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?
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.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Sandy Blanton:
I don't think we have agents holding back offers just for the hope of getting both sides.
That's a great point that I failed to mention...
In most cases where we hand over our commission, it works like this:
The listing shows up on the MLS first thing in the morning.
Within an hour or two, we see the listing.
We call the listing agent and ask if they have any offers.
They say, "Not yet."
We essentially say, "We'll be sending a full-price offer and if we close it, you can have our side of the commission."
We immediately write up and send a full-price offer.
The offer is generally accepted before they receive any other offers.
By noon, the agent is telling other potential buyers that the house is under contract.
So, as Sandy mentioned, the agent didn't ignore other offers and didn't lie to the seller about the existence of other offers. The agent/seller got a fair offer (full price) and the agent got extra commission.
Btw, if the appraiser and lender determine that the offer wasn't fair (that it was too far below market), I won't get the property for my offer price. So, that covers the situation where I'm offering full-price but full-price is far below market value.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
David,
Not exactly. For an owner occupied(primary residence) the 250/500 capital gain exclusion is not related to off setting the Ordinary Income generated by debt forgiveness. This is a common misconception.
Primary residence, MDRA provision; income is exempt if bought prior to 2009, and the fdebt forgiven was for the purchase/improvement of the primary residence, including refinancing of that debt only. Any excess amounts borrowed, then forgiven, are not exempt.
Non Primary Residence; Forgiven debt IS income, unless one meets the insolvency test, IRS Form 982.
As a short sale agent I receive numerous offers from"investors" who want me to keep both sides. This does Not influence me. Usually, it's some wholesaler (experienced or wannabe) who I won't deal with or some low ball offer.
Commercial Landlord · Oshkosh, WI · Member since 2013 · 299 posts · 88 votes
13y
Over the years in several transactions I have watched the broker in my deals leave the table check in hand and on occasion my greed got the better of my mind thinking, why am I leaving that money on the table? Im speaking of commissions of course.
Then I am reminded of my freedom as an entrepreneur. While I have had my issues with lack of access to mls a small partnership with a broker solved that problem. The thought of maintaining that license and having to work under another broker seemed like a job.
I have revisited this issue several times as I have business in several states now. I cant just fire up a new partnership every time I need access. The though of starting my own office was another possibility and I had an attorney lined up to let me use his office and firm as a conduit to start the business but after enough research decided again I would just tie myself down.
The idea of buying a 12 unit building and getting it stabilized then let it roll and make 75k to 100k just seems like more fun then chasing the 12k commission - 1/2 since your paying a split to someone. The lack of focus on my main objective which is investing in income property, net worth and getting a spread in my deals.
If your starting out without capital I would highly suggest the license since the commissions could matter and access helps. Also the education you get and the people you are around can be the jump start once you have a little money and get going on your own. Just be careful your not sucked in as a sales person permanently . An entrepreneur can make more money then a salesperson unless your listing 4 million dollar apts in NYC. I know its probably cliche to say but I will say it anyways. I would rather have money work for me then, me work for money.
I will say this to J Scott: if I could get 1400 of a 1500 dollar commission your getting that would be a company worth being licensed for!! and maybe leaving the commissions on the table was a big mistake on my part. I appreciate J Scott sharing with us your split it does a lot to help people think about this dillema to license or not to.
I appreciate the info from brokers in here its helped me think about what I have been doing in my business.
Wholesaler · College Station, TX · Member since 2012 · 20 posts · 1 vote
13y
I love all of the feedback on this topic. I am glad I am on the right track on deciding to get my license. Seeing as though I plan to get into Flipping and Commercial deals one day, I believe this decision will be well worth it in the end. Thanks everyone
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
Originally posted by Gene Hacker:
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.
I agree with this statement. I think that in many cases, the listing agents are doing a disservice to their clients. When I do these deals, I am working in the best interest of my client (me), so I don't really care if the bank gets less because they hired the wrong agent. I don't have a lot of respect for the banks anyway after they had a huge part in creating this mess.
I did buy a house a few years back that was listed for $6,500. I offered $5,000 through the listing agent and my deal was accepted. A few days later, I ran into an agent I know and he asked me what I was buying lately. I mentioned that I had bought a house for $5K on a certain street. His demeanor completely changed and he said he knew all about that house. He said that he had written up a full price cash offer and it was rejected. He thinks that the listing agent sent my offer to the bank and his offer went into the paper shredder. He talked about pursuing an ethics complaint against the listing agent. I don’t think that it ever went anywhere.
That said, sometimes the bank will come out ahead with only one agent as you have a lot of amateur agents out there that will just make the deal worse when there’s two agents involved. As an agent, I always prefer to be in control of the deal. Too many times, you get stuck with an idiot who doesn’t return calls, has no control of their client, etc. I can see why a listing agent would want to go solo for reasons other than getting all of the commission.
Real Estate Broker · Gibsonia, PA · Member since 2013 · 828 posts · 260 votes
13y
@William bannister. Thank you! Your whole argument is the reason for my dilemma. Thank you for sharing. I think you are right about if you are starting out with no capital license is a great tool. But like you I rather be the entrepreneur.
But I will finish my course take the exam and I have 3 yrs to decide and activate it.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
Originally posted by F Foster:
J Scott-You totally lost me! Please explain what you mean by " I'm offering full-price but full-price is far below market value. "
F Foster - I'm not J Scott, but I can explain it I think.
In the listing, the seller is asking for a price that is less than market value, so when the full price offer is being made they are simply giving the seller the asking price.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by William Bannister:
Over the years in several transactions I have watched the broker in my deals leave the table check in hand and on occasion my greed got the better of my mind thinking, why am I leaving that money on the table? Im speaking of commissions of course.
Then I am reminded of my freedom as an entrepreneur.
Just to clarify a major point...
We earned (on the buy side) and saved (on the sell side) a total of over $80K in commissions last year -- a decent amount of money.
But, that earnings/savings was a DISTANT second to the main reason we have our license (actually, MLS access is a distant second and the money is third). If you read my blog or read the stuff I've written here on BP over the years, you'll know that the most important thing to me as a real estate investor is control. Because the players in this industry can be so amateurish and flaky, maintaining control of your investing will often make the difference between success and failure.
We're licensed so that we have this control. By having our licenses, we can:
- Talk directly to listing agents when buying (you'd be surprised the information they'll give up if they like you)
- Negotiate directly with agents when buying or selling (don't have to wonder if our agent is leaving something on the table to get the deal done)
- Work directly with closing attorneys on our deals (don't have to wonder why closings aren't happening on time)
- Direct access to data (MLS access)
- Control the content of our listings (we control the public and private remarks)
- Talk to our buyer's lender (we decide if the buyer will be able to perform)
- Talk to our buyer's inspector (as agents, the buyer generally doesn't mind us sticking around the inspection so we know first-hand what issues we have)
- Talk to our buyer's appraiser (this may be the most important reason)
- Know exactly who is seeing our properties and when (we can make sure every showing is perfect)
- Get direct feedback on showings (not have to wonder if our agent is not asking the right questions or miscommunicating feedback)
- Have the ability to easily network with other agents (this is how we buy and sell most of our deals, through our agent network)
- Lots and lots of other stuff
Don't get me wrong, the extra money is nice. But the control is mandatory. Our average hold time on our properties is about 100 days; we rarely have a buyer's contract fail to close these days; our appraisals generally come in at value; and we never wonder what's going on with our deals.
I think it's safe to say that if we hadn't gotten our licenses when we started, we wouldn't still be in this business. We didn't have our licenses on our first two deals, and it was more stress and headache than I'll ever consider dealing with again in this business. It wasn't worth the trouble.
That's why we're licensed. It certainly may not be right for everyone...but I couldn't succeed in this business any other way.
Real Estate Investor · CA · Member since 2009 · 174 posts · 39 votes
13y
Thank you Steve B. Here is how I understand it. I'm offering full LISTING-price but full LISTING-price is far below market value. "OK? I have never hear it put that way before.
Wholesaler · College Station, TX · Member since 2012 · 20 posts · 1 vote
13y
Question to those who have their licenses...after the license exam is passed, what is the next step? Are you on your own looking for a broker to work with? I am in Texas so I am not sure if the process is different state to state.
Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 969 posts · 488 votes
13y
J Scott
Well said. I also got my brokers licence after too many deals were being lost because of the same issues you describe. I had many deals that didn't work out or that were much more difficult than they needed to be because of the two agents. I love the full access to the MLS and the saved commissions but overall your list is dead on.
As to all the agents that have chimed in about not being swayed by receiving both sides of the commission... that is good to hear. Of course that is your responsibility to your client. Of course not all are like you. Like I said, I saw numerous deals sell for less and with more contingencies than the offers myself and my clients were presenting...the only constant was that the listing agent got both sides. Often times these offers were in within hours of the property being put on the MLS, and of course there was no or little response from the listing agent for several days or weeks until it finally showed up as pending. Again...many agents are ethical and do the right thing...but many don't.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
To go along with my post above, here was my first post on the BP Blog a couple years ago...this should give you a better idea of why I like to have my license:
Real Estate Broker · Gibsonia, PA · Member since 2013 · 828 posts · 260 votes
13y
J Scott thank you so much! i do want to gain control on all the areas mention all the time! that was a great list. thanks for taking the time to break it down for us!
Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
13y
J Scott You're right on!
To the poor bast*rd listing agent handling a $5,000 listing, that's a waste of energy unless you're collecting 100% of the sales price as a commission.
ENTREPRENEUR vs Real Estate Agent: the top agents are entrepreneurs. They are the creme of the crop and quite rare, but the best are ENTREPRENEURS by any definition. IMO:)
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
13y
Get the license, and no not a Realtors license because there is no such thing. I was an investor for 10 years and then one day it dawned on me how much money I had thrown away on deals I had passed on as an investor because they were too slim for me but were good to retail and earn a commission on.
Reasons to get a license. 1. Doesn't hurt to acquire the knowledge base a agent has. 2. You are likely to be more current on changes in the law, etc that are broadcast to agents. 3. You can list a property you are going to pass on and earn a commission. 4. Buyers you find that aren't buyers for your product can be shown listed stuff and earn a commission. 5. You can earn referral fees from agents for those buyers and sellers that are out of your market area. 6. and of course MLS access. 7. Earning a commission on your deals if one is on the table.
Final comment, some states like California do no require you to tell a seller or buyer you are an agent if you are acting as a principle in the deal. The requirement comes from the contract you sign that you will comply with the code of ethics when you become a Realtor, and the code states you need to disclose or you could lose you membership status. And all MLS's I know of require you follow the code of ethics whether you are a Realtor member or just a MLS member..
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
You have to hold a real estate salespersons or brokers license to be a member of an MLS and have access (or an unlicensed assistant to a licensee), but you do not have to be a Realtor, which signifies a member of the National Association of Realtors, a professional organization. At least, that is the case in several MLSs that I belong to in CA. I suppose there could be MLSs out there that do require Realtor membership in order to have access. Is that the case in your area, Sandy?
You have to hold a real estate salespersons or brokers license to be a member of an MLS and have access (or an unlicensed assistant to a licensee), but you do not have to be a Realtor, which signifies a member of the National Association of Realtors, a professional organization. At least, that is the case in several MLSs that I belong to in CA. I suppose there could be MLSs out there that do require Realtor membership in order to have access. Is that the case in your area, Sandy?
This is true in my area as well wrt MLS membership. However, if you want access to CAR (California Association of Realtors) forms you have to either pay dues and become a member of CAR/NAR, in which case you get the CAR forms for free, or, you can decline membership in CAR/NAR and pay a subscription fee to get CAR form access that is about the same cost or more than the membership dues.
Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
13y
Correct. You do have to be a Realtor in our area to be an MLS member. You brought up a good point, an unlicensed assistant to a licensee can be given access.
Involved In Real Estate · Humble, TX · Member since 2013 · 16 posts · 0 votes
13y
In my area (texas) you can purchase software for a monthly fee ($80 I think) that is licensed to have access to the MLS....you do not have to be licensed yourself per se.
And in the original post, what the poster was saying about Texas being a nondisclosure state doesn't mean disclosing if you are an agent or not, but rather knowing the exact sale price of a property. Here they give ranges that a property sold for as public information (I.e. when you look a property up it will say it sold for $100,000-150,000), which is not very helpful when looking for comps. That's why the MLS access is pretty much mandatory.