As I'm researching the pros/cons of getting my real estate agent license, one of the main cons that keeps coming up (other than the cost of getting and maintaining the license) is having to disclose your status as an agent in any RE transactions that I would have a financial interest in. If my wife gets her license instead of me, would I still need to disclose a "conflict of interest"? What if her name is not on the title and/or the property is held by an LLC and not directly in either of our names? Any other tax consequences related to REI I should know about for either myself getting a license or my spouse?
@Jed Burkey Hi Jed, There is no conflict of interest because you are a Real Estate Associate buying or selling property for yourself. You do however have to disclose.
To disclose you complete a "Licensee Disclosure of Personal Interest" in which you would write your name, the information on the property in question and whether your interest is in buying or selling the property. It is a 1 page disclosure (in FL it is CR-5x_AA). The disclosure is provided to the seller or buyer depending on which side of the transaction you are in.
As a Real Estate Agent, every property I see; my first question is always, is this a good investment for me. If it is, I will try to buy it.
You do however, need to discuss this with your broker. They do need to know what you are doing and depending on who you work with, the brokerage will have its own set of rules around commissions as it relates to personal investments.
Hope this helps!
If the principal purchaser himself is a licensee, then absolutely you must disclose that. However if the purchaser's spouse is a licensee, but not involved in the transaction in anyway, then I do not think that is something that needs to be disclosed (and, of course, check with the licensee's broker and state laws to confirm).
As far as downside of your spouse getting a license, I think the biggest one is feeling committed to using him/her in any transactions. Just because they have a license does NOT mean that they will be a committed, professional, and high performing real estate agent. What happens if they get their license in order to support your business and then they suck at it? Don't fall into the trap of thinking that all it takes to become a quality agent is 40 hours of Pre Licensing classes.
Thanks for the response! Do you usually have a discussion with the buyer/seller about this or just include this document in the paper work? If you discuss, what’s a good one-two sentence explanation you’ve found that works well to explain that you’re an agent?
Thanks Joe! The main reason I want myself/spouse to get a license is to have access to the MLS and potentially other sights that are exclusive to realtors (like RPR) and be able to get into properties for walk throughs without having to go through an agent. I'd mainly be using the MLS/RPR for comps (and searches for any deals that haven't been snatched up before they're even put on the MLS).
@Jed Burkey Talk to your CPA. In my case, having a “real estate professional” in the family was a tax game-changer. Most of my income is from investing as a LP in multifamily syndications, which generate massive depreciation paper losses that the tax code enables my family to offset income from any source. You also don’t have to have a real estate license to achieve that classification.
Thanks Holly! Yes, I shouldn’t have skipped over one of the main advantages-tax benefits. I’ll have a chat w my CPA about this. Great advice!
@Jed Burkey If you wife has her license and is involved in the transaction then she would need to disclose. Here in Florida If I were to help my parents buy a house I would have to disclose that I am related to them. Disclosing you are a Realtor should have little to no impact on your ability to close a deal. It really is no big deal unless you do not disclose and then it can be a big deal. I say get the license get your access and maybe you can make a few bucks helping friends and family buy or sell. Heck you might be able to make a decent side gig out of referral fees.
@Jed Burkey Hi Jed, I am always upfront about it. I find it that when you take this approach, you create a trust relationship immediately because you have nothing to hide and your clients, buyers, or sellers, appreciate that.