To License or Not to License?????????

Question

Hey all,

I'm a newbie Wholesaler and am really struggling with finding deals and more importantly when I do find what could be a deal finding reliable comp data for ARV. I'm not getting very much cooperation from realtors on helping me with comps.

I'm on a very limited budget to get started and am weighing the merits of becoming a licensed real estate agent.

Pros: Access to MLS, Access to seeing listed houses any time I want, if I work with an RE agency getting to sell properties, Making referral fees on those deals that the numbers don't work.

Cons: Taking a lot of time out of my days to get the license, costing valuable $$ that could be going into DM campaigns, and a little nervous it's distracting me from taking my eye off the prize - in other words is this just one more place I am choosing to get more educated rather than just diving in and making deals.

Any input???

Account Closed · Answer

License 3% on the front and back end. At the height of the foreclosure crisis I had my agent write 15-20 deals a week he was overwhelmed Disclosure is not a disadvantage it shows that you are serious about closing the deal ,plus all the comps and deals that come thru an office The cost is very little for a license compare to the benefits

Account Closed · Answer

@Kim Handelman I currently work with a realtor and he provides Comps, even CMAs although I don't like to ask him for CMAs because they are more time consuming. He provides this information because I give him leads that I don't want  (short sales or people who want to sell the property at market value). You need to provide a benefit/incentive for them and develop a good relationship with them. I'm not sure what are the costs of getting a license but it's something I'm considering as well. You'd save 3 % commission fee if you list your wholesale deals through the MLS and if you run mail campaigns, you will run into people who want to seller only for Market value. In which case, you would just offer them to list the property on the MLS, and get your commission once the property sells.

Che Chiu Wong · Answer

Hi Kim, I would have a comment on one of the "Pro" points which you have highlighted.  If the numbers don't work (for you), make sure the numbers work for the person who you refer to.  You want to make sure for EVERY deal that run through you, the end client thinks it is a good deal.  Reputation is much much more important than 1 single deal's earning.

In general, it is certainly easier to get comp data if you are a licensed realtor.  If you can afford it and if there is no way that you have cooperating realtors, you should strongly consider to get licensed just for this reason alone (I was, even though I have realtor friends, it's just easier!)

Brian Gibbons · Answer

I think it depends on what you are doing for deal flow, what you know now, where you are working, etc.

IMHO Transaction Engineers look at leads and say: how can I help the seller and make money too.  Wholesalers say: how can I get my All Cash Buyers to be interested in this lead.

What kind of deals you are doing:

Wholesaling only, I do not think you need a license, as long as you have a good realtor team and good all cash buyer list.  In wholesaling, it is all about you finding the kind of deals your all cash buyers want. Transaction engineer: If you are doing sub2, lease options, wraps, etc, I would recommend you get licensed.  You can get referrals from licensed agents, and have more respect from attorneys and the public.

What you know now:

If you have not studied basics of Principles, Legal, Financing, etc: I think you are not prepared to do real estate.  At least buy the books in your state.  Just having the books of being an agent and a broker are good references.

Where you are working:

If you are "wholesaling only" and All Cash Buyers are not buying where you are, you are not going to do well, no matter what you are doing marketing wise.  If you are a Transaction Engineer, and you are in a smaller market, you can do any kind of deal, and being licensed helps you to succeed, IMHO.

TINSTAAFL Theory

"There is no such thing as a free lunch."  TINSTAAFL is a golden rule.  Get licensed and be invaluable to the best training RE Broker like Keller Williams, that allows investor buying and selling.

Toyin Dawodu · Answer

@Kim Handelman There is no substitute for a one on one coach, especially in today's competitive real estate flipping market. I would not start in this business by getting e real estate license. The mentality of agents is different from an investor. Real estate is a business. Most people who succeed treat it as a business. 90% of people who take courses never do anything. The get overwhelmed with information and become disoriented from jumping form program to program, lead source to lead source and information overload. I am an agent, but I have never listed anyone's property, yet I have been paid commission on over 400 properties. In addition, I made another $20-40k profit on each property because I controlled each property. You can find out about me by googling my name, or check out my one on one coaching program by emailing me at toyin@capvestgroup.com

Karin Crompton · Answer

There are a bunch of threads on BP as well as discussions on some of the podcasts related to this very topic. I think it all boils down to your motivation for getting a license, and I'm not sure there's a right or wrong answer.

I got my license because I wanted to be able to get into a property quickly - not having to wait for my Realtor, who in this case is my business partner (and Mom!) and who lives an hour and a half away - and I wanted to be able to write up an offer asap. I also wanted my own access to the MLS and the ability to run comps myself (though we both usually run them and then compare notes). So speed and autonomy were my major motivators. I also enjoy the educational component and the continuing ed classes, which help my understanding of some of the technicalities involved.

To my mind, that's about where the benefits end. Sure, we save on commission - but so what? This is one of the current conversations in our personal business. It can be quite time-consuming to sell a property, and I wouldn't mind paying another Realtor - a GOOD one - to do the marketing, create the listing, do negotiations, attend inspections, etc etc etc. It's the old question about what your time is worth. If you know you're going to pay a commission on the resale, you factor the $$ into your initial purchase. Again, personal preference. Mom says she doesn't mind being the go-to person on our sales, so for now she handles that and we typically list our own properties. (As for the purchase, we could earn a commission there, and we sometimes have. But whenever possible, we offer up both sides to the listing agent to potentially sweeten the deal and make our offer stand out just a little bit more.)

On wholesaling, there's a quite a bit of debate on this topic as well. The concern, as I understand it, is in something called equity stripping. As a licensed professional, some folks feel that you could get yourself into trouble if you offer the seller one price to purchase, then turn around and wholesale it to an end buyer for something higher. The potential trouble? Your duty as an agent is to get a seller the highest price possible. The flip side of this argument: you're not acting as the seller's agent, you're acting as a wholesaler, and so long as you disclosed everything you need to disclose, all is good. That's an overly-simplified summation from someone who's not an attorney nor an expert on the topic - search around for a bit on BP and you'll find much more, and much better. And you of course can always check with an attorney.

Sorry for the long-winded reply, but I hope that helps!

John Santero · Answer

I am in the minority here but if you are going to wholesale - I think a license limits your earnings. You got to disclose as well as who do you represent ?  Unless I am wrong-You can make a few grand wholesaling but only 3% if an agent.

Find an agent that is investor friendly. Go to a local REIA club. Ask around. Get your feet wet first- than decide is a RE lic is right for you.

I make more  money hiring out than doing it myself.

Brian P. · Answer

Get the license, the average agent out their does a couple deals a year and you can do that and more as a investor agent. I keep hearing having a license restricts you but in general that is BS. First of all what it does in most states is require you to disclose your an agent but think about that for a minute, if your really an agent you know the paperwork, you have relationships with other people involved in the business, such as closing agents, title companies, and other professionals. The seller or buyer is normally glad you know what you are doing and they were not having the deal handled by some half knowledgeable idiot and I made a point of that in my disclosures. Now I became a California Agent/Broker in 1965 ten years after becoming an investor and if I could redo it I would have gotten my license as soon as possible.

As a side note California law doesn't require me to disclose my license status when acting as a principle, but I did it anyway and it didn't screw up my life, it actually gave me more side business.

Amine E. · Answer

From what I hear, being a licensed real estate agent will limit your ability to be a wholesaler due to Real estate laws. Can someone shed some light on the reasons why this mught be the case??