Real estate investing as a licensed realtor

Real estate investing as a licensed realtor

Knoxville, TN · Member since 2012 · 25 posts · 2 votes

I’m a real estate investor in Knoxville, both flips and rentals. I decided recently to become a licensed affiliate broker in the state of Tennessee to have faster access to listings, comps, get in doors, etc.. I’ve always known that if I list my own properties or represent myself in buying or selling, I have to disclose that. No problem.

But as an investor, I maintain several websites as marketing funnels, I have business cards and flyers, run Facebook ads, etc. I don’t have a company logo or anything, it’s more less “I buy houses in Tennessee” type of thing.

As a realtor, I will not be a buyers agent for anyone, nor will I be a listing agent for anyone. Ever. Even initially I’m not going to represent myself on my own transactions. Maybe on down the line. But I have worked out an arrangement with a local realtor who will be drawing up the contracts for me on the buy side, and will list and sell the properties that I’m flipping. I’m not even going to be a part of that process. I Find the property, tell her what I want to pay for it, she does the rest and I just bring the money to closing

I’ve learned recently that if I do go ahead and hang my license with a brokerage, I might have to disclose EVERYWHERE that I am an agent. That makes it kind of difficult to run a Facebook ad back to a landing page. It also takes away from my primary message, which is, I will buy your house fast, for cash, no repairs necessary, etc. etc. 

I don’t really want to put the branding of my chosen brokerage, or my broker license number or anything like that on my website, business cards, lead pages, Facebook ads, printed mail marketing, etc. Before I hang my license somewhere I want to make sure I know what I’m getting myself into and that I won’t hurt my marketing efforts. I don’t mind putting in the disclosures when she goes to sell one of the flip properties, that the owner is also a licensed agent. But in my marketing materials to try to find under the radar houses to buy, I just don’t want to do that.

The rules of each state commission may differ, but those of you who are a realtor and are also investors… Have you had to deal with this? Do you know somebody who invests as a licensed agent, who doesn’t represent buyers or sellers? What did they do? can you see this hurting my marketing efforts or am I overthinking it?

Thanks!





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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y

Your state probably requires disclosure, whether you are a buyer or seller. Even if you have another agent represent you, there's probably a requirement to disclose that you, the buyer, are a licensed real estate agent. I don't think there's any way around that except to terminate your license.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    6y

    Your state probably requires disclosure, whether you are a buyer or seller. Even if you have another agent represent you, there's probably a requirement to disclose that you, the buyer, are a licensed real estate agent. I don't think there's any way around that except to terminate your license.

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  • Real Estate Agent · Sevierville TN · Member since 2018 · 305 posts · 224 votes
    6y

    @Curtis M.

    Do you have your license or have you just taken the course and passed the test?

    If you already have your license then you should already be affiliated with a broker. Being an agent in TN requires you to work under the supervision of a Broker for a period of time before you can get your Brokers license.

    Brokers will usually expect a split of your transactions or require a monthly fee. Sometimes both.

    Having your license does have benefits but yes it does require you to disclose it. The reason being is that as a Realtor it’s assumed you have more knowledge and information on the market. If you don’t disclose and the buyer or seller finds out later and decides that you “took advantage of them” because you offered below market value they can file a complaint which could lead to a fine and loss of your license. But that’s pretty extreme.

    My experience has been disclosing has had no impact on anything I’ve offered on market. It may have actually helped as I act as my own agent and while I often can’t get right to the seller being able to negotiate with the listing agent myself and tell my story I believe helps my chances.

    Even if you’re using an agent it’s not likely your status as an agent should have an impact since the other parties agent should be the one looking out for their best interest.

    On off market deals it’s really only a factor if you’re acting as your own agent for the reasons I mentioned above. But I feel it’s all in context, telling someone you’re an agent as part of your story won’t matter unless they’re just super anti-agent in which case you just have to work a little harder to win them over.

    Of course I’ve had lots of offers rejected or not responded to. We’re any of those because I was an agent I’ll likely never know.

    Bottom line is if you have your license, disclose it.

    Best option is to have your wife or someone else close to you get their license so you have that access but then you aren’t an agent and don’t have to worry about it.

  • Knoxville, TN · Member since 2012 · 25 posts · 2 votes
    6y

    @Derek Tellier I appreciate that response. My concern were the ads, print marketing and my private lead gen websites. I wonder if I can just put the broker branding/mention in the footer. Or maybe even disclose my status and spin it as a positive to save money on commissions or similar. I have selected a broker but have not applied for the license yet. It’s not a broker rule though, it’s a state rule.

  • Real Estate Agent · Sevierville TN · Member since 2018 · 305 posts · 224 votes
    6y

    @Curtis M.

    Correct it’s a state rule.

    This is from the actual rules under personal disclosure

    PERSONAL INTEREST.

    No broker or affiliate broker shall, either directly or indirectly through a third party, purchase for himself or attempt to purchase or acquire any interest in or option to purchase property listed with him or with his company, or property regarding which he or his company has been approached by the owner to act as broker, without first making a full disclosure of his true position to the owner of the property or to any prospective purchaser for which he has acted for as a client or customer. After acquiring any such personal interest, either directly or indirectly, the broker or affiliate broker shall make a full disclosure of his true position to prospective purchasers who tender offers to buy the property.

    All licensees shall identify themselves as a licensee when buying or selling property for themselves.

    Advertising gets a little grayer and I’m no attorney or expert.

    I'd say the easiest thing would be to create an LLC, not that expensive to do. Then have the websites and everything like be run by the LLC.

    I'm going to research this more myself as I'm about to get my sites going and already an agent so need to make sure. I did start an LLC though so I will likely just use it.

  • Real Estate Agent · Sevierville TN · Member since 2018 · 305 posts · 224 votes
    6y

    More from the rules in regards to advertising

    “All advertising, regardless of its nature and the medium in which it appears, which promotes either a licensee or the sale or lease of real property, shall conform to the requirements of this rule. The term “advertising,” for purposes of this rule, in addition to traditional print, radio, and television advertising, also includes, but is not limited to, sources of communication available to the public such as signs, flyers, letterheads, e-mail signatures, websites, social media communications, and video or audio recordings transmitted through internet or broadcast streaming. Advertising does not include promotional materials that advertise a licensee such as hats, pens, notepads, t-shirts, name tags, business cards, and the sponsorship of charitable and community events.”

    So if you aren’t advertising the sale of property do you have to disclose?

    I’m going to reach out and directly ask the commission for clarity on this though as I need to know myself.

    I’ll follow up once I get their answer which shouldn’t be more than a day or 2.

  • Knoxville, TN · Member since 2012 · 25 posts · 2 votes
    6y

    @Derek Tellier @Derek Tellier I’ll call the state commission tomorrow to see what they have to say. One broker just told me the new rules state that business cards don’t count. And that digital advertising needs to be “one click” from disclosure. Meaning my landing page would need disclosure but that the Facebook ad would not. I’m not sure about other print advertising I send out though. I’ll figure that out and post my findings.

    I actually just closed down a Colorado LLC I used for investing and I am setting up a Tennessee LLC. Two in fact. One for flips and one for buy/holds. I guess since I will not be generating any realtor commission because I have another agent buying and listing my properties (she will deal with the broker split), I can have the branding of my LLC on the site and maybe there's a workaround there. Or again, maybe it's not even a big deal to disclose. I was just picturing on lead generating ads trying to find space in the ad to disclose broker relationship without taking away from the focus of the message in the ad

  • Knoxville, TN · Member since 2012 · 25 posts · 2 votes
    6y

    @Derek Tellier That was my other thought. When I sell the property my listing agent will be disclosing that the seller is an agent. In the MLS ad and anywhere else it appears. That's no issue. Im referring to finding an under the radar seller to buy from through my advertising.

    I wonder if it was made a rule because of bait and switch agents? Maybe they reach out and say “I’d like to buy your house. Oh, your house is too expensive. But it’s a beautiful house and I think I can sell it for you.”

    I’m not sure. But it does seem silly that in order for me to go and find someone willing to sell me their house, I have to put on all of my marketing the branding of my parent brokerage and disclose my licensure.

  • Real Estate Agent · Sevierville TN · Member since 2018 · 305 posts · 224 votes
    6y

    @Curtis M.

    I'm with you, I'd believe that if the LLC is operating the website then no disclosure would be required on the site itself.

    But when you go to the property to meet a potential seller you’d need to tell them you’re an agent.

    I’ll let you know what I hear and please do post what they tell you as well. We’ll compare notes and hopefully both get the same clear answer.

  • Realtor · Gatlinburg, TN · Member since 2018 · 261 posts · 155 votes
    6y

    @Curtis M. I don't see it really hurting either the purchase or the sale. The only thing you have to do is disclose it. 

    As a seller, you just include it in the text description. As a buyer, you have to give the seller a document saying you're interested in acquiring it and bid like anyone else. 

    Where being a licensee does hurt you is as a seller of your own properties b/c your state required E&O insurance may not cover you if something goes awry and a disgruntled buyer sues you.

  • Knoxville, TN · Member since 2012 · 25 posts · 2 votes
    6y

    @Matt Castle. Hey man. My only issue is my lead generation strategies. Website, Facebook ads, lead pages, mailers, business cards.

    If I have my agent submit an offer to a seller, I have no problem with her disclosing that the buyer is a licensed agent. Similarly, when it comes time to sell, my listing agent will be happy to put that the owner is also an agent. I don’t see any harm there.

    My problem is muddying the message of my marketing because I have to put broker branding or licensure information on every piece of marketing. so if I see a distressed property in the neighborhood I want to buy and I want to send them a letter, the rules state that I need the branding of my parent broker on the letter. In fact the rules even go so far as to say that not only do the name and phone number of the local brokerage where I hang my license have to go on the marketing…the font in which I put their info has to be as large or larger than the font I use for my own name. It’s really weird. And distracting I would think.

  • Knoxville, TN · Member since 2012 · 25 posts · 2 votes
    6y

    @Derek Tellier that's a good call. Because I did just learn through the agent training that a corporation is an artificial person. And my LLC will be paying cash for most if not all the properties purchased. That likely means that if the business has its website, and the business is making the offers, and the marketing is paid for by the business, then I can keep my marketing clean.

    Like you said though, when it does come time to make an initial offer or relist the property after remodel, I have no issue disclosing that the owner of the LLC is a licensed agent.  My goal isn't to trick somebody. It's simply to attract potential sellers through my marketing, without muddying the message with broker branding and licensure information. Especially when I don't have a lot of space on an ad for extra info. 

    I will be looking into this further this week.

  • Real Estate Agent · Murfreesboro, TN · Member since 2019 · 194 posts · 181 votes
    6y

    @Curtis M.

    Following this closely as I will soon be a listed agent as well.

  • Realtor · Gatlinburg, TN · Member since 2018 · 261 posts · 155 votes
    6y

    @Curtis M. yeah I've went round & round with my broker on lead generating issues as well. It's a difficult strategy these days b/c of TN requirements. Hopefully I can spend some time digging into the specifics one day. 

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