Real Estate License or Not?

23 Replies

I know this topic has been discussed quite a bit but I think my angle is a little different.  I haven't read all the previous posts so maybe not.

I have already purchased and have been studying my Kaplan home study materials to take the exam but, in talking to a contact/friend today who is both a Realtor and an attorney, he said I'd be better off NOT getting the license.  Sure, learn as much as I can but don't get the license unless I plan to actually become an agent.  I don't/never planned to become an agent, I want to become a better investor... not sell real estate.  He says the standards are much higher for licensed realtors so it becomes a liability issue.

Should I just study the material and not take the exam???

It depends on what you are wanting to do with your investing. If your plan is to approach sellers directly with the intent of getting great deals and flipping them, then your buddy is probably correct. As a licensed professional you'd have a fiduciary responsibility to the seller and at that point you'd run the risk of getting into some trouble by equity stripping properties. 

If you do study for the exam, but neglect to take it, you'll be in good company. @Brandon Turner has been planning to get his license for a long time now, but he never gets around to taking the test. Ask him about it. It hasn't held him back at all as far as I know.

That said, there are plenty of other investors who say that the required disclosures are no big deal. They claim being licensed is the only way to go because, if for no other reason, they feel it makes them seem more credible. Others say that it gives them access to the MLS and this gives them an edge.

I guess it depends a great deal on how you intend to invest. Are you likely to want direct access to the MLS? Do you know a broker that would let you hang your license with him just so you could gain MLS access? Do you really want to shop in the MLS?

And then there are fees and requirements you'll be saddled with, like continuing education and license renewal. Not a big deal, unless you're not getting any deals done.

Every investor is different. What I would do is no indication of what you should do. Disclaimer stated, however, I have elected to do the studying, skip the test and when I need a realtor I call one of my many friends with a license. If you do nothing else, study the materials. Most of it has nothing at all to do with investing, but it will give a good grounding in real estate fundamentals, contract law and government regulations.

Happy holidays!

Originally posted by @Brad Smith
an attorney, he said I'd be better off NOT getting the license.  Sure, learn as much as I can but don't get the license unless I plan to actually become an agent.  I don't/never planned to become an agent, I want to become a better investor... not sell real estate.  He says the standards are much higher for licensed realtors so it becomes a liability issue.

Should I just study the material and not take the exam???

You have a qualified opinion, the issues clearly in front of you, and you know your goals - - you have "a self-evident truth" right in front of you :smile: and best wishes.

Yes, the MLS was one of the things that I thought might be an advantage but I really don't think I/we'll be spending our time waiting to jump at the next property that comes along. We're not relying on this to make a living, more like a retirement past time with some income to go along with it.

I think I'll continue to try to learn all I can but not plan on taking the exam.  

Thanks!

As an agent/investor in Texas, we are held to higher standards for disclosure.  Additionally, we have standing requirements for ethical conduct and satisfying fiduciary responsibility.  It hasn't been an issue for me but the first thing I always disclose is that I am a licensed agent.  Honestly, if you aren't looking to sell real estate, use the materials as a learning resource and work on finding an experienced investor friendly agent that you can develop a long term working relationship with.  Best of luck in whatever avenue you choose to pursue @Brad Smith .

@Brad Smith

Great post.  I'm sure most people only ask this question in their head.

Take the course to learn about real estate.

Take the classes as if you are on the path to getting licensed.  The education you will get grossly exceeds its cost, in my opinion (it's usually about $500).  Pay close attention to the state specific laws and rules about owning property.

If you are going to buy and sell property then do not take the exam.  In most states it puts you in a very different liability situation.

If you want to represent other people in their real estate transactions, being an agent may be for you.

Don't let anyone tell you to get licensed just so you can have access to the MLS.

Either way, at the end of the program you will be much more educated in the area of buying and selling property in your state.

Always makes me laugh when people are wary of higher standards and liability. How exactly are you planning to operate your investing that those should ever be a concern?

Hi @Brad Smith . This question just came up in the forums this week. A member was going to study the coursework and then not take the test.

Many people jumped in and said the coursework is a waste of time if you aren't going to take the test. I agree with them.

I took the courses, and the test. I am licensed. The coursework taught me obscure laws and weird measuring techniques that will almost never come up in real life. In fact, most of what you learn in the coursework doesn't actually come up in your day to day real estate agent life, nor in your day to day investing life. 

I can't remember who said it, but someone replied, the coursework is only designed to help you pass the test. Totally true. 

The standards you are held to as a licensed agent are decent moral standards. "Don't take advantage of people" pretty much covers that. If your plan isn't to rip people off, then you won't have anything to worry about. 

If you aren't going to take the test, I wouldn't bother with the coursework.

I think the only potential problem has to do with disclosures for selling and, since I'm not planning to sell anything at this juncture Rusty, I don't think it's a real issue.  As a buyer, I can't imagine anything that I could do wrong...?  I was simply paraphrasing what the lawyer/realtor told me to see what others' opinions were on the matter.  As I said, my decision is made but I can't close this discussion so others will continue to comment.  :-)

Originally posted by @Brad Smith :

I think the only potential problem has to do with disclosures for selling and, since I'm not planning to sell anything at this juncture Rusty, I don't think it's a real issue.  As a buyer, I can't imagine anything that I could do wrong...?  I was simply paraphrasing what the lawyer/realtor told me to see what others' opinions were on the matter.  As I said, my decision is made but I can't close this discussion so others will continue to comment.  :-)

 Correct....and even selling, as long as you are honest in the representing the property, and not intentionally concealing a known defect, you'll be totally fine. You disclose on the listing that it's agent owned, and that's about it. 

The downside of it is the cost/time. You'll likely need to be doing at min 2 closings per year to cover your fees, depending upon your price points. Good luck.

I invest for myself and others in single family residences in Ohio. For me, I can do many of the functions that I am doing with real estate as an attorney anyways, however, access to the MLS for me is everything. I like having control of my access to information, to know what properties are available and which I can see and when. It is important to me and important to my investors. I do not work as an agent helping buyers buy a home to live in otherwise or helping sellers list, at least not yet. This way, I get the benefits of earning commission on my own deals that I do most of the research for anyways and will not have to worry about paying as hefty a commission when I come to sell if I did not have my license. So, I guess it comes down to controlling your access to what is available to the market both when searching and viewing (i.e., access to the MLS) and commission going to you or the realtor you are working with. Of course, there are disclosures to be made, but the benefits for me outweigh the difficulties associated with the duty of disclosure.

Originally posted by @Matt Motil :

It depends on what you are wanting to do with your investing. If your plan is to approach sellers directly with the intent of getting great deals and flipping them, then your buddy is probably correct. As a licensed professional you'd have a fiduciary responsibility to the seller and at that point you'd run the risk of getting into some trouble by equity stripping properties. 

Everything @Matt Motil is spot on. Don't be equity stripping "Wholesaling" and you'll be right.

Thank you for asking this question @Brad Smith
@Brandon Turner touched a little about this subject on his weekly webinar, there is a discussion about it from his perspective that I need to find.
I am in Santa Fe NM, and am wondering the same thing. I have been advised, as a newby, I should find a way in to a prestigious RE Office with a well know agent, be an assistant while I take the REL course. I was told that I will have a higher success as a licensed RE. My interest are not in selling, they are in investing. Creating Immediate income and long term residual income. Being new to the industry, I am not sure which route to go. All though I do see everyone's point of view who has responded to you.
If anyone here has further opinion and is familiar with New Mexico State Laws and regulations, I would appreciate any advise.

The laws in every state are different, so you need to seek out the information in your state, but honestly, unless you want to be a wholesaler, I'm not sure where getting your license hurts you. 

I am at this point studying to get my RE as an investor. I have been given guest status to the MLS by my realtor, but having access to the properties on my time, when I want to see them, is the biggest plus I am looking forward to. Getting to keep the commission is just sort of icing on the cake for me. Being able to see a property as soon as it becomes available and head right over, without having to check with someone else's availability all the time, will be a huge simplification of the process for me.

This post is filled with so much useful information. I love everyone's input because I am enrolled in an online real estate course & want to become a Realtor, as well as, buy & hold. My approach is to learn about selling houses by getting out in the field, understanding & assisting buyers in the different ways that they can purchase & acquire property, being knowledgable about assessments, the legality part of real estate & property ownership, and, of course, commissions. Networking is vital & I believe all of these things will make me a very savvy investor. I'm definitely looking at the business aspect of having a license.

Originally posted by @Nicole Garner :

As an agent/investor in Texas, we are held to higher standards for disclosure.  Additionally, we have standing requirements for ethical conduct and satisfying fiduciary responsibility.  It hasn't been an issue for me but the first thing I always disclose is that I am a licensed agent.  Honestly, if you aren't looking to sell real estate, use the materials as a learning resource and work on finding an experienced investor friendly agent that you can develop a long term working relationship with.  Best of luck in whatever avenue you choose to pursue @Brad Smith .

I fully agree to this. I recently got mine and in a way, wish I hadn't. The fees the first year for me were around $1,700 and I have no plans to be an agent either. Having said that, I think access to the MLS and immediate access to properties listed is crucial to jumping on a good deal. For me, trying to run solid comps on the free sites was just too time consuming. With the MLS, it takes just a few minutes.

One thing I don't necessarily agree with (though, in fairness, have no experience with yet) is that the license makes you seem more credible. I would imagine that through direct mail campaigns, it may raise eyebrows as I'm not fishing for listings, I actually want to buy myself. Maybe (hopefully) I'm wrong but I could see myself getting suspicious if a RE agent sent me a letter saying he wants to buy my house if I did not know anything about REI.

I would say don't do it. Once you become a licensed agent in Texas you are held to much higher standards of care, disclosure, etc. And you'll have to hang your license with a broker, who will probably limit your personal investment activities, not to mention charging you fees and splits. Many brokers do not allow their agents to buy and sell for themselves because of a perceived conflict of interest.

Then there are the fees to join your association and MLS.

Hi Brad,

Even as a buyer, most Real Estate jurisdictions will hold you to a moral and ethical code of conduct. In Ontario, Canada, we must adhere to REBBA (the Real Estate and Business Brokers Act), which does not allow some entrepreneurs to be quite as creative in their negotiations, financing, etc.

From what you have described of your situation and your goals, it seems best for you to learn what you can from the course and materials, but to not actually become licensed.

Another option is to take the exam(s), but not apply for your license.

I can tell you from personal experience that I have purchased several properties where the seller stated they wanted to deal with me as a licensed professional rather than an unlicensed person. Some have even stated they know we are held to higher standards. I have never felt having a license is a disability. When I make offers to purchase properties I always disclose and this is required. On my most recent purchase I offered to pay 'x" to list it and "y" to purchase it. They took a substantially lower price stating they didn't want to list it and wanted a fast sale.  If you get your license and at some point decide against it, you may (as in Florida) put your license in an "inactive" status and have no disclosure requirements. 

I'm also amused by the "a license will disallow me from being an unethical jerk" argument.  If you have questionable morals, there are far more lucrative investment opportunities available to you than real estate (drug dealing, gun running, organized crime, etc.).

I have a license in CA and am not aware of any legal or ethical requirement for me to disclose my license if I'm buying a property, as a principal.  I don't see it as a hindrance in any way (probably because I treat people fairly as a matter of practice).

I argue in favor of getting your license, if only to force you to learn the material better.  Barring that, learning the material and not taking the test is certainly better than many investors are willing do so kudos to you.

Originally posted by @Brad Smith :

I know this topic has been discussed quite a bit but I think my angle is a little different.  I haven't read all the previous posts so maybe not.

I have already purchased and have been studying my Kaplan home study materials to take the exam but, in talking to a contact/friend today who is both a Realtor and an attorney, he said I'd be better off NOT getting the license.  Sure, learn as much as I can but don't get the license unless I plan to actually become an agent.  I don't/never planned to become an agent, I want to become a better investor... not sell real estate.  He says the standards are much higher for licensed realtors so it becomes a liability issue.

Should I just study the material and not take the exam???

 Brad, here is why I got my license...I have had a lot of success with short sales by writing the contract and simply calling the listing agent of the short sale to represent me (or have their partner represent me) in order to collect both halves of the commission. This essentially doubles their commission and you can get a bit of an edge in a tight market. . Of course there is also the obvious savings when buying/selling properties for yourself. Ultimately there are pros and cons to each but that is why I got mine.