Some beginner investors may look at licensed real estate agent and feel—let’s face it!—a little bit jealous. Easy access to the MLS… not having to wait for someone else to tour properties… the benefits seem obvious. Yes, there are a number of downsides (like having to work under a broker), but the benefits of a real estate license are real.
While a real estate license isn’t a necessity for all investors, some find it an essential part of their investment strategy. But getting your license can be a long process, involving coursework, exams, and background checks—and, of course, you’ll need to find a broker. Learn more about what separates average agents from the great and get all the details on acquiring your license with our in-depth guide: How to Become a Real Estate Agent—An Investor’s Guide.
Our in-depth guide to the downsides of a real estate license walks you through the negatives. Now, we’re here to talk about the benefits of a license. Why should investors go through the coursework, the testing, and the expense of licensure? Here’s why.
1. MLS access
Having a real estate agent’s license allows you to legally and legitimately access the multiple listing service (MLS).
This has two major benefits for creative investors: First, you can closely watch a neighborhood and spot a new property the moment that it comes onto the market. You don’t have to wait for an agent to find the property for you, or for a public website like Zillow to pull the data.
Secondly, you can mine a treasure trove of historical data. The MLS provides detailed information about prices and comps. Yes, some of this is also available through websites such as Trulia, Redfin, Zillow, and LoopNet, but the MLS is—and always will be—the gold standard.
Here are some questions the MLS can answer for you:
- How many houses sold in the last year that meet my investing criteria? Don’t waste time searching for something that doesn’t exist.
- What was the asking vs. sales price for similar properties? This will help you save money when putting in an offer.
- What are the seasonal trends in prices for a particular area or type of property? Some cities have fluctuations of $30 to $50 per square foot from winter to summer in areas with good school districts. Parents don’t want to move their kids in the middle of the school year.
- How much do the owners owe? If you plan on putting in a low offer, you can pull records that will give you a good idea what they owe on the house—and if they can afford to take even less.
- How many days can you expect properties to be on the market? Do you need to put in an offer right away or do you have time?
- Who owns a specific property, and what is their address if they don’t currently live there? You can send them a letter and see if they want to sell.
Whether you’re buying or selling, a licensed investor has the power to make the other agent’s job as easy as possible. You can handle turning on the utilities for inspections, completing extra paperwork, coordinating with the closing attorney, and managing the title search—making the listing agent much, much happier.
Volunteer to go above-and-beyond the call of duty. Do everything in your power to make the other agent feel like you’re easy to work with.
Agents who go out of their way to make the other agent’s job as easy as possible get rewarded with close relationships. And those close relationships are essential for a strong real estate investment strategy—if you’re well-regarded within your community, people will forward you leads and tips.
We don’t want to overemphasize this point—the commission is one of the less-important licensure benefits. But that doesn’t mean it’s not nice.
As an agent, you’ll be able to collect a commission on the deal. If you buy a $100,000 house, for example, and each agent receives a three percent commission, you will collect $3,000. After paying broker fees, you may net $1,500 to $2,500. (There is a wide variation in broker fees depending on which brokerage you hang your license under.)
4. Real estate industry education
A real estate license helps you jumpstart your real estate learning experience. You’ll go through around 12 to 14 weeks of classes, and you will learn anything and everything associated with becoming a successful real estate agent.
You will also learn other things, like branding, marketing, lead generation, contracts, talking to buyers, talking to sellers, and compliance. Unfortunately, there are a lot of real estate investors out there who do not understand these basics.
This process will also help teach you how to do real estate the right way. There are a lot of cowboys out there who do not know what they are doing. They break the rules and regulations on a daily basis. It makes all of the other legitimate real estate investors look bad.
5. Risk minimization
When you do get your real estate license, you’re going to have to peg that license under a broker. Guess who will oversee your real estate transactions, make sure that you abide by all of the laws and regulations, and ensure you’re not doing anything shady?
Your real estate broker—who has a real estate broker’s license and insurance.
Licensed agent are at lower risk of legal issues and lawsuits—or simply losing money—because they have someone overseeing all of their work. Plus, you’ll meet multiple people throughout the licensing process. The more people you speak to on a consistent basis, the more your mind expands and the more educated your decisions become. Therefore, you will make fewer mistakes, thus lowering your risk.
6. Less start-up hassle
Once you have your real estate license, you know how to do things the right way. You’ve built your network, and you’ve met a lot of real estate agents. Now you have a bonafide real estate business.
Your broker should have a full-blown support staff at your disposal to assist you with anything and everything related to agenting. Compliance, transaction coordination, contract reviews, web design, marketing, lead generation, discussions with buyers and sellers, training and education—you will have all of these things at your fingertips.
Without this, real estate can seem like a jungle—especially for beginners. You don’t know where to start, who to talk to, or where to go. A real estate license puts you on the right track.
Another advantage of being a real estate agent—and especially a Realtor licensed by the National Association of Realtors—is that clients and other investors know you work by a code of ethics. Realtors even have a proscribed code of ethics, which is more strict than the actual law. Even if you aren’t acting as a Realtor, but just trying to purchase a property, you have to abide by this code.
If part of your investment strategy involves contacting off market sellers and convincing them you are trustworthy, it is much easier as a Realtor. Point them to your website and show them how long you’ve been in the business—screwing them over would hurt me a lot more than it would help me.
8. Early access
With a real estate license and a membership to the local MLS, you can get into any property you want. If properties are going quickly, you can go see it that day and beat the rush.
Plus, most listing agreements are signed two to four weeks before the property hits the market. It’s expensive and time consuming to market a property, so most agents tell their contacts first, so they can sell it before spending a lot of time and money marketing. You want to be in that group.
For successful real estate investors, the number-one job isn’t to make a little bit of cash on the side. Your job is to find and secure the best new deals. Direct access to the MLS can help you find the deal. And speaking directly with the other agent—and giving that agent every reason to like you—may help you secure the deal.
Any other reasons why folks should get their real estate license?
I want to hear from you below.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.