I would like to start off by congratulating the founders and members of BP. To think about building a community to connect people with interests Real Estate is a good idea on paper. To actually build such a community with active membership from RE gurus and volunteer moderators is super awesome.
I have been on the fringes of buy and hold investing for a few years and am thinking of getting into it more actively. I had a few questions about getting a RE license, as I like the flexibility of checking out properties without having to coordinate with a RE agent. I would appreciate if folks on the forum could answer the following questions.
1. RE Broker: I believe every agent needs to be affiliated with a broker, with whom the realtor splits the commision. I am not a 100% sure of the role of the broker in the transaction. Can someone explain that to me. Also, are there brokers that are more investor-friendly than others. Is the typical commission split different if I do all the legwork myself and use the broker only for paperwork.
2. Cost of RE License: I am not entirely sure of the total annual cost of being a realtor. I guess there is the cost of RE education (variable), exam and licensing (~300 dollars in California). I am not sure the cost of MLS membership. I am interested in MetrolistMLS (For San Joaquin and Stanislaus COunty) and NorcalMLS (for Santa Clara/Alameda County). I am interested in the ability to view MLS data and have access to the magical realtor electronic key. I am not interested in listing properties.
3. Bid on HUD/Homepath properties: Is there any special steps I need to do to be able to bid on HUD properties.
Looking forward to answers
Thanks for writing our post. This is an ongoing subject worthy of an answer.
First, your choice to get a license is a personal decision. It is true that every licensee with a Salesperson license must place their license under a broker in order to operate as an agent. The broker is charged with the responsibility to oversee the activities of salespersons (agents under the broker). State law requires brokers to supervise activities of salespersons primarily to ensure compliance with real estate license law. It is against the law for a salesperson licensee to represent a client in a real estate transaction without a broker. The salesperson can not receive a commission by law, without a broker.
Real estate investors can buy property without a license and also sell their properties without a license.
One of the advantages of a real estate license is the ability to collect available commission on the purchase of a property listed with a real estate broker. Another advantage is the ability to subscribe to a MLS system. Access to the MLS provides the investor agent with a powerful tool for listing and searching available properties. MLS access also makes the due diligence process easier.
Finding an investor friendly broker may be a challenge. Many brokers offer services and commission plans designed for a residential brokerage. The residential brokerage survives on listings and sales of property to buyers and sellers in need of representation on sales or purchase transactions. An investor is primarily interested in their own property transactions versus the general representation of buyers and sellers.
There are brokers that offer high commission split plans, even 100% commission plans. It is advisable to compare the plans, fees and services offered. Even 100% commission plan brokers are not necessarily "investor friendly". A real estate investor, in many cases, has no need to pay additional fees associated with a residential brokerage and may find working with a company that offers services for real estate investors more to their satisfaction.
The costs of being a "Realtor" is higher than being an "Agent". All "Realtors" are agents, but not all agents are "Realtors". A "Realtor" is a member of the National Association of Realtors, and annual dues are required to use the designation of "Realtor".
MLS membership costs vary among the service provider, but the dues typically run about $400 a year. Depending on the MLS service provider, the subscription may be paid on a quarterly, semi-annual or annual basis.
Finally, in answer to number 3, a broker must have a NAID number in order for the agent to bid on HUD properties.
Please feel free to contact me if you would like more information about investor friendly brokers.
Thanks for the awesome reply. A quick follow up question. What is the advantage of being a member of NAR, except the privilege of being called a Realtor. Also, if there is a brokerage with 100% commission split, then why is it not investor friendly. Also, why is the broker in the game if he does a 100% commission split.
The services of your group look very interesting. Can you confirm if you have an NAID number.
p.s. I am looking to invest in Modesto, Tracy. (Just to activate some keyword alerts).
You have to be a member of the Realtors association to have access to the MLS. Brokers with a 100% split charge a monthly office fee and usually a "per transaction" fee, as opposed to a 60/40 to 90/10 commission split.
There are benefits to membership in NAR. The "Realtor" designation is perhaps the one most talked about because of national advertising. I suggest visiting the NAR website to get a complete list of member benefits.
Brokerages offering 100% commission plans vary with the fees charged for broker services. For example, there is typically a transaction fee and in some cases monthly fees, etc. The value of 100% commission plans for agents depends on a number of factors and is not necessarily an appropriate choice for every agent. An investor friendly brokerage is a company that offers services especially for real estate investors. One distinct difference is the choice of services offered for both licensed and unlicensed investors.
In response to your last question, yes, I do have a NAID number.
@ANuraag M. Buying real estate doesn't cost the buyer anything. The seller pays the commission. I believe you are looking at holding more than buying. I think the best benefit of a license is the flexibility of looking at properties and drilling into sold and active properties for comps, which to me out weighs the cost associated of holding a license. The majority of agents don't even own properties or a personal residence. That is a fact and I will challenge it.
7 years ago there is no way I could show, sell or buy a property for someone else and with a straight face tell them I knew what I was doing. Once I started owning and controlling properties, rehabbing, renting, arguing with tenants, pay bills, worrying over cash flow, negotiating with banks to loan me money, selling myself to banks on my goals, building a internal system to manage lots of properties (which i'm still working on refining, nothing is perfect) and most importantly... explaining to my wife the train is still on the tracks. After all of that, that's when I felt ready to have a license. There is a lot of pressure of contacts and legal stuff that goes with an license which I don't care for but respect.
I believe a good investor agent is someone owns many properties, similar to a mother that has given birth.
First thing to know is the average agent, is not a true agent. Only a brokers license gives a person the right to list and sell with the public. Thus all business is in the name of the broker. The Non-brokers or regular salespeople work with the public by being an agent for the true agent, the broker, not the public. So if you can swing getting a brokers license you will have much more flexibility in how you can use your license.
You say your not interested in listing properties but having your license will allow you to refer people for a fee to another agent. As you become more active investing you will find deals that are not a deal for you as an investor, but are good leads for an active agent that does list and sell. And a few referral fees will cover you MLS costs.
Now there are brokers that belong to the MLS but not CAR or NAR which is a legal right earned by case law decades ago. and frankly the use of the word Realtor is almost a non-factor. The public thinks of every real estate agent as a Realtor whether they are or not.
NAR started as an association to represent real estate boards nationally, not individual members, but they found that by charging the individual members they flow of money to them would be massive. So boards were basically out and individuals were in. The only people that could use the term Realtor were broker members and the salespeople had to use the term associate Realtor. Then the masses wanted to use the term Realtor too and when that was allowed I threw my Realtor pins and tie tacks into the trash and replaced it with the broker ID.
As far as the NAR today they should be ashamed of themselves. Members and their output are just sources to be plundered.
Another thing that was said was the seller pays the commission the buyer gets a free ride, this is a quote often cited by the brainwashed. It is used when dealing with buyers by agents so often they begin to believe it. The buyer always pays the commission, he doesn't normally fund it but the money the seller uses to pay the commission is from money he received from the buyer. unless there is some commission fairy like the tooth fairy that leaves the money under the sellers pillow.
I have told the story before of a Japanese delegation stopped at my Cupertino office back in the day and asked why we handled commissions the way we do in the states. So I covered all the reasons and received a letter from them after they had returned to Japan and it said they had decided to have each side pay their own agent separate from the sales price based on what I said, and because their lenders were more astute, to them it was just like each having their own attorney. About 25 years ago a broker friend spent a month in Tokyo and said they were doing it that way.
Of course we could do it like New Zealand (if they still do) where everybody is required to list a home for sale with a broker, even brokers with another broker, using a national contract, and only the selling broker gets paid a commission.
As for the investor friendly broker, find one that invests, I was a investor for 10 years before I became a broker, so had no trouble in understanding investor agents.
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