over 1.5 million Realtors. The term is trademarked, which is why you’ll often see it capitalized and sometimes accompanied by a registered trademark symbol. While someone can be a fully licensed real estate agent or broker without being a member of NAR, they cannot use the title Realtor.

What’s the difference between a Realtor and a real estate agent?

All real estate agents are licensed to assist in buying and selling properties. They undergo extensive training and educational courses, culminating in passing a state exam to obtain their license. A Realtor goes beyond this by also being a dues-paying member of the National Association of Realtors (NAR). Membership in this organization signifies that they have fulfilled its educational requirements and adhere to its bylaws and code of ethics, among other obligations.

What is the Realtor code of ethics?

Real estate transactions involve substantial financial stakes. While specific job duties may vary among agents, all Realtors are bound by the same code of ethics. This comprehensive document sets a standard of professionalism and integrity for anyone holding the Realtor designation, with a primary aim of safeguarding consumers. Key principles of the code include:

• Providing accurate market value assessments to property owners.
• Truthfully representing potential savings and advantages of their services.
• Handling offers and counter-offers objectively and promptly.
• Transparently disclosing compensation details.
• Offering equal professional treatment to clients without discrimination based on race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity.
• Using truthful and ethical advertising practices.
• Refraining from making false or deceptive statements about other real estate professionals, their businesses, or their methods of operation.

How do Realtors make money?

Realtors facilitate real estate transactions for clients involved in buying and selling homes, operating on a commission-based model where they earn a percentage of the property’s sale price.

Traditionally, these commissions have typically totaled between 5 and 6 percent of the sale amount, split equally between the buyer’s agent and the seller’s agent. Historically, sellers have covered the entire cost of both agents’ commissions. However, following a federal lawsuit settlement in early 2024, changes to the Realtor commission structure are imminent. Starting August 2024, buyers may be responsible for directly compensating their own agent.

Regardless of whether the commission is paid by the buyer or seller, Realtors are often obligated to share a portion of their earnings with their brokerage. They also bear various other expenses, such as marketing costs, membership fees for professional organizations, access to the local multiple listing service (MLS), and other business-related expenditures.

Do you need a Realtor?

No, homebuyers and sellers are not obligated to work with a Realtor. Here are several common alternatives:

Use a non-Realtor agent or broker

There are numerous real estate agents and brokers who, while not affiliated with NAR, are fully licensed and qualified. Any accredited agent or broker can offer valuable expertise throughout the buying or selling process.

Buy or sell on your own

Buying a house without a Realtor is entirely feasible. Some homeowners choose the “for sale by owner” (FSBO) route, as indicated by the latest NAR data, which reveals that 7 percent of homes were sold directly by their owners in 2023. Opting for FSBO eliminates the commission typically paid to a listing agent but may also reduce profit potential: NAR reports that FSBO homes often sell for less than those listed traditionally.

However, both options require significant effort. If you go the FSBO route or buy without a Realtor, be prepared for extensive work. You’ll need to handle negotiations yourself and navigate through a substantial amount of paperwork, including intricate legal disclosures and contracts. This process can be daunting, and errors can prove costly given the substantial financial stakes involved.

Use an iBuyer or cash homebuyer

Instead of navigating through agents, open houses, and negotiations, some homeowners skip the traditional listing process entirely by selling directly to iBuyers. These companies utilize online algorithms to provide instant cash offers. Alternatively, there are various other types of homebuying companies that also offer quick cash deals. While these options are swift and convenient, they come with a trade-off: Since these companies often intend to flip houses for resale, they typically offer lower prices compared to what homeowners could potentially secure through traditional selling methods.

How to find a Realtor

Now that you understand what a Realtor is, how do you go about finding one? Connecting with a Realtor doesn’t have to be difficult. You probably see their names and contact information on billboards and for-sale signs all the time. However, since buying or selling a home is one of the most significant financial decisions you’ll make, it’s crucial to find the best agent for your specific needs.

Start by seeking recommendations from friends, family, colleagues, and neighbors. But don’t solely rely on recommendations—interview multiple candidates to gauge how they approach your home buying or selling requirements. Building a good rapport with your Realtor will enhance your overall transaction experience.