Debate On A Realtor License

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Debate On A Realtor License

Kendra J.
Wholesaler · College Station, TX · Member since 2012 · 20 posts · 1 vote

Being as though I live in a Non-Disclosure state and have been unsuccessful at getting a Real Estate Agent to work with me, I have been debating on going for my own Real Estate License. I have read lots of pros and cons to being an Investor with a Realtor license. If I understand correctly, I must work under a Broker in order to gain and keep MLS access? I have an opportunity to further my education with little out of pcket expesne, so I thought it would be good to look into getting my license. What are your thoughts on the RE License issue BP?

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Sandy Blanton
Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
13y

***SCREAMING*** Ok, Sweet Jesus, I had a Cold Pop.

If you buy one deal a year from the MLS, then YES...get licensed.

I've bought and sold over 100 units personally in the past decade. I find 98% of my deals in the MLS. There's no substitute for the MLS database. Not only can you find deals and earn the agent's portion, you can accurately predict your investment numbers: current value, ARV, your rental values, etc.

Florida, as I'm sure all states do, require that you disclose you're a licensed agent and a principal to a deal. This has no bearing on your negotiations with a seller or buyer. The other party doesn't care if you're an agent, a mortician, a transsexual, etc.

Don't worry about finding a broker that will accept your license due to your investing activity. The average full time agent probably closes six deals a year, it's dismal and it's always been this way (excluding the boom years and maybe the average agent closed a dozen deals a year). As long as you act ethically and within the law, your broker won't care what you do. Just be upfront with your broker before he/she hires you, have a clear understanding so there are no surprises. If you have to interview ten brokers before you find a fit, who cares. If you're lucky you'll get a progressive broker who will teach you about the brokerage business (if you have any interest outside of investing).

Even if you're a wholesaler, I encourage this. There's one agent in our town that makes his living wholesaling. Every listing of his I have ever seen in the MLS has his disclaimer "listing agent has a lease option with the seller and is a principal to this transaction." He's the only agent I've ever seen that's a wholesaler, but he must be doing well as I see his name on more listings than most agents. He's also with one of the largest, well liked brokerages in town.

I can't get more enthusiastic about this advice for the non licensees here. Let me know if any questions.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    Is it because you are trying to wholesale??

    I don't consider a wholesaler a buyer which is probably why you are not having much luck. A wholesaler is a middle person in a deal trying to collect a fee. Many do not have 10 cents to their name. It's different if a wholesaler is a bonafide buyer who closes on a property and then resells it days later etc. versus double close, simultaneous close and all that stuff.

    Most want to close with little to no money of their own and tie up a property. If you want to wholesale and become an agent It will be hard to find a broker who wants to get involved in such things and allow you to hang your license there. Lot's of liability with a small return for the head broker. Licensed you could earn commissions the regular way working with buyers and sellers under a brokerage.

    Hope it helps.

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  • Jennifer Lee
    Real Estate Broker · Gibsonia, PA · Member since 2013 · 828 posts · 260 votes
    13y

    Thanks for posting. I'm in the same shoe. Just finished my first course.... Everyday I change my mind... Would love to hear what ppl say too.

    In PA I have to hang my license for 3 yrs bef getting my broker.

    I'm an investor, I've been fine without MLS, I only get broker to open door and buy the units. I work from home.

    Weighing the fact to see if I can cover the cost of maintaining the license.

    1Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by Jennifer Lee:

    Weighing the fact to see if I can cover the cost of maintaining the license.

    If you purchase one $50K property per year and can collect 3% commission from the seller, that's $1500. I don't know where you live or how much it costs to maintain your license, but that would cover my annual costs on that one deal.

    If you do more than one deal, the extra money goes right into your pocket...

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    5Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    Does a "Non Disclosure state" mean that you don't have to disclose you are an agent when buying and selling for yourself?

    1Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    13y

    Kendra – I've been asked this question a lot over the years and I think it is a tossup. It depends on what your intentions are. One of the posters above mentioned if you receive a 3% commission of $1500 on a $50,000 property, you can cover the cost of your license for one year. First off, you're not going to receive the entire 3% commission unless you have already served your time to become a broker.
    I own a lot of properties in Texas and I'm not familiar with what you mean by it being a nondisclosure state. I'm under the impression that you do need to disclose all information you obtaine about a particular property that you are either going to purchase or sell.

    If you are simply dealing as a nonlicensed investor, you are not required to disclose the amount of information that you are as a real estate licensee. Sometimes this fact can be financially very rewarding for you.

    If you are having a difficult time finding a real estate agent to work with you, my guess is you are simply trying to serve as a wholesaler or middleman and the real estate agent fails to see the benefit of working with you. If you were sitting there with a checkbook ready to write out earnest money checks, I can assure you the realtors would want to work with you.

    If on the other hand, you plan on purchasing lots of real estate and multi family buildings in the future as a BROKER, then you have a chance to receive the full 3% which can amount to a good chunk of cash. Rich

    1Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by Rich Weese:
    One of the posters above mentioned if you receive a 3% commission of $1500 on a $50,000 property, you can cover the cost of your license for one year. First off, you're not going to receive the entire 3% commission unless you have already served your time to become a broker.

    Rich is right if you're working for a large, big-name broker (Re/Max, Keller Williams, Century 21, etc). Many of those brokers will take a large split of the commission (up to 50%!), so if you're working for one of them, you'll likely have to do several deals to cover your annual costs.

    But, it doesn't have to be that way. Most investors don't care about the brand name broker, the fancy office, etc. So, you don't have to pay large chunks of commission.

    For example, I work for a medium-sized broker (about 3000 agents), and I only pay $40 out of my commission for each transaction. So, out of that $1500 commission, I keep $1460.

    For reference, I also pay .12% of the sale price to the MLS (every agent pays this fee when listing/buyng a property), which would be another $60, so I actually keep $1400 of the $1500.

    It still covers my costs for the year.

    But, Rich is certainly correct that you have to be careful about which brokerage you affiliate yourself with, as some are much more expensive than others.

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    3Reply
  • Sandy Blanton
    Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
    13y

    ***SCREAMING*** Ok, Sweet Jesus, I had a Cold Pop.

    If you buy one deal a year from the MLS, then YES...get licensed.

    I've bought and sold over 100 units personally in the past decade. I find 98% of my deals in the MLS. There's no substitute for the MLS database. Not only can you find deals and earn the agent's portion, you can accurately predict your investment numbers: current value, ARV, your rental values, etc.

    Florida, as I'm sure all states do, require that you disclose you're a licensed agent and a principal to a deal. This has no bearing on your negotiations with a seller or buyer. The other party doesn't care if you're an agent, a mortician, a transsexual, etc.

    Don't worry about finding a broker that will accept your license due to your investing activity. The average full time agent probably closes six deals a year, it's dismal and it's always been this way (excluding the boom years and maybe the average agent closed a dozen deals a year). As long as you act ethically and within the law, your broker won't care what you do. Just be upfront with your broker before he/she hires you, have a clear understanding so there are no surprises. If you have to interview ten brokers before you find a fit, who cares. If you're lucky you'll get a progressive broker who will teach you about the brokerage business (if you have any interest outside of investing).

    Even if you're a wholesaler, I encourage this. There's one agent in our town that makes his living wholesaling. Every listing of his I have ever seen in the MLS has his disclaimer "listing agent has a lease option with the seller and is a principal to this transaction." He's the only agent I've ever seen that's a wholesaler, but he must be doing well as I see his name on more listings than most agents. He's also with one of the largest, well liked brokerages in town.

    I can't get more enthusiastic about this advice for the non licensees here. Let me know if any questions.

    8Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    This really varies on your goals. Most of my clients in commercial real estate are very high net worth clients.

    They are very good at their chosen profession or the businesses they own. They do not want to be a broker, get a license ,or any of that other stuff. They simply want to make investments and have a portfolio for retirement or a multitude of other reasons (tax shelter) etc.

    If someone is trading little houses and wanting to make a living at it I can see them wanting to get a license maybe.

    In Georgia for residential we have GAMLS and FMLS. GAMLS charges the broker a monthly charge to belong to the system. FMLS is the one that charges .0012 of the sales price and you have to meet minimum sales volume as a brokerage or you get charged over 1,000 in fees.

    So as a broker in Georgia initially you have to pay the real estate commission brokerage fees and also filing corp fees and then if you want to belong to the MLS pay deposits to join plus the other on going fees I mentioned.

    Even if you just want to be an agent J's company they are with Solid Source unless they have changed that low plan is for experienced agents. Newly licensed agents for your first few deals you are on a totally different split.

    There are companies that will take any agents. There are also companies that do not want ANY agents. They do not want to babysit agents and all of their wild ideas to try to close a sale. J is experienced with closing deals but many other agents are part time, rusty, etc.

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  • Kendra J.
    OP
    Wholesaler · College Station, TX · Member since 2012 · 20 posts · 1 vote
    13y

    @Wayne brooks no. It means i am having a hard time running comps since the sale price is not made publc.

    0Reply
  • Sandy Blanton
    Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
    13y

    Good counter-point Joel. Somewhere between my bullish and your bearish views on the topic, the viewers can decide their best course. I'm a newbie to BP, but it seems there's a wide demographic: people who have never owned a piece of dirt and don't know what an appraisal is to those with hundreds of millions of dollars in experience.

    Of course an investor in large commercial parcels wouldn't likely benefit from being a licensee. But the individual that trades one or two dozen units a year all in one town could benefit tremendously.

    2Reply
  • Kendra J.
    OP
    Wholesaler · College Station, TX · Member since 2012 · 20 posts · 1 vote
    13y

    Thanks everyone for your feedback. I guess I need to start looking at Brokers in this area since I will have to work with one.

    0Reply
  • Robert Taylor
    Broker, Investor, Property Restorer · Fox Point, WI · Member since 2012 · 288 posts · 120 votes
    13y

    I have often wondered just how an investor, especially one doing flips like I do, would get by without mls access, because this whole sector of investing is all about getting in for the right price and knowing what the fixed up value REALLY is! I'd say the same thing for someone wanting to be a wholesaler as well. As a flipper, I haven't bought anything yet from a wholesaler, but if someone's going to bring me a potential property for a flip project and they're claiming that the fixed up value of this place is going to be $xxx,xxx or more, my first question is how they got to that number? The ONLY way I trust to get to an accurate figure is to use the recent comp sales and that goes a lot deeper than just what a certain address sold for. How long was it for sale, were there concessions to the buyer, etc, etc.

    I'm often on another forum like this that's for realtors and one thing I see over and over and over is realtors talking about buyers or sellers that go on Zillow or Trulia, do some "research" using the figures those sites list and then come up with a value for their house that is TOTALLY high or low when compared to the comp sales for their house.

    I also don't know what you mean about Texas being a "non-disclosure" state, but I haven't yet run into any situations where I think being a licensed realtor has hindered me at all. Here in WI, we are able to get either a sales agent's or a broker's license right away, you just have to take the sales agent's education first, pass that exam, then get the broker's education and pass that exam, you don't have to hold an agent's license for a year or whatever before being able to get a broker's license. When I was first licensed in 2004 (I went and got both licenses right away) I just formed my own little one-man firm and used it to buy and sell my own projects, but now I'm working for a small firm here, I found that it was too much work and expense to have my own firm. I signed on with a small firm that was happy to have me, takes a very small cut of commissions and its nice to have someone to ask when any questions about legal stuff in a deal (which is often) come up that I'm not 100% sure about.

    One other benefit to having a license to consider is that there certainly are people that make a great living out there just by being RE agents! I'm not working that angle now, but its always in the back of my head, as I get to know more and more people and they know that I make my living investing in real estate, that I know what I'm doing, I'm an honest and trustworthy guy, etc. I could always use that at some point to jump more into taking listings and/or buyers, too.

    4Reply
  • Jennifer Lee
    Real Estate Broker · Gibsonia, PA · Member since 2013 · 828 posts · 260 votes
    13y

    Thank you that's great responses, much to think about.

    I also have retail commercial. I mostly buy/hold, do occasional flip bc we are using our own capital. It's a side thing. So slow steady, 10 yrs now.

    But this year I'm doing one for another investor/family, and I'm doing it for FREE!!!
    I'm gaining experience bc this is a new market for me. Just recently moved here. And I currently just bought another retail commercial, so no capital.

    The working for free....is what is making me thinking about the license bc I got another investor waiting if this one is successful.

    I'm currently trying to re-rent my retail commercial, and don't envy my brokers' job. I'll gladly pay him commission bc I have no tap in that business.

    I know my weakness, marketing, I have been an agent 12 yrs ago, although really wet behind the ear. And I can't see myself wasting time making quota for a broker.

    And creating my own brokerage firm...is way too much $$$, time, effort for the volume I'm doing.

    Anyone HAVE LICENSE BUT STILL WORK WITH AGENT/Broker???

    I haven't sold much property...holding/ rentals.

    So I'm deciding to take my exam... My project will be done by then. List with my broker. If she is as good as everyone claims for her to be, I'll keep her.. I've only bought with her. I do all the work...she just gives me comp when I zero in my target, open door, negotiate/inside info, close. And she gets easy commission.

    I will active my license if she turns out to not be a good fit, and/or I have to manage it as rental or my investor. (License required)

    Thanks again for wealth of info here

    1Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by Jennifer Lee:

    Anyone HAVE LICENSE BUT STILL WORK WITH AGENT/Broker???

    My wife and I are licensed and do everything ourselves here in Atlanta. But, we also flip houses in Milwaukee with a partner (who lives in Arizona). Because we're not local and can't build the network like a local agent can, we use another agent for all our deals (buying and selling). But, my partner still got his RE license in Wisconsin, for the sole purpose of having access to the MLS.

    Even with saving/earning any commissions, it's important enough to us to have MLS access (for comp analysis, etc) that we're willing to pay the annual costs of being licensed.

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    3Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    I'm a licensed broker. I have access to two MLS systems for a flat fee of $123 per month.

    I also deal with other agents who bring me deals. For example, an agent has a bank owned home that they are selling. They will call me and let me know about it. I will go look at the property on my own. If I like it, I call that agent back and tell them that I want it. They write up the deal and get the commission. I get a cheap house and they get a fat check. I'm happy and they're happy.

    I know other agents that think I'm crazy to give up my commission like this, but I would rather have people feed me good deals instead of chase small commissions.

    6Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by Rob K:

    I know other agents that think I'm crazy to give up my commission like this, but I would rather have people feed me good deals instead of chase small commissions.

    We give away our commission on many deals, and as far as I'm concerned, that $2K or so that I'm giving up at the purchase is earning me $20K on the back end. We get many of our deals because we're handing the listing agent our side of the commission.

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  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    Another thing I should add is that some of my best deals have been houses that are back on the market. They fall apart for a variety of reasons. Usually some type of financing issue. The banks seem to be willing to deal a little more on these houses. Listing agents will call me and say that a deal is falling apart and I'm able to get in there before others know that it is back up for sale. Having that inside info pays off big time.

    A lot of the houses that I purchase are around $20-30K. The commission is usually only $1,000-1,250. I too am more than happy to give up this small amount to make $20K.

    3Reply
  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    13y

    More education is always good. Make sure you are able and willing to cover all the dues etc to maintain your license. If you are doing several deals for yourself throughout the year it should easily pay for itself. If you are only cosing one deal a year it may not be worth the additional fees.

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  • Gene HackerPro Member
    Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 969 posts · 488 votes
    13y
    Originally posted by J Scott:
    Originally posted by Rob K:

    I know other agents that think I'm crazy to give up my commission like this, but I would rather have people feed me good deals instead of chase small commissions.

    We give away our commission on many deals, and as far as I'm concerned, that $2K or so that I'm giving up at the purchase is earning me $20K on the back end. We get many of our deals because we're handing the listing agent our side of the commission.

    I was loosing a lot of the best deal in my area because the agents were likely only presenting offers where they would get both sides of the commission. I am not positive of this but there were too many deals that sold for much less than my offer, even though my offer was all cash, and no contingencies. I decided to start making offers through the listing agent, telling them that I am a broker but I would like them to represent me in the deal...and guess what...I started getting a lot more of these really good deals.

    It sucks these agents were screwing their clients by holding out for both side, but that is very common. It also leads to lower sales prices (compared to an organic sale with a true bid war), which hurts the comps.

    The agents want less work and more pay...ethics be damned.

    2Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by Gene Hacker:

    It sucks these agents were screwing their clients by holding out for both side...

    It probably won't make you feel any better (it doesn't make me feel better when I lose deals for this reason), but with short sales (the most common situation in which this happens), the client generally isn't being screwed. Generally, it's the bank that's being screwed.

    Normally, the deficiency is negotiated away and if seller is an owner occupant, there are no tax consequences these days. So, it's the same to the seller.

    Though again, I'm sure that doesn't make most investors feel better...

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  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    13y

    J Scott,

    Even if they are not an owner occupant, there may not be any tax ramifications if they are insolvent (negative net worth).

    -Steven

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    3Reply
  • Account Closed
    CA · Member since 2011 · 762 posts · 182 votes
    13y
    Originally posted by Steven Hamilton II:
    J Scott,

    Even if they are not an owner occupant, there may not be any tax ramifications if they are insolvent (negative net worth).

    -Steven

    Isn't the basis reduced by the forgive debt, creating a phantom profit that is taxed? An OO can use their 250/500 exemption to exclude capital gains but the NOO is stuck.

    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by David C.:
    Originally posted by Steven Hamilton II:
    J Scott,

    Even if they are not an owner occupant, there may not be any tax ramifications if they are insolvent (negative net worth).

    -Steven

    Isn't the basis reduced by the forgive debt, creating a phantom profit that is taxed? An OO can use their 250/500 exemption to exclude capital gains but the NOO is stuck.

    David C. -

    That's technically true. Except that back in 2007, Congress passed a bill that would relieve certain sellers from this obligation ("The Mortgage Debt Relief Act of 2007").

    That act was supposed to expire at the end of 2012, but was recently extended for another year:

    http://www.dsnews.com/articles/mortgage-debt-relief-act-to-see-another-year-2013-01-02

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    0Reply
  • Sandy Blanton
    Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
    13y

    I don't think we have agents holding back offers just for the hope of getting both sides. If we jump on a deal and offer to give up our buyer agent commission, it's a major bargain. The "under pricing" if you will is either due to the foreclosing bank having an out of town appraiser who was unfamiliar with the area or an estate sale where the heirs under price. If we jump on this deal, we know we're going to be in a multi-offer situation.

    If a listing agent has two offers, all else being equal, of course they're going to encourage the seller to accept the deal where there's not another agent involved. A listing agent with both sides has more control, less hassle and a larger chance of getting a deal to closing.

    1Reply
  • Sandy Blanton
    Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
    13y

    Steven Hamilton II The insolvency exclusion rule is something I learned about last year. I was shocked after years of many short sale deals that we had never heard of it. Every agent that does short sales should be telling short sellers about it, it's such a stress relief.

    0Reply
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