I am interested in fixing and flipping properties. Should I take the time to get my real estate license or is this a waste of time?
I don't know too much about what you're asking, but it seems that having a license would be helpful only because you would have MLS access, and could then do your own searches without the help of another agent. I guess you'd also have a better understanding of Real estate transactions. I'm curious if it is helpful or not - I wonder if there are any restrictions that come with having the license?
I"m kind of torn on this one, I used to have my license. I got it because I got tired of agents NOT RETURNING phone calls and also I had two of them SNAKE ME OUT OF DEALS using straw men.
However, I really got it because AT THE TIME, Houston was going through about 500 or so FORECLOSURES per week. Having my license got me personal access to the weekly HUD SEALED BID OPENING. There was a slight advantage to that access.
Having the MLS access got me "first look" at the "new listings" first thing each morning. Having the access that way, along with the listing agents comments; particularly comments such as "seller looking to ZERO OUT (that is, walk away from closing with no gain and no loss) were good things to know as the market started to turn upward. I bought a few VA and FHA assumptions back then (late '80s, early 90s), and sold quite a few to investor acquaintances.
Once the "big run" in Houston ended I surrendered my license. My salaried job paid me more than the average agent earned, with lots less expenses and hassles.
Now I don't worry about agents not returning my phone calls. NOW THEY DON'T RETURN MY EMAILS EITHER, LAZY BUGGERS.
I was enrolled a while back to get my license but decided to pull out at the last minute because I realized I didn't need it. I have a very close friend that is one of my investors that is a broker and has MLS access. Other than that what do you think the benefits of having a license are? What are the downfalls too? I just thought about all the rules and regulations you have to follow as a realtor that you don't as an investor. Your thoughts would be appreciated. Thanks.
i believe that also when you have your RE licence, you can actually use your commission as leverage on properties you are buying, or your "company" is buying. meaning either, you can negotiate with the seller to not have to pay your half of the commission or you can have it credited to you at escrow. im not exactly sure how it works, but it sounds like a good way to walk into a property with either a grip of payments already made or a bit of equity.
I would recommend anyone, that they DON'T get licensed to be an investor! BUT, you MUST find the right RE agent/mortgage person to work with.
I've done it both ways. I have a license, because I own a mortgage company and need one. But, I hate all the disclosures and liability that go along with investing on my own with my license.
I understand that if you are dealing with the "average" agent, that you would want to consider your own license, but the liability isn't worth it if you pick someone like myself, that's decent, to do the searching for you.
The biggest challenge you come up across most agents, is they've NEVER invested other than buying their own home! They tell you "what a bargain this property is," and then you have to spend $50,000 to correct the property to market conditions, and then the stupid realtor says, "This is why it's $50,000 cheaper." Where's the incentive to do the work? Where's the profit if you spend $50,000 to get it to market, and then only receive your money back? I don't like this type of return! You shouldn't either.
Pick a better person to get involved. "Not tooting my own horn," just stating facts. People like me, that do invest, understand what it is like to do it. Pick someone like this. How? Ask them how many properties they've ever bought for themselves. If they say, 1 or 2, move on.
Don't bother with the license, unless you plan on selling the property to yourself or others. Again, the little 2-3% commission you are paying to the buyer's agent is worth it if you get a good deal and structure better financing.
Remember, "you can't teach well something you don't understand yourself," and this fits most realtors in my book!
I hear a lot of people complain that their agent doesn't know anything about investing. It is funny Jeff, that you say that. How can someone with no investing experience explain the full ins and outs of investing in properties? I'd much rather work with someone experienced.
As for the license - don't have one.
I'm both. Sure I have to disclose that I'm an agent but thats not a disadvantage. I did not learn anything in RE school except how to pass the test. Everything I learned about investing I learned on my own. THE BOTTOM LINE, If you want to be a RE agent get your license. Other wise no need to do both.
Well I can see that there are a lot of mixed feelings on this subject. Hi I'm Ray Washington and I am a real estate broker in Atlanta. I have been licensed in Goorgia for 14 years, but have been involved in real estate alot longer. I purchased my first "no money down" property when I was 19 and that was in 1974. I have owned several real estate companies, written several books and courses on real estate investing, delt with hundreds of investors and trained dozens of agents. Here is what I will tell you. If you don't plan to make a career as a real estate professional, getting a license is probably one of the biggest liabilities a real estate investor can have. If you want to be an investor, you do what investors do and let the agents do what agents do. There are a lot of well qualified agents that know a great deal about investing. The people along with other qualified professionals, ie....attorneys, CPA's ect...can be of great assistance--and often time help you avoid pitfalls and stay out of trouble. Find yourself a good agent, feed him or her and let them feed you. A good agent can be a great asset to your investment team. After all, as a buyer (in most states) you are not paying a fee for the service. Typically the seller has already negotiated the fee out of their proceeds as part of the listing agreement anyway. Note, I said the fee comes from the seller proceeds, not added to the price you pay for the house. That fee is generally splited between the listing and selling company. So, in effect, you get representation for FREE. Give me a call or email. I'd be more than happy to give you one on one advice. Good luck!
Originally posted by "raywashington":
getting a license is probably one of the biggest liabilities a real estate investor can have.
Iv'e read a lot of debates about whether it's worth it to get a real-estate license if one is an investor.
I've heard several times from many people with experience that having a license is a liability.
What legal liabilities can occur?
Thanks in advance. (I am debating whether I should get a license, and I only plan on investing.) Not sure.
First of all and probably most inportantly, the agent(s) is held to much tougher scrunity and standards than the average citizen when it comes to real estate. Generally the real estate lic. commissions' first object in any and all cases is to protect the public and safeguard the interest of the consumer.
There is an assumption (however unfair) that the real estate agent(s) has an unfiar advantage over the average consumer simply by knowledge, training and exposure to information.
This is not alwys true, I know some agents that don't know sick-em from come here--when it comes to real estate. In contrast a growing number of consumers and investors alike know more about real estate and investing than that certain agent.
However; the agents role and primiary responsibility is one of a fudiciary nature. That is he/she represents the best interest of his/her client in a real estate transaction. It does not matter if the client is a buyer or a seller. The client has typically shared information with his/her representative--that being the real estate agent; that, if the agent were not acting in that capacity--they might not have otherwise shared.
Heres an example:
Mr & Mrs Jones during a listing interview with agent Cody tell the agent that they are 3 months behind on the mortgage payment. The house is worth $150,000 and they owe $100,000 to pay it off. Even though they have $50,000 equity, in order to prevent foreclosure and get a quick sale they would be willing to sell for a whole lot less than the true value of the house.
The agent comparative market analysis indicates that activity is brisk in this community and houses are selling pretty fast. In fact the average days of the market is 27 and the sellers are getting pretty much full value for their homes.
The agent quickly realizes that if she makes an offer to purchase the house herself, that she may very well have a buyer for the house at or near full price before she her self can close on her loan.
Being an investor herself and keen business person--spots this as the great investment opportunity that it is, promply pulls a sales contract from her brief case, writes up a legal offer to purchase the house for a hundred and seven thousand dollars, with a 7% commission being paid to her as the listing agent at closing.
Problem solved, the Jones' don't have to worry about foreclosure and the agent has made $7,000 for her time and picked up a great house for $50,000 below market. In fact, this house won't be a problem at all whether she decides to resale it or keep it as a rental.
Pretty good huh? Not really. There are alot of problems here. First agent Cody did not represent the best interest of her clients as she had promised. Her job was to help that couple get as much as they could for the house--as quick as possible. Second, she used knowledge and information that she acquired in client/agent confidence to make a good deal for herself, not help the Jones'. Let's face it, the Jone's plite was not public knowledge, and had she not been there in a professional capacity, she may not have been aware of it either.
This example is fairly extreme. But I can tell you I have seen this type of situation occur more than once. And this is not the only type of situation, there are countless ways an agent/investor can find themselves in questionable if not unethical situations. It's questionable and unethical situations that get agents into all types of legal trouble. Not to mention the danger that it creates for the public at large.
That's why the laws and rules are so tough on licensed agents. You as a private citizen could do a deal like this and become an over night investment guru, where a licensed agent can not only find themselves at risk of losing their licensure, but quite possibly fines and legal problems.
Again, I say; if you want to be an investor it's probably best not to become licensed. As a private investor you can do things that are perfectly legal--these same things for an agent might mean jail. An agent cannot afford even to be inplicated in questionable real estate activity, and that's just the beginning.
I hope this has helped to answer your question.
P.S. This email ended up being so long, I did not go back and proof my typing and spelling. Please forgive any mis-spells or typo's.
EXCELLENT post! Thank you...Ive been here two days and just now dug this up. You cleared up a lot. I found the same problem that others have. Whenever I tell a Realtor what I want, the so called "deals" they find are at market value...of if they're below, the price of the repairs will take it up to or past market value...hence, no profit.
If I have them find me a rental, they always show me a negative or barely break even situation, and I have to explain that I'm looking for 1.5-2 percent of the sales price gross monthly income. Another poster here posted this formula, so he's aware of it, Im aware of it, Im sure you are...but you wouldn't believe how many realtors Ive tried to explain this to where their eyes cloud over and they dont get it...even after 25 years in the biz....and thats assuming they even return phone calls/emails, or worse, forget everything I've told them when it comes to what I'm specifically looking for
Okay, enough of the realtor rant....
Let me ask you this....
I understand the liability involved by scooping up a deal at 50k below market plus getting the 7 percent on top will cause some problems. since they're not looking out in the best interest of the seller, which would be Mr/Mrs Smith on a conventional property...now, let's look at a HUD
Lets say a HUD property comes up, and it goes thru the first week, where only owner occupants can purchase it. After that week, it goes to all bidder status, where the first person who gets it gets it...and HUD offers it to investors.
If I got my RE license, put in a year's experience as required here in FL, then got my brokers' license, and bought this property and paid myself the 5 percent, could that be a problem?
Nobody else has bid on it for a whole week, HUD opens it to investors, and since theyre getting their money, would I be in a predicament later on?
Also, the same for REOs/foreclosures.....they don't have a one week waiting period, unlike HUDs, my experience is they have a sealed bid that stays open for a week, everybody puts in their bid, and once it sells, lets say I got the winning bid, as a broker, I would then split the commission with the listing broker.
After typing this, I realize I probaby could've made it more succinct, but I guess my point is....
1) In your example, you were using a conventional market property where there was an obligation to the seller
2) In my examples, I was using HUD as the first, where after the 1 wk waiting period, they welcome investors and will take the first bid that is at the asking price, and in the case of the REO/foreclosure, there best interest will be met, since the sealed bid process will get them the highest dollar amount for their property. Whether I split that commision with the listing broker or somebody else does, would that still be a conflict of interest?
Finally, in the last example, would the ONLY person who could get in trouble be the actual listing agent of the REO/foreclosure since they would have to advertise it, let the listing run a week so others can bid on it (and not snatch it up themselves?)
Sorry about the typos...I also wrote this rather fast, and realized I probably could've worded it better, but hopefully you (and anyone else) can chime in here with your thoughts. If I wasnt clear, I'll try to rewrite it better
Thanks in advance for your response
Sorry, forgot two things....
For the poster who had mentioned "straw men."
Was this a situation where you had found a deal, you told the realtor about it, they wrote up the contract, and then told one of their friends about the deal, where they wrote one up in his name a few dollars higher than your bid, so they could snatch it away from you? I've always suspected this thing goes on in sealed bids, but didn't know there was a term for it.....
Ray (and anybody else here).....regarding Realtors and their "ethics"
First off, let me say this...I realize I'm painting with a rather large brush here, and this isn't representative of all realtors, just some I've met. This example seems to me like its a breach of client confidentiality, and I don't know why it seems to be a common practice....
In my search to find a good realtor who knew where to get the smoking deals, I've had to go thru a lot of them. I can't tell you the number of agents who have told me "This person needs to sell this house quick because of a job loss/job transfer/divorce/tax lien (fill in the blank) and I'm sure you could offer them less money, and they wil take it."
Now, I'm a newbie here, and don't know the rules, but that seems like a clear violation of an agent NOT looking out for their clients' best interest by telling me that they want to sell quickly, which of course, means that this agent wants to get paid quickly. My interpretation of all this is that the agent is looking out for HIS interest and not the sellers', yet this seems to be a common practice.
Is this legal/moral/ethical? Should I report them to the board of realtors if it does happen, or let sleeping dogs lie? Would it to any good? I'm wondering how I would feel if my realtor that Im paying thousands to would divulge this info to a buyer.
Lets say Im selling my car....regardless of how desperate I am, I don't want a buyer to know my situation, because if he knows I need to sell, he's gonna lowball me. Unless I get desperate, he doesn't need to know. That should be my decision. Unless I tell a realtor otherwise, he/she shouldnt be telling this to a buyer, right?
Thanks in advance for your comments
I'm just getting started in this, but I've been researching the rehabbing of properties for a few years now. This past year I've had a HUD fall through due to a sub-par mortgage broker. My second one looks like it'll close in the next week or so, but it's taken the 45 days plus a 30 day extension. And it's still looking like it might not happen. And this one is through a large national bank that probably does a kazillion of these every year. I guess I've had some terrible luck. And I got sidetracked on this topic... Anyway, I agree with you 100%. I don't see any potential conflicts with these properties that you're putting bids on (HUD/VA/REO's/whatever). If, like me, you don't plan on actually buying and selling for others I fail to see how conflicts can arise. I plan on geting my license when I'm done rehabbing this house. At the very least I'll make about 2.5 to 3%, and if I FSBO, I get to keep it. If I put it on MLS and put a bounty on it, then my purchase commission will help defray the selling commission... If you can get to the point where you're moving about one a month, that's a lot of money for holding a license. And even more if you become your own broker...
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