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REALTOR® designation vs. real estate agent license - what’s the difference? And which one do you need?
There are a lot of titles in the real estate industry, which can create confusion. One of the biggest misconceptions about real estate professionals is that Realtor and real estate agent mean the exact same thing. These terms are often used interchangeably and sound similar, but they actually mean different things.
So naturally, the terms Realtor and licensed real estate agent are often used incorrectly. Many people use Realtor as shorthand for all real estate agents not realizing there’s a distinct difference. But people in the industry certainly need to know the difference and why it’s important.
Let’s start with the real estate agent license because it’s the foundation of having a real estate career. This is where it all starts, and becoming a Realtor isn’t possible if you don’t take this initial step.
A real estate agent license is the state-issued license that allows the license holder to legally assist the general public in buying and selling real estate. You can’t call yourself a real estate agent without having an active state-issued license.
A real estate license is only applicable in the state where it’s issued. However, some states allow for portability. A state’s portability laws determine whether out-of-state licensed agents can take part in transactions locally. Some portability regulations allow out-of-state agents to carry out work while physically in the state whereas others only allow out-of-state agents to conduct business from their home state.
It’s also possible to hold real estate licenses in multiple states. In many cases, once you hold a real estate license in one state it’s easier to earn another license since you may be exempt from some licensure requirements.
The typical requirements for obtaining a state-issued real estate license include:
Every state makes its own requirements for obtaining a real estate license. For example, some states require that license applicants be at least 21 years old. One thing that’s fairly consistent from state to state is that real estate education must be provided by an accredited university, college, or state-approved real estate school.
Once a person has earned a real estate license it isn’t a completely done deal. Agents must complete continuing education and go through the renewal steps in order to maintain their active licensed status. State licensing boards decide how much continuing education is needed as well as how often an agent must renew their license. Typically, licenses have to be renewed every 2-4 years.
Real estate agents also have to continue to work under the supervision of a licensed broker. Although licensed real estate agents manage their own micro-businesses and handle all the day-to-day duties, they technically work for their broker.
Many real estate agents decide to take the next step in their career and become a licensed broker themselves. Again, each state creates their own broker licensing requirements. Most of the time, broker license applicants must be an agent for a specific period of time, take additional real estate courses, and pass the state broker exam.
Before we can properly explain the Realtor designation, we need to define what a Realtor is. The term Realtor is a federally registered trademark that applies specifically to real estate professionals who are active members of the National Association of Realtors® (NAR). Real estate agents who are not active NAR members cannot call themselves Realtors.
NAR was established in 1908 and is one of the largest professional organizations in the world today. Currently, there are 1.2 million members and 1,200 associations/boards. There are also 87 cooperating associations across 66 countries.
The association began using the Realtor designation for its members around 40 years ago. Since then, the term Realtor has become synonymous with real estate agent in the minds of many people, partly because NAR is so prominent.
Something worth noting is the NAR organization doesn’t actually grant any official “license” to its members. So, interestingly, the term “Realtor license” is a misnomer. But the industry needed a shorthand way of saying “a real estate agent license held by someone who’s also a member of the NAR”. So that’s what the Realtor designation has come to represent.
In addition to licensed real estate agents, licensed brokers, associate brokers, property managers, real estate counselors, and appraisers can also be Realtors. Therefore, all Realtors are licensed real estate professionals, but not all licensed agents are Realtors.
You might be wondering why NAR membership makes enough of a difference to affect an agent’s work title. The biggest reason is the NAR Code of Ethics that was adopted way back in 1913. The Code includes 17 ethics points and 71 supporting Standards of Practice. Every year the Code of Ethics is updated, although it primarily remains the same. You can find the updated Code in the January edition of Realtor Magazine.
Local associations work to ensure members follow the Code of Ethics, which is often more strict than the state ethical requirements. Above all else, honesty in all real estate dealings is paramount for Realtors.
For the most part, the NAR Code of Ethics is considered to be a very high standard for professionals and gives consumers peace of mind. This is one big reason why NAR has such a stellar reputation and many people prefer to work with a Realtor.
The typical requirements for obtaining membership in NAR include:
Another caveat is that the principal of a real estate firm must be a member of NAR before a non-principal can join. Many firms will have a designated Realtor in order to meet the qualification so their agents can join.
For many people, the Realtor designation represents a commitment to a career in the real estate industry and working with integrity. It’s not uncommon for buyers and sellers to choose one agent over another simply because they are a Realtor.
Another unique aspect of NAR membership is that it gives Realtors the opportunity to earn additional NAR certifications and designations.
The current selection of NAR designations include:
The current selection of NAR certifications include:
All of these additional certifications and designations are powerful marketing tools that help set an agent apart, especially if they want to make a name for themselves in a particular niche. There’s also a REALTOR University Graduate School and Green Resource Council that provide additional education.
Bottom line: being a Realtor gives an agent access to a lot more education that can significantly further their career.
The short answer: you only need a state license to legally work as a real estate agent. However, if you plan to build a career in real estate you should probably get both.
You must have your real estate agent license if you want to earn commissions helping clients buy and sell homes. The Realtor designation is a good idea because membership in NAR increases your credibility in the industry. It assures your prospective clients that you will be held to the highest ethical standard. This gives you an edge over non-Realtor real estate agents.
If you’re serious about your real estate career, you should start with a real estate agent license, then soon after, become a member of NAR to market yourself as a Realtor.