Most people have a general idea of what real estate agents do, but the profession is also surrounded by plenty of assumptions. Some are partly true, some are outdated, and others simply miss what happens behind the scenes. Let’s take a closer look at seven common myths about real estate agents and separate perception from reality.
MYTH #1 – EVERY LICENSED REAL ESTATE AGENT IS A REALTOR®
Not true. A real estate agent is someone who has met the licensing requirements to practice real estate in a particular state. 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 an important difference when it comes to property information. Depending on local MLS rules and participation, real estate professionals with authorized MLS access may see detailed information that isn’t displayed on public real estate websites. Much MLS listing information is distributed to consumer-facing websites, but not necessarily every field or detail. In some markets, certain delayed-marketing listings may also be available to MLS participants and subscribers before they’re publicly distributed through IDX and syndication. That’s one reason working directly with a knowledgeable real estate professional can provide more than simply searching public websites on your own.
- REALTORS® pledge to follow the National Association of REALTORS® Code of Ethics in addition to the laws and regulations governing their real estate licenses.
- MLS participants and authorized subscribers may have access to property information and listing details that aren’t necessarily displayed on consumer-facing real estate websites.
MYTH #2 – AGENTS DON’T HAVE TO WORK VERY MUCH
Real estate can certainly offer scheduling flexibility, but flexibility shouldn’t be confused with having little to do. Active agents may spend their days prospecting, researching properties, preparing pricing analyses, marketing listings, coordinating showings, writing and reviewing contracts, negotiating, solving transaction problems, attending inspections and appraisals, and communicating with clients and other professionals. Much of that work happens outside traditional business hours because that’s when clients are available. The public may see the showing or the closing; what they don’t always see are the hours of work surrounding them.
MYTH #3 – REAL ESTATE AGENTS ARE NOT EDUCATED
A college degree isn’t generally required to become a real estate agent, but that doesn’t mean the profession requires no education. Agents must complete state-specific licensing requirements, pass an examination, and generally complete continuing education to maintain their licenses. Beyond those requirements, many pursue additional training, certifications, designations, technology education, contract knowledge, negotiation skills, and market expertise throughout their careers. In real estate, education doesn’t end when the license is issued.
MYTH #4 – IT’S EASY TO BE A REAL ESTATE AGENT
There is an important distinction between getting a real estate license and building a successful real estate career. Licensing requirements vary by state, and becoming licensed can be relatively accessible compared with entering some professions. Building a sustainable business is another matter. Agents compete for clients, generate much of their own business, manage unpredictable income, keep up with changing laws and technology, and must earn enough from successful transactions to cover their business expenses. Getting through the door may be achievable. Staying there and succeeding takes considerably more.
MYTH #5 – REAL ESTATE AGENTS ARE PAID A SALARY FROM THEIR BROKER
Many real estate agents are independent contractors rather than salaried employees. In a commission-based arrangement, an agent may spend weeks or months working with a client and generally earns compensation only when a transaction successfully closes. Agents may also be responsible for many of their own business expenses, which can include licensing, association and MLS fees, technology, insurance, transportation, marketing, continuing education, and other costs of operating their businesses.
Important note about compensation: Broker compensation is not set by law and is fully negotiable. Buyers working with an MLS participant generally enter into a written agreement before touring a property that explains the services being provided and the compensation the buyer’s representative will receive or how it will be determined. Depending on the transaction and negotiated agreements, that compensation may be paid by the buyer, may involve an agreed payment or concession from the seller or listing broker outside the MLS, or may involve another lawful arrangement. Your agent should explain the compensation agreement and any potential payment obligation before you begin working together.
When a transaction closes, the brokerage fees involved depend on the agreements negotiated by the parties. The listing brokerage and buyer brokerage may each receive compensation according to their respective agreements, and individual agents may then receive a portion based on the compensation arrangements they have with their brokerages. From an agent’s portion come the expenses and taxes associated with operating the agent’s business. So the commission figure someone sees associated with a transaction should not automatically be mistaken for the individual agent’s take-home income.
The graphic below provides one simple illustration of how brokerage compensation could be divided. The percentages were chosen to make the example easy to follow. They are not intended to represent standard, required, customary, or recommended fees. Brokerage fees are negotiable, who pays them may vary by transaction, and the compensation arrangement between an agent and brokerage can also differ substantially.
HOW MUCH DO REALTORS® MAKE?
(Illustration only: This example uses a $300,000 sale price, a 3% listing brokerage fee, a 3% buyer brokerage fee, and 75/25 agent-broker splits simply to demonstrate the math. These percentages are examples only. Brokerage fees are fully negotiable, who pays them can vary, and actual agent-broker compensation arrangements may be substantially different.)
MYTH #6 – REAL ESTATE AGENTS GET KICKBACKS FROM OTHERS
When an agent recommends a lender, title company, attorney, inspector, or another professional, some consumers understandably wonder whether money changes hands for the referral. Federal law places important restrictions on that practice. Section 8 of the Real Estate Settlement Procedures Act (RESPA) generally prohibits giving or accepting a fee, kickback, or other thing of value in exchange for the referral of settlement-service business involving a federally related mortgage loan. It also prohibits splitting settlement-service charges when no actual services are performed.
That doesn’t mean every payment between real estate-related businesses is prohibited. RESPA permits certain legitimate compensation for services actually performed, qualifying affiliated-business arrangements that meet applicable requirements, and certain cooperative brokerage and referral arrangements between real estate agents and brokers. When an affiliated business relationship exists, disclosure requirements may apply. The important distinction is between legitimate compensation for actual services or permitted arrangements and paying someone simply for steering settlement-service business their way.
MYTH #7 – MOST AGENTS HAVE ABOUT THE SAME SKILL SETS
A license establishes that an agent has met the state’s requirements to practice real estate. It doesn’t make every licensee equally experienced, responsive, knowledgeable, organized, resourceful, or skilled at negotiation. Agents can differ substantially in the number and types of transactions they’ve handled, the markets they know, their communication styles, their ability to use technology, and how they respond when a transaction becomes complicated.
Those differences matter. A strong agent isn’t valuable only when everything goes according to plan. Experience and judgment can become especially important when an appraisal comes in low, an inspection uncovers an issue, financing hits a snag, competing offers arrive, deadlines become tight, or negotiations get difficult.
When choosing an agent, ask questions. Learn about the agent’s experience, communication practices, knowledge of your market, services, and approach to situations that matter to you. You can also verify licensing information through the appropriate state real estate licensing authority and ask for references or information about past experience when appropriate.
The myths may be common, but the takeaway is simple: a real estate license tells you someone is legally qualified to practice. The person behind that license is what can make the real difference. Choose someone whose knowledge, service, communication, and integrity give you confidence that you’re in capable hands.