Most people understand the visible parts of a real estate agent’s job. What’s less obvious is everything happening behind the scenes — including licensing distinctions, compensation structures, MLS information, business expenses, and the work involved in managing a transaction. Understanding those differences can help you evaluate an agent more effectively. Here are seven common myths worth examining more closely.
MYTH #1 – EVERY LICENSED REAL ESTATE AGENT IS A REALTOR®
The terms aren’t synonymous. A real estate agent has satisfied the applicable state’s licensing requirements. REALTOR® is a registered term identifying a real estate professional who is a member of the National Association of REALTORS® and subscribes to its Code of Ethics.
There can also be differences between information available through an MLS and what consumers see on public real estate websites. Subject to local MLS rules and participation, authorized MLS participants and subscribers may have access to listing fields and property information that aren’t included in public displays. Although substantial MLS data may be distributed through IDX and syndication, public websites don’t necessarily display every available field. In some markets, delayed-marketing listings may also be accessible within the MLS before public distribution through IDX and syndication begins.
- REALTORS® pledge to comply with the National Association of REALTORS® Code of Ethics in addition to applicable laws and licensing regulations.
- MLS participants and authorized subscribers may have access to information beyond the fields displayed on consumer-facing real estate websites, subject to local MLS rules.
MYTH #2 – AGENTS DON’T HAVE TO WORK VERY MUCH
A flexible schedule doesn’t necessarily mean a light workload. An active agent may spend time researching the market, prospecting for business, preparing analyses, coordinating showings, marketing listings, reviewing contracts, negotiating, tracking deadlines, attending inspections and appraisals, and communicating with lenders, attorneys, title professionals, inspectors, appraisers, and other parties. And because clients aren’t always available during traditional business hours, evenings and weekends are often part of the schedule.
MYTH #3 – REAL ESTATE AGENTS ARE NOT EDUCATED
Education requirements vary by state, but becoming licensed requires prescribed education and examination, and maintaining a license generally requires continuing education. Many agents go considerably further through certifications, designations, contract training, technology education, negotiation training, and ongoing market study. So when you’re evaluating an agent, the more useful question isn’t simply how much formal education that person has. It’s whether the agent has the knowledge and skills your particular transaction requires.
MYTH #4 – IT’S EASY TO BE A REAL ESTATE AGENT
Getting a license and building a successful real estate career are two different things. Licensing requirements may make entry into the profession relatively accessible, depending on the state. Building a productive business requires finding clients, managing expenses and irregular income, maintaining professional knowledge, adapting to regulatory and technological changes, and successfully guiding transactions from beginning to end. A license establishes that someone has met the legal requirements to practice. It doesn’t tell you how skilled, experienced, or successful that person will be.
MYTH #5 – REAL ESTATE AGENTS ARE PAID A SALARY FROM THEIR BROKER
Compensation models vary, but many agents operate as independent contractors and receive transaction-based compensation rather than a salary. That means an agent may perform substantial work before a transaction closes and compensation is earned. Agents may also be responsible for business expenses such as licensing, professional memberships, MLS fees, technology, insurance, transportation, marketing, and continuing education.
Important note about compensation: Broker compensation is not set by law and is fully negotiable. MLS participants working with buyers generally must enter into written buyer agreements before touring a property. Those agreements must specify the compensation the participant will receive or how it will be determined. Depending on the negotiated transaction structure, buyer-representative compensation may be paid by the buyer, may involve an agreed payment or concession from a seller or listing broker outside the MLS, or may involve another lawful arrangement. Compensation terms should be understood before services are provided.
It’s also important to distinguish a brokerage fee from an individual agent’s net income. Listing and buyer brokerages may receive compensation under separate negotiated agreements, and individual agents may then be compensated according to their respective brokerage agreements. Business expenses and applicable taxes further reduce the amount an agent ultimately keeps. Gross compensation and net income are not the same number.
The graphic below illustrates one hypothetical compensation structure. The percentages were selected for mathematical simplicity and aren’t intended to represent standard, customary, required, or recommended fees. Brokerage fees are negotiable, the source of payment may vary by transaction, and agent-broker compensation structures differ.
HOW MUCH DO REALTORS® MAKE?
(Illustration only: Assumptions are a $300,000 sale price, 3% listing brokerage fee, 3% buyer brokerage fee, and 75/25 agent-broker splits. The percentages are used solely to simplify the calculation. They do not represent standard or recommended fees. Brokerage compensation is fully negotiable and actual arrangements may differ materially.)
MYTH #6 – REAL ESTATE AGENTS GET KICKBACKS FROM OTHERS
RESPA Section 8 generally prohibits giving or accepting a fee, kickback, or other thing of value pursuant to an agreement or understanding to refer settlement-service business involving a federally related mortgage loan. It also prohibits splitting settlement-service charges when no actual services have been performed.
That doesn’t mean every payment or business relationship involving real estate professionals is prohibited. RESPA permits certain bona fide payments for services actually performed, qualifying affiliated-business arrangements, and certain cooperative brokerage and referral arrangements between real estate agents and brokers. Affiliated-business arrangements are subject to specified requirements, which can include written disclosure of the relationship and financial interest. The important distinction is whether compensation is legitimately earned or otherwise permitted rather than being provided in exchange for a prohibited settlement-service referral.
MYTH #7 – MOST AGENTS HAVE ABOUT THE SAME SKILL SETS
A license establishes a minimum legal qualification. It doesn’t mean every agent brings the same abilities to the transaction. Experience, market knowledge, negotiation skills, communication, responsiveness, organization, technology proficiency, and problem-solving ability can vary considerably from one agent to another.
Those differences become especially important when a transaction doesn’t follow the expected path. A low appraisal, significant inspection findings, financing problems, competing offers, contractual deadlines, title concerns, or a difficult negotiation can require experience and judgment that simply holding a license doesn’t measure.
When you’re choosing an agent, ask about relevant experience, services, communication practices, market knowledge, and how that person approaches common transaction problems. You can also verify licensing status and, where available, disciplinary information through the appropriate state real estate licensing authority.
The conclusion is simple: a license tells you that someone is legally qualified to practice real estate. It doesn’t tell you whether that person is the right agent for you. Experience, knowledge, communication, service, and judgment are what help you make that distinction.