Many people believe that “realtor” is simply a synonym for “real estate agent”. People who work in the business know that this is not the case and are aware that many outsiders get the two confused. For a handy guide to consumers, and for you to explain to your clients what the difference is, read on…
Difference between a real estate agent and a realtor
Many people believe that these two terms are interchangeable and use them indiscriminately to refer to anybody dealing in the business of buying and selling houses and land. This may be because “real estate agent” sounds a bit of a mouthful, and so “realtor” is used as a convenient abbreviation.
However, while it is true that realtors and real estate agents both are professionals who hold a license to buy and sell real estate, the two titles represent different branches of the same profession and there are significant differences between the jobs they do.
A real estate agent is a person who holds a license to assist clients in buying and selling commercial or residential land and property. A real estate agent may be a broker, an associate broker, or a sales professional.
Real estate agents have to hold a real estate license in order to practice in their state; in order to do this, they must participate in a prescribed course of education and pass an examination. The licensing requirements for estate agents vary from state to state.
The Bureau of Labor Statistics states that applicants for a real estate license must undergo between 30 and 90 hours of classroom teaching from a certified college, technical institution, or university – the amount varies between states. All applicants must successfully complete an examination that tests their knowledge on nationwide, state, and local laws, practices, and standards in the real estate business.
Every real estate agent must pay an annual fee for their license and licenses must be renewed every 12 or 24 months, again varying from state to state. In certain states an agent may have to undergo some ongoing education courses prior to license renewal.
The term realtor is trademarked and means a real estate agent who holds an active membership in the National Association of Realtors (NAR), which is the USA’s biggest trade Association.
Although the NAR began in 1908 under the title the National Association of Real Estate Exchanges, and later (1916) underwent a name change to the National Association of Real Estate Boards, it has only employed the term “realtor” for its members for around 40 years. The term has been around somewhat longer though: it was first suggested by the organization’s vice president, Charles N. Chadbourn, a Minneapolis Real Estate agent, as a term that would indicate that the individual was a member of the association. So that the title couldn’t be misused, a copyright was issued to the association, and it was trademarked, in 1950. The association’s current name comes from 1974.
Not everybody has been happy about the trademarking and copywriting of the term realtor. Lawsuits have been brought against the NAR contending that realtor is generic and so should not be trademarked. Nevertheless, in all these cases the US Patent and Trademark Office (USPTO) has allowed the registration to stand.
The NAR, which has its headquarters in Chicago, has over 1 million members in the US, and many different professionals in the real estate agency are permitted to join, not just real estate brokers/agents. Real estate councilors, appraisers, and property managers, amongst others, may join.
In order to join the NAR, an applicant must have a current Real Estate license, have an active involvement in real estate business, and have no recent or upcoming bankruptcy proceedings against them nor any record of being sanctioned for unprofessional behavior.
No employee of a real estate company can join a realtor association unless the principals of their company – meaning the majority shareholders, corporate officers, partners, sole proprietors, or branch office manager acting in the principal’s stead – have already joined. If the principal of a firm decides that they do not wish to be a member of a realtor association, no employee of the firm can become one either. If the principals decide they do wish to be members, a single principal will be selected as the company’s “designated realtor”.
Having joined a realtor association, any of the principal’s licensed or affiliated appraisers, brokers, or agents may also become members. If any of these individuals decline the opportunity to become realtors, the designated realtor will be charged a non-member levy by the NAR for each one.
The NAR has a code of ethics which it claims is what makes the difference between a realtor and a real estate agent. Every new member must attend an orientation session and promise to practice in line with the NAR’s Code of Ethics & Professional Standards, which details how members should interact with their clients, customers, members of the public, and fellow realtors. In order to maintain their membership, members may from time to time be asked to undergo training regarding the Code of Ethics.
The code comprises 17 Articles, 71 Standards of Practice, and 131 exemplar cases. The code is based on the principle of the “Golden Rule”, mandating that all realtors should work cooperatively for the benefit of clients and consumers. The code mandates that every realtor should be respectful of any exclusive relationship between a fellow realtor and a client, and that any conflict between fellow realtors should be arbitrated/mediated by other members of the profession rather than outside agencies.
At the start of every year an updated edition of the code is published in Realtor Magazine. The NAR states that the code represents “living” documentation and it has been changed many times over the years to make sure it retains relevance for the present-day business world. Changes have also been made to the code to keep it in line with equal opportunity laws and those laws and standards related to equality in housing. The NAR has stated that “Part of the incentive for becoming a realtor is to capitalize on the good reputation of NAR members. The idea is that consumers will opt to work with a real estate agent who has sworn to treat all parties fairly and honestly.”
The chief responsibility for ensuring that all members follow the code lies with state and local realtor associations; some of these have created standards for dealing with any transgressions by members.
Annual membership of the NAR costs $120 per member. As above, any company principals who are members of the NAR will be assessed an additional fee based on the number of employees they have who choose not to join the NAR.
Whether or not you choose to be a member of the NAR, i.e., whether you work as a realtor or a real estate agent, you should always bear in mind that your business and livelihood could be under threat from a lawsuit brought against you in the case of any errors or omissions on your part. Real estate insurance coverage is a must for anyone working in the profession. If you do not have real estate liability insurance, all your legal costs in such an action, as well as any award made against you, would come out of your own pocket. To learn more about insurance for real estate agents, visit this website.
*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.