The Difference Between A Real Estate Agent And A REALTOR
There is a fairly large difference between a real estate agent and a REALTOR. To summarize real estate agents are not held to the high standards, ethics and additional training than that of a REALTOR.
One easy example would be a REALTOR who has an exclusive listing. If I go direct to that Seller and try to solicit for that listing, I would be in violation. Personally, I think that real estate agents in general should have this type of training and education. There is a moral compass that should be defined by our real estate governing entities and this should be part of it. At this time, however, there are no stipulations for ethical conduct unless you are a REALTOR.
What is a REALTOR?
A REALTOR is a licensed real estate agent who has signed up with a brokerage who are also affiliated with the National Association of REALTORS. They have the training and schooling within their local boards. They also have direct access to the MLS (Multiple Listing System) which is one of the most important tools needed to sell residential real estate.
There are other benefits REALTORS have including a legal center with a team of real estate attorneys available to answer general questions that REALTORS have. However, the REALTOR cannot convey that information as legal advice to their clients. REALTORS also pay into NAR which some monies are allocated to marketing the REALTOR brand.
Why and when was the REALTOR designation Started?
National Association Of Realtors was founded in 1908 in Chicago, IL. It consisted of 120 founding members and 19 boards. The first Board of Directors pictured here. The mission was “To Unite The Real Estate Men of America for the Purpose of Effectively Exerting a Combined Influence Upon Matters Affecting Real Estate Interests.”
In 1913 the Code of Ethics was adopted with the theme of “The Golden Rule.” In 1916, the term REALTOR was introduced naming those who are part of this organization. Today NAR has close to 1 Million members, 54 state associations and over 1400 local associations. In our two counties in Southwest Florida (Lee and Collier) we have 4 local associations.
What Does National Association of Realtors do for you?
NAR is THE nation’s largest professional association. So, we have some pull and a say in the highest levels of government. This is a good thing but maybe bad depending on your own judgement. For example, this is good for you as a REALTOR as it will increase the amount of sales due to loose lending requirements for borrowers which NAR lobbies for all the time.
The bad is these borrowers are more susceptible to foreclosures and short sales. Just take a look at the last real estate crash of 2008. Lenders were funding bartenders for 2 or 3 investment properties with stated income. Meaning on the loan application they “stated” or lied on how much they were really making. When the market crashed and they couldn’t flip these properties, they didn’t have the income to cover the mortgages (even if they were leased).
As of this article written in 2018, we are seeing these types of loans coming back to market like 3.5% down. Just remember, the real estate market is cyclical. It will go up and it will go down. I just wish our governmental agencies were to learn from history. I wouldn’t place money on it. You can also hedge your bet by reading How to Survive as a Real Estate Agent During a Recession.
I Got My Real Estate License. Am I Required to be a REALTOR?
Not necessarily. Two main reasons why you would not become a REALTOR. One is if you are acting just as a referral real estate agent. Meaning you are not actively selling. Rather you refer any leads to a trusted REALTOR to handle the sale and you are provided a referral fee. You can only do this if your Broker has a referral company.
We started a second real estate firm just for referral agents. This allows agents to remain in active status thus being able to collect a real estate referral commission. This also prevents our local real estate board from making it mandatory that they sign up, pay the fees and become a REALTOR.
If the referral agent was with our main firm, then they would be required to sign up with a Board that we are affiliated with. It is illegal for a licensed real estate agent who is in inactive status to collect a commission. Therefore finding a referral company to hunker under maybe a good option especially if you are not full time yet.
** This may vary in your state, so be sure to check with your state and local laws.
My real estate broker is a REALTOR. Do I have to be one as well?
As mentioned above, if the broker has another referral brokerage that isn’t affiliated with the board than no. However, if the entity is affiliated with a REALTOR association, then yes you will have to.
What Are The Costs To Be A REALTOR?
All things considered the costs are fairly minimal based on the kind of revenue you can make in this industry. Our local board charges around $900 annually which gives you MLS access as well as a Supra Key. The Supra Key is actually an app on our phone pictured here.
This allows you to gain access to other REALTORS listings (with permission). This also allows you to put your lock boxes on your listings and monitor who comes in and out of the property.
This prevents any unwanted guests getting a Push Button Code like the old lock boxes and entering into the property. In the past, thieves have acted like prospective buyers. They would watch over the real estate agent shoulder and notate the code. They would come back and steal. There is no way to track these individuals and that is why GE saw an opportunity and invented the SUPRA Lock Box.
Don’t get me wrong, the Push Code Boxes are still good for vacant homes with nothing in them including appliances or commercial real estate.
Many times, we will have the push button lock box hidden on the property so we do not spend the time going to the property to open up doors for appraisers and inspectors. We have to be in the field selling! Not waiting around for non-income producing activities.
What is a Real Estate Broker?
A real estate Broker is someone who took additional schooling and passed a state exam for the Broker designation. A REALTOR or Sales Association must be under a Broker. They cannot sell real estate without one.
A real estate agent can get their Broker’s license after certain time active in the industry. Once they get a Broker’s License they can set up their own real estate company or go under another Broker. If they go under another Broker, they are then designated as “Broker Associate.” This is how it is set up in Florida. This may vary state to state so check with your state laws.
In Florida you must have been active as a sales associate with a Florida Broker 2 out of the previous 5 years to become a Broker. I personally think that it should be mandatory for real estate agents to be required to get their Broker’s Licenses within 24-36 months.
The reason is getting a real estate license is a fairly simple process. There are a lot of bad agents and part time agents out there. This forced schooling and state exam should weed out a lot of people who have no business being in this industry.
REALTOR is Political
One thing to keep in mind, many of these local boards are essentially bureaucracies. They are a business and need real estate agents in order to survive. In my experience many times they can be very political and not the best in customer service.
I have had my run in with a certain local board regarding Board of Choice. She worked at the board and didn’t even know the rules associated with it. She was trying to get one of our agents from a neighboring county to sign with their board. Even though she was compliant and active with the board up there.
Some boards are better than others. You will just need to figure which one provides the MLS that you need and make a decision from there. Also ask around if you have multiple boards in your area.
Quick Story – Ethics Complaint
One of our REALTORS came to be about another REALTOR. This other agent essentially did everything you should not do to solicit another REALTORS client. We had plenty of proof and my agent decided to pursue an Ethics Complaint in which I agreed.
The process was long and drawn out. The Ethics committee which is made up of REALTORS in that board, do the review and make a determination. The report came back with absolutely no violation. I truly was shocked. We had screenshot texts from the client, emails and other evidence of wrongdoing.
I think there is a lot of good in our associations, but you will have to keep eyes wide open. You may even want to consider running for the board or sitting on a committee to make changes and hold people accountable.
Are Commercial Real Estate Agents REALTORS?
Some are and many are not. Commercial real estate is a different animal all together. Commercial real estate agents are not bound by the ethical code and standards of a REALTOR. I have sold some commercial real estate in my career and I can tell you it can be a dog eat dog world.
Quick Story
I sold one of my investors a mobile home park in St. Petersburg, Florida. It was a 60 unit compound with all park owned units. This transaction made me want to go after listing these types of properties in Florida.
We got on an aggressive mail and cold call campaign and grew our inventory to $20MM in about a year. It was great. However, I can tell you some (not all) of these commercial real estate agents were ruthless.
It was not uncommon for one of these agents to call my seller direct and say they have a buyer and to skip me out to save some commission dollars. Crazy huh? Talk about bad Karma. Fortunately most of my sellers were good moral people who told those agents to piss off.
If a REALTOR did this, they would be reported, face fines and potentially lose their REALTOR status which would revoke MLS access, etc. So in commercial real estate, we always got Non-Circumvention Agreements signed. FREE SAMPLE HERE.
This would somewhat protect you in ensuring you got a commission. Even with an exclusive right to sell, sellers can be ruthless as well. So we would provide this agreement to any prospective buyer and or their agent. They wouldn’t get the details of the property until we had this back in hand. Be sure to run this form past your broker to ensure it is ok to use. However, they likely have one on file already.
What are the types of Commercial Real Estate?
If you have interest in selling commercial real estate, it is best to really understand what you are selling. I loved selling the mobile home parks. The buyers and sellers were investors. So they were very limited with their emotions unlike selling a “home.” The investors looked at cash flow, ROI, Cap Rates, Value Add, etc. Not how the pink carpet didn’t go with the blue walls.
Commercial Real Estate can consist of but not limited to gas stations, strip centers, churches, flex space, warehouse, large land parcels, apartment complexes, hotels, marinas, mobile home parks, RV parks, banks, convenience stores, medical, office, industrial, retail, residential income, Healthcare and more.
If you are considering going after this venture in a full time manner, consider going for your CCIM designation.
What is CCIM?
It stands for Certified Commercial Investment Member. It consists of extensive courses in Financial, Market, Negotiation and Investment Analysis. Only around 30,000 agents have this superior designation. Getting this is no easy task and isn’t cheap. The designation could cost you anywhere from $10,000 – $15,000. However, this will set you apart from the others.
In Summary
I think you can see a clearly the differences between a real estate agent and a REALTOR. Take the time to figure out what your plan of action is. Why did you get your real estate license? What is your intention and what to do with it? If you are still lost consider reading 52 Niche markets for real estate agents to procure some ideas.
As always we appreciate you reading our content. If you feel these articles were helpful, please share with other fellow real estate agents who could use some guidance.
