Should I get my real estate license or not?

[mistyaustin]

I am trying to decide if it makes sense for me to get my real estate license or not.  I do not want to make a career out of real estate, but my husband and I have one rental property and plan to invest in one or two more this year, as well as more in the future.  The idea would be to save some money on comissions in the transactions by me representing our side.  Pros?  Cons?  Is it worth it?  Any opinions are very much appreciated!

[JaredfromIndiana]

This is one of the most popular questions out there.  My wife got her license this year and it has been nothing but beneficial.  My PROS:

1.  MLS access, run your own comps!
2.  When we want to look at 6 houses, my wife calls and lines them all up when WE want, not waiting on when an agent has time.
3.  When we buy a flip, my wife gets paid a commission.
4.  MLS access!  Oh, I already said that.
5.  You do get a little education when you take the course on getting your license.  Not an education in investing, but it does get you familiar with terms and laws and whatnot.

That's all I can think of right now. 

[Roger J]

Since Jared is running the pros, look at the cons.

First and foremost, what is the cost of being a licensed agent in your state, and for MLS access a REALTOR?  I'll go ahead and tell you, it ain't cheap!!  If you're only planning on representing yourself in transactions, and you're only going to be buying 1-2 properties a year, then IMO, the cost of being isn't worth it, especially when you add in annual costs of continuing education just to maintain the license.

Two, again, your state laws will determine, but chances are that you'll have to work for another broker in order to do business.  Can you find a place that wants an agent that is only going to be producing 1-2 properties a year?  If so, what is it going to cost?  What is the company split?  High, I'd imagine.

Three, commission is NOT a plus!  First, a top agent usually grosses only 1.8% in commissions per $100K.  A new agent is lucky to gross 1%.  If one percent makes or breaks the deal, it's not a deal.  Add to that that more and more REO properties are adding in the "agent acting on his/her behalf shall not be paid a commission" makes it hardly worth the effort to have your license.

Fourth, and VERY important.  Having a license in RE makes you a PROFESSIONAL in the eyes of the courts.  You, as an agent, have alot more responsibility to your clients (tenants) than the "average" landlord.  If you go to court, you, as an agent, have a higher chance of being ruled AGAINST simply because you hold a license.  If you are ever sued in court and lose, you, as an agent, may also have fines/penalties from your state's RE commission OR may have your license revoked.

There are plenty more, but you get the picture.

Raj

[Hoosier4life2005]

Im in the same place as you mistyaustin.   I can't decide if I should get mine or not.  I have a year before its even possible to get mine, because thats when I graduate highschool.

I want to buy and sell and buy and rent houses, I want to do both.

Decisions Decisons Decisions!!!!!!        

[aznorthstar]

I too have struggled with this question.  I have ultimately decided not to get my RE license.  I think it is much easier to do deals without having to overcome the impression that I am a professional.  It is easier for them to think that I "tinker" with RE instead of make a living at it.

As far as comps go, everyone has a friend in RE.  Comps are free, and you leverage their time.

[yrush2000]

Some great Con points and also an important one is seller/buyer disclosure that you are a RE Agent.
I still feel it is better to have a license.

As for cost and commissions, it really varies based on the state you live in and area for commissions..

In Fl you can take the course in 7 straight days and then go for your license. Total cost is under $600 last I checked. 2 yrs after getting your sales license you can go for your broker license and work independitly.  In SoFl many brokers will let you keep 100% commission and just pay a desk fee in the $250 a month range but do not ask them for help, you get the desk, MLS access thru the brokers license and a computer to print your paperwork up on.. 
License renewal is rather cheap every 2 yrs...

[Bluemoon06]

The only down side to having a license is the disclosure issues.  If you are planning to be above board with all parties then get the license and save on agent fees and better access to MLS data.

I deal with agents all the time.  Other than their disclosure it looks just like dealing with any other investor.  Depending on the size of the deal, you can save $2k to $4k on each deal in commissions.  If you start making agent money you may loose sight of the goal.  Assuming your goal is to own lots of property.  You could just start selling houses.

It is difficult to find an agent that has any idea how real estate makes money.  If you as an investor can bring that skill to the table y can make a lot of money.  But remember, what gets in the way of a great life is a good life. 

[Tmnoonan]

It cost me $99 for the 3 classes necessary here in California.  The test will be another 125.  Its really good to know the basics of real estate - laws, transactions, disclosures, terms, language, etc.

My 3 classes were all simply a bunch of reading material and then an online multiple choice test (open book).  It isn't that hard to get one and can't hurt you unless you can't afford the time or ~$250.

The broker's license will only be an additional 2 courses for me since I have a 4-year degree.  I am planning to do that asap.

[JaredfromIndiana]

I think a con also is that it costs us about $1,000 year in fees for the MLS.  If your doing 1-2 houses a year that is a lot, if you do more, no big deal and worth it. 

[RErookie]

I heard this being discussed on a Real Estate radio show last week.  It's basically as Roger J explained it.  A real estate attorney on the show said that if you have a RE license and you buy a "for sale by owner" type property the owner can come back and sue you if

-you fail to disclose that you have a RE license/are an agent, and the seller later finds out.

-you disclose that you have a RE license/are an agent before the transaction, and then he feels he was cheated after the transaction occurred.

The court will find you guilty because you are a licensed PROFESSIONAL.  Also if you bought the property at a discount, (something like more that 10% off list) the court will see this as the seller being cheated. 

Hope it is somewhat clear, I can't remember the complete details as I heard this last week.

[REIforNewbies]

MLS access is one of, if not, the biggest benefit.  The investors that I know who are not licensed have very close friends who are so these investors "have" MLS access w/out being licensed.

(Yes, I know it is not legal for realtors to share their login information and I am not suggesting this is what anyone should do...I am not judging anyone, just pointing out a "work-around" and that I know many who do this.)

Chris

[Tien]

MLS is definately a benefit.


If I was an agent, I'd get 3-4x more listings than I would get deals.... Sometimes I wish I was.....


But deep down I knew I have no ambition showing houses / listing houses / doing open houses or whatever.


As well as the disclosure aspect of it. I wouldn't be able to do options if I was an agent.... It would be "illegal" in my province to option a property and sell it for profit if I was an agent.

[Roger J]

MLS access is NOT a benefit of being a licensed agent.  It is a benefit of being a REALTOR.  Besides the (greatly) added expense, you also have added another "code of ethics" to your dealings.  And to be frank, it doesn't matter if you ARE already above board on your dealings or not, these codes, laws and guidelines for agents/realtors WILL severely limit your ability to effectively buy/sell your own properties UNLESS you are already buying and selling primarily through an agent.

When I talk about costs of being an agent, I'm not talking just about the cost of getting a license.  State laws vary, but generally, you have to maintain that license by continuing ed, costs/fees of a company, insurance, advertising, etc.  Add in getting your Realtor logo and double or triple those costs.  Simply on a cost basis, doing 1-2 deals a year is a big negative.

If you primarily deal with FSBOs in their various forms, you need to SERIOUSLY review your state's laws/guidelines for agents before getting licensed.  In many states, if you are the only agent involved in a transaction, you may HAVE to represent the seller by default.  Very difficult to represent both you, as the buyer, and the seller.  In almost ALL states, regardless of your representation status, you have to disclose your "professional" opinion of the value of their property.  Again, makes it much harder to buy if you have to say, "Mr. Seller, I think your house is worth $100K as it sits, but I'm only willing to give you $50K."

And finally, getting your license so you can learn the "basics" of RE investing is like becoming a mechanic so that you can learn to race cars.  The only thing in common is the car (or the house).  The careers are completely different.

Raj

[Bluemoon06]

I agree that most investors don't have a license.  A license is a tool to do a job and there are a lot of distractions from your primiary focus being an agent of Realtor as I said in my first post.

"Mr. Seller, I think your house is worth $100K as it sits, but I'm only willing to give you $50K."

But the disclosures are not a problem because instead of the phrase above what you say is Mr. Seller, your house is worth $50k and I will give you $50k.  You don’t have to tell him that it will be worth $100k after I buy it.  You have not violated your honor code you just did a business deal.

[Roger J]

As I said, Blue, "as it sits," which means it's current "as, is" value.

I doubt that if it's worth $50K in it's current condition, that you, as an investor would pay $50K for it.  And yes, in fact, you do have to tell him what you think it will be worth after repairs IF, by your state laws, you have to represent the seller.  That is a material fact.  "Mr. Seller, as your agent, I believe that you could probably sell your house "as is" for $50K.  If you are willing and able to invest the money to fix this and this and this, in a professional manner, I believe that you could sell for $100K."

Again, state laws may vary, but I'm dealing with this exact situation right now.

Raj