In 2004, the United States real estate market was booming. With the growth of technology that paved the way for do-it-yourselfers, it looked like real estate agents were doomed to the same fate as travel agents. Fueled by a hot market and a flood of real estate Web sites, buyers and sellers were going straight to the Internet to find homes, make offers and close deals. The idea of paying a real estate agent a 5 or 6 percent commission seemed ridiculous when it was so easy to find buyers.
But between April 2007 and April 2008, the housing bubble burst, and new home sales dropped 42 percent. Existing home sales sank 17.5 percent [source: Luhby]. Across the United States, homes sat on the market for months while their values slowly seeped away. Sellers offered creative incentives like free utilities for a year or flat-screen TVs to lure buyers who were waiting for the market to bottom out.
With such stiff competition, the for sale by owner (FSBO) option didn't look attractive anymore to some sellers. People turned to real estate professionals for help with effectively marketing their properties to the largest possible segment of buyers. Some sellers turned to a group of agents called Realtors.
There are more than 2 million licensed real estate agents in the United States, but only half of them are Realtors [source: National Association of Realtors]. The title "Realtor" stands for a member of the National Association of Realtors (NAR), a real estate trade organization that holds its members to high ethical standards and trains them in the most effective professional practices.
So what exactly is the difference between a Realtor and a real estate agent? Let's find out what Realtors can do for homebuyers and home sellers and how Realtors make money.