Michigan RE License Rules

5 Replies

Do you need your RE license to buy and sell RE and make a profit off it in Michigan? If I would rather use a realtor for veiwing, buying and selling properties anyways, is it at all beneficial for me to get it? I would rather not get it, but I want to make sure I can still invest in any property! 

Thanks for the help!

Brock

Hi @Brock Hoffman ,

If you are already leaning away from getting your license, then I would not bother. There are plenty of agents out there that do this full time, are experienced in their market, and have a good sense of comps. Just make sure you talk to a few different agents and find one that is investor friendly. Best of luck!

Matt

A relationship with a licensed agent that knows the market is a great way to go.  Otherwise...

Michigan law regarding real estate professionals addresses this question in the Michigan Administrative Rules for Real Estate Brokers and Salespersons. Generally speaking, the Rules state that “licensure as a real estate broker is required of an owner of real estate who engages in the sale of real estate as a principal vocation, unless the owner engages the services of a real estate broker.”

Within the Rules there are three (3) “questions” that an investor can ask to test whether or not they are participating in real estate as a “principal vocation.” If you answer “yes” to any of the following questions, you should be licensed, unless you are exempt under some other area of the law.

Have you or will you engage in more than five (5) real estate sales in any 12-month period? For example, if today is December 15, 2009 and you have sold more than five properties since December 16, 2008, you would need a license. If you’re a busy “rehab and flip” investor, you will most likely need a real estate license.

Have you or will you hold yourself out to the public as being principally engaged in the sale of real estate? If you’ve placed one of those signs on your car or truck that states, “we buy and sell houses”, you may very well have to answer this question, yes. Whether you are principally engaged in the sale of real estate is somewhat of a fuzzy area. For instance, if you have a published cell phone number that is on 12 hours each day where potential buyers can call you would most likely be considered principally engaged in the business.

Have you or will you devote over 50% of your working time, or more than 15 hours per week in any 6-month period, to the sale of real estate? If you have an office where you actively sell (or at least attempt to sell) real estate four days a week, you definitely would have a hard time arguing that you’re not principally engaged in the business.

You don’t necessarily have to be a real estate broker to engage in the sale of real estate, but, if you’re not, you’ll have to be licensed as a real estate salesperson and work under a real estate broker or be licensed in some other occupation that does not require an additional license to sell real estate, e.g. a licensed attorney or builder. Of course, working under someone else usually means that they will have their nose in your business and want a cut of the proceeds. For those reasons, most investors that plan on working the business as their principal vocation will go the extra effort to obtain a broker’s license.

If you're using seller financing, Dodd-Frank regulations will come into play and limit the number you do without a mortgage loan originator as well.

Have fun!

Clay

Originally posted by @Brock Hoffman :

Do you need your RE license to buy and sell RE and make a profit off it in Michigan? If I would rather use a realtor for veiwing, buying and selling properties anyways, is it at all beneficial for me to get it? I would rather not get it, but I want to make sure I can still invest in any property! 

Thanks for the help!

Brock

Good real estate agents bring three things to the table (#1) relationships in the area with other agents and sellers/buyers, (#2) negotiating skills, and (#3) pricing knowledge. 

Now, if you're young and new to RE, you probably won't have #1 right away. You probably won't have #2 either, though it can be learned over time. However, if you're diving into RE investing, it's a massive mistake fnot to have #3 from the get-go. You should be able to talk comps and pp sqft with your agent by the time you're seriously considering buying something, and the agent's pricing opinion should be more of a sanity check than anything else. A "good deal" can vary greatly depending on what the plans for the property are.

It's probably a good idea to hire an agent for your first couple deals for items #1 and #2; but do not be overly reliant on your agent's pricing knowledge. Once you feel more confident with regard to #1 and #2, and your pricing knowledge is solid, you can ditch the agent and save some money.

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