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Obtaining a real estate license for the purpose of investing

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Chris D

SFR Investor from Springfield, Virginia

Jan 28 '12, 10:54 AM


I would like to obtain my real estate license in the state of Maryland for the purpose of investing. I do not want to be a Realtor as a career or participate in transactions in which I am not either the buyer of the seller.

My objectives for obtaining the real estate license are:
1) To get access to the MLS listings
2) To be able to view the inside of properties on my own without having to coordinate with a realtor.
3) To be able to take my time in traveling to and examining properties in search for the best deals without having to be concerned that my realtor will only make $8 an hour after we look at 75 properties and I buy only one 50k townhouse.
4) To save the 2.5% commission that I would normally pay to the realtor. (Instead I would pay this to myself)

From what I understand, the effort to study for and obtain the license seems nominal. (About 60 hours?). And I assume the fee for obtaining the license is also nominal (a few hundred dollars)

However, I have two concerns having to do with parts of the process that I do not understand:
* Do I need to pay a broker thousands of dollars a year just to have the right to look at properties and represent myself in transactions?
* Are there any other *gotchas* such as other expenses or hoops to jump through that I am not aware of?

Thanks so much!



Steve L.

SFR Investor from Rancho Cucamonga, California

Jan 28 '12, 10:59 AM
2 votes


To get MLS access and register with NAR and your respective board it probably will cost you $500-$700/year. You can probably join a brokerage that will hang your license for no upfront costs and will take 10% or 500 to 1000 whichever is more of any commission you earn.

No gotchas. It is a great idea to get your license. I represented myself on 18 of my 42 purchases last year and was the Listing Agent on all of my resales.

You do have to disclose that you are a licensed agent in my state.



Will Barnard Moderator Donor

Real Estate Investor from Santa Clarita, California

Jan 28 '12, 11:09 AM
2 votes


Chris,
If you are buying foreclosures and not marketing to desperate homeowners, there is little downside to going this route. As you mentioned, MLS access (you can get this other ways besides becoming an agent) and more importantly, the abiluty to view homes on your own, plus represent yourself is a large benefit. You will likely have to disclose to buyers/sellers that you are a licensed agent (once you become one). Such disclosure is mandated in most states.

As far as your broker, shop around, every area and state is different as are the fees a broker will charge you. SOme have monthly fees along with a percentage of each sale, while others have only per sale fees. You will have to carry EOM insurance (errors and ommissions)which is an added cost as well.

The best of both worlds - If you are married, have your wife get the license. This way, you have the agent advantages along with the non agent investor advantages such as not having to disclose some things.



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Jan 28 '12, 04:27 PM
1 vote


Agreed with Steve and Will...my wife and I both have our licenses (for the very reasons you mentioned) and it's been a large contributor to the success of the deals we've done so far. In fact, last year alone, we earned/saved over $51K in commissions by having our licenses and representing ourselves...



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Rich Weese Donor

Real Estate Investor from sioux falls, South Dakota

Jan 28 '12, 04:51 PM
3 votes


Remember that if you hold a license, carry HUGE errors and omissions insurance. You must tell every FSBO that you are stealing their property, going to re-sell it foe a HUGE profit or you are open to be sued for non-disclosure. Disclose everything and more-then no worry about having a license, imo. Rich



Will Barnard Moderator Donor

Real Estate Investor from Santa Clarita, California

Jan 28 '12, 05:05 PM
1 vote


Originally posted by Rich Weese:
Remember that if you hold a license, carry HUGE errors and omissions insurance. You must tell every FSBO that you are stealing their property, going to re-sell it foe a HUGE profit or you are open to be sued for non-disclosure. Disclose everything and more-then no worry about having a license, imo. Rich
What Rich mentions here is exactly what I was referring to regarding the negative side of having a license. If you deal with FSBO/distressed/motivated home sellers that are not banks, you MUST disclose you are an agent along with many other things. When doing so, it is common that you would scare away your deal as the seller may not want to sign the disclosures you are providing.



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


David C.

Real Estate Investor from Los Angeles

Jan 29 '12, 10:14 AM
2 votes


This is always a fun topic :-)

I challenge anybody to show me the law in CA that requires a real estate licensee to disclose their license status when acting strictly for their own account. I'm talking about a law, or Department of Real Estate (DRE) regulation. The National Association of Realtors (NAR) may have some rule along these lines but they are not law, they are a private organization that a licensee may or may not join, as they choose.

When you are acting in the capacity of the license, ie, as an agent for another, it's a totally different story. But, when acting solely as a buyer or seller, distressed property or not, there is no law that requires any disclosure that I have ever seen. Actually, I believe that if you do disclose and don't do it properly you could lead a buyer or seller to think you are their agent, thereby creating a fiduciary relationship, then you do have some serious obligations.



David Beard

Real Estate Investor from Cincinnati, Ohio

Jan 29 '12, 10:40 AM


An aside, but are there generally any restrictions on agents buying REOs when the listing agent is in the same office.



E-Mail: [email protected]
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Keith Schulz

Residential Real Estate Agent from Verona, Wisconsin

Jan 29 '12, 11:48 AM
1 vote


I started out as an investor and I became a licensed agent (in Wisconsin) partially for the investor advantage you mentioned, and partially to earn a little extra income to help me get out of my day job.

Being an agent definitely makes it easier and more convenient to look at properties. Also the access to more detailed MLS info is great. However, there are a lot of fees associated with being a licensed agent. There's supra key fees, MLS dues, NAR dues, E&O insurance, and broker fees. I would say at a minimum your looking at $2200/yr just to maintain a license.

My broker allows my to buy or sell my own properties without any additional fees to them. In fact, I just closed on the sale of one of my properties last week, and saved $5,000 in commission, because I only had to pay a buyers agent.

In Wisconsin, I do have to disclose that I am a licensed agent with any personal transaction or I could lose my license. It hasn't been a big issue though (never scared off a seller or buyer).

There's pros and cons just like anything else. If your doing more than one purchase or sale a year it's probably worth getting your license. If not, just make friends with a good agent.



Ed O.

Real Estate Investor from

Jan 29 '12, 11:54 AM


I'm with Will and JScott.
I see some disadvantages that vary from state to state.

In Missouri, it's illegal for a licensed realtor to give an inducement to get someone to rent. So, it's illegal to give a tv or free rent to get someone to sign a lease. After reading this line, I stopped working towards getting a license for myself. Also, let's say you find some info about a property that will make it's value double or triple. Guess what - you have to disclose it to the seller before you buy it from them.
There's pros and cons, it just depends on what your focus is.




James Vermillion Donor

Real Estate Investor from Lexington, Kentucky

Jan 29 '12, 11:57 AM
1 vote


My business partner and I both have our agents licence and it has saved us a ton of money in the last year and half on commission. On top of that, we have been approached by family and friends and made some additional money by acting as agents for them.

As for the broker, we found a broker and made an agreement that works well for us. Like Will said, shop around and I am sure you can find a broker who you will be able to work with and both benefit.

My business partner is working on his broker license, which he will finish in the next 6 months. I would recommend getting your licence, as it generally does not cost too much and you can make it back on just one real estate transaction. Additionally, it provide you another way to get your name out and make contacts with other agents, which has worked to our advantage.



Medium_kvJames Vermillion, K&V Investing
E-Mail: [email protected]
Website: http://www.kandvinvesting.com
Invested in the Bluegrass!


Sandy S Harris

Real Estate Investor from Los Angeles/Santa Barbara, California

Jan 29 '12, 01:16 PM
1 vote


Good discussion. I am a licensed agent-although it's inactive while I study for the broker's exam. And while I haven't done an investment deal yet, I've had several investor clients. I can definitely see the value in being licensed for your personal investing, for all of the reasons already mentioned. Additionally, I think it can help to keep your finger on the pulse of what's going on in your area, along with using those commissions for your purposes.

E&O insurance is a big expense, but undeniably necessary. I had a client who purchased commercial property, ran the business in the ground, and then sued everyone involved-including me. Having E&O insurance assured a great outcome for both my broker and myself. The other agent let his insurance lapse, and consequently didn't have as good an outcome as we did.

David Cholvin: that's an interesting argument you make regarding disclosure. I've always heard that you must disclose your status when conducting business when acting in your own interest. Even surfing the MLS, you come across many listings where it's stated that the owner is a licensed agent. I will most definitely have to dig further on this.

@JScott and @Steve L., do you hold agent or broker licenses? If not the broker's, do you think it's more work than necessary? Just curious.



Joel Owens Moderator

Commercial Real Estate Broker from Canton, Georgia

Jan 29 '12, 02:00 PM
1 vote


I hold a brokers license in the state of Georgia. I own my own company.

Having agents in your brokerage can be areal thorn in your side.Many never do any kind of volume or if they are in investor getting licensed aren't worried about breaking the rules if it gives them monetary gain.

Example they get licensed and make a ton of money.Break some rules and get slapped on the wrist and lose their license and go back to doing deals as usual as an investor.

The broker however suffers massive repurcussions from the fall out.
Usually in my state if you are a new agent then you do not qualify for the cheap per transaction closing with a broker.Most brokers want you the agent to have experience before giving you a deal.If an agent does 40 deals a year at 300 a transaction that is 12,000 gross to the brokerage before expenses but a huge liability.I would rather mentor an agent on a commercial deal with a split and make much more and know the transaction was performed correctly. With J and them they have their stuff together but with many agents they might buy only 1 to 2 properties and make all kinds of mistakes.

In GA you do have to disclose to the public when purchasing or selling per the GREC state laws.The premise is you have an unfair advantage over a seller being trained in contract law and negotiation techniques.



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Jan 29 '12, 02:55 PM
1 vote


Originally posted by Sandy S Harris:
@JScott and Steve L., do you hold agent or broker licenses? If not the broker's, do you think it's more work than necessary? Just curious.

My wife and I both have agent licenses. In GA you need to be an agent for 3 years in order to test and qualify as a broker -- my wife has been an agent for more than 3 years but I haven't been.

Personally, I don't want to deal with all the paperwork and hassles of being a broker (though admittedly I don't know exactly what's involved). The cost of working with our current broker is about $5000 per year for the two of us combined, plus $40 per transaction (we could also opt for about $2000 per year, plus $300 per transaction, but it's cheaper this way). Given the number of transactions we do, the total cost is probably about $6500/year for the two of us.

My wife getting her broker's license would probably save us a couple/few thousand dollars, but the overhead and liability associated with it just doesn't seem worth it to me.

If we decide to expand and hire other agents to work with us, we might do it, but not until then...



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Richard Martin

Real Estate Broker from Gilbert, Arizona

Jan 29 '12, 03:19 PM
3 votes


@J.Scott- I have a brokers license in both AZ and CA. My extra costs are minimal. I don't have any paperwork issues. But I am a one man shop. If you hang your license with your wife's brokerage that may change. I saw the brokers license as just some more classes and a more difficult test so why not. I have no split or extra transaction costs.

btw- I appreciate all your wise and reasoned advise. When I see your name I look to see what you have written. Thanks.



Steve L.

SFR Investor from Rancho Cucamonga, California

Jan 29 '12, 05:38 PM


@Sandy S Harris: my partner has his brokers license and my license is hung with him. We do have three or four other investors that we hang a license for, they pay us a small fee per transaction they do.

Our costs don't go up that much from agent to broker. Combined we aren't big, maybe 50-60 transactions a year.



Joel Owens Moderator

Commercial Real Estate Broker from Canton, Georgia

Jan 29 '12, 05:53 PM
1 vote


"In GA you need to be an agent for 3 years in order to test and qualify as a broker"

You can test for the brokers license earlier than that (year 2 I believe if they haven't changed it) but cannot get the actual license before year 3.

Also you have to have 3 years of ACTIVE LICENSE status and in good standing to qualify.So someone couldn't have 2 years active and 1 year inactive and qualify.

J - I know you know this already just putting it out there for people who do not looking at a GA license.

Having a bunch of agents is not what it is cracked up to be.I have tried it and didn't like it. I don't want all the drama. Many agents barely get by and then make their life problems your problems as a broker.

If you have a certain personality then running a brokerage with a bunch of agents might work for you.



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Chris D

SFR Investor from Springfield, Virginia

Jan 31 '12, 09:10 PM
1 vote


Thanks everyone for replying to this post!

I decided to go for it and am already enrolled in an online course.



James Park

Real Estate Broker from Johns Creek, Georgia

Jan 31 '12, 09:34 PM


Hey J Scott,

I think this may be an interest for you. I currently hang my license with Park Mason Brokers and their fees are just $195 for the whole year and $195 per transaction. There is no monthly dues like $68/month for Gold and $325/month for Platinum plan with Solid Source. With this much commission split for the agent, there seems to be very little incentive to get a broker's license, unless you want to start your own brokerage.

http://www.parkmasonbrokers.com/

Just curious.. do you and your wife also make transactions as real estate agents on the side, or do you soley use your RE license to save on your flipping business?

Originally posted by J Scott:
Originally posted by Sandy S Harris:
@JScott and Steve L., do you hold agent or broker licenses? If not the broker's, do you think it's more work than necessary? Just curious.

My wife and I both have agent licenses. In GA you need to be an agent for 3 years in order to test and qualify as a broker -- my wife has been an agent for more than 3 years but I haven't been.

Personally, I don't want to deal with all the paperwork and hassles of being a broker (though admittedly I don't know exactly what's involved). The cost of working with our current broker is about $5000 per year for the two of us combined, plus $40 per transaction (we could also opt for about $2000 per year, plus $300 per transaction, but it's cheaper this way). Given the number of transactions we do, the total cost is probably about $6500/year for the two of us.

My wife getting her broker's license would probably save us a couple/few thousand dollars, but the overhead and liability associated with it just doesn't seem worth it to me.

If we decide to expand and hire other agents to work with us, we might do it, but not until then...


Edited Jan 31 2012, 21:41 by James Park


J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Feb 01 '12, 07:20 AM


Originally posted by James Park:

I think this may be an interest for you. I currently hang my license with Park Mason Brokers and their fees are just $195 for the whole year and $195 per transaction.

Hey James,

Thanks for the tip! We've definitely been considering switching brokers in the near future, though our biggest disincentive to switching at this point is just that we've co-branded all of our marketing materials (signage, business cards, etc) with solid source and the time/effort of switching would be annoying. Though again, it's likely going to happen in the next year or so.


Just curious.. do you and your wife also make transactions as real estate agents on the side, or do you soley use your RE license to save on your flipping business?

We do a decent amount of listing for other investors -- generally when my wife also stages their properties -- and for one investor who does a decent amount of volume, we also act as buyer's agent. In a given year, we probably do 15-20 transactions that are not our own.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


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