Having a Real Estate License: Does that make you an Agent?
Member since 2013 · 67 posts · 4 votes
I was wondering about something for a little while now. When you get your salesperson license you will then have access to the MLS, and you need to find a broker to "sponsor" you. So, does this technically make you an agent? I was thinking, if I could start off working as an agent listing and marketing properties for sellers and then bringing them buyers and collecting a 3%-6% commission for each transaction it would be a great way for me to raise capital for investing. Would it be possible to be an agent and an investor at the same time or is being an agent a full time job that would make it difficult to invest as well. Would appreciate it if anyone could answer my questions or give me advice on this matter. It's something I've really been thinking about.
Edited, two posts beat to it. Yes, you act as an agent individually under a broker or if you have a broker's licensee then you can have a company under the brokers company. You could have a company in your name to invest, but you better clear that with the broker and the state authority, depends on what that company is doing.
Terry, there are several options, being a licensee does not mean you're an agent until you enter into an agency relationship with a broker. Technically you represent the broker in providing representation to the public. A broker or agent does not need to be a Realtor, that is a professional organization but since the NAR sponsors the MLS, you may not get access, you'll find many commercial brokers are not Realtors.
Your broker, as a Realtor will be a member of the local board of Realtors and they govern the relationships between brokers, in doing so they set a co-brokerage fee to be divided for commissions, but each broker is free to set thier own fee structure, but, if a property is listed on the MLS as a condition to do so, that board may require a fee being split under the co-brokage agreements, but some may allow an exclusive listing without fees to others, which means others won't be showing or mentioning such a listing.
It's highly unlikely a broker would allow you to do only such exclusive listings trying to get 6% or full commission and there is also the split with the broker to hang your license under them. SInce they want sales (and listings that sell quickly) the broker is motivated to use the MLS on the co-brokerage agreement in that board area. If I were your broker, I wouldn't allow your scheme as it really hinders the owner in providing the best marketing path to get thier property sold.
You can be a Realtor or an agent under a broker and invest for yourself, you can read here on BP about thos issues and the requirements to disclose your being a licensee or agent.
As far as a way to earn, yes, being an agent probably has advantages over trying to go out on your own, especially with limited capital as an investor. There are brokers who provide additional training, they can generate leads and business for a new agent that an investor starting out just would not get. But, you'll be spliting commissions not hauling in full commissions on every deal but it is possible.
Study well! :)
Personally, I think that's a great way to start. Not only can you make some money, it will give you the opportunity to learn the process, learn a farm area and get familliar with values in your area.
Btw, you likely won't get MLS access until *after* you hang your license with a broker, not before...
Thanks a lot for that reply J Scott. I'm really glad to hear that you think my plan is a good idea. I see you as one of the professionals on this site and now that I know you think that being an agent as a way to raise money and learn is a good way to start I think that's what I'll do (as soon as I get educated and licensed that is). Thanks for the heads up about when I'll have access to the MLS. By the way, if I do take this route would you recommend that I set up two different business structures for my real estate agent business and my real estate investing business, or how would that work? For example, would I have my real estate investment LLC and then a real estate agency separately?
Edited, two posts beat to it. Yes, you act as an agent individually under a broker or if you have a broker's licensee then you can have a company under the brokers company. You could have a company in your name to invest, but you better clear that with the broker and the state authority, depends on what that company is doing.
Terry, there are several options, being a licensee does not mean you're an agent until you enter into an agency relationship with a broker. Technically you represent the broker in providing representation to the public. A broker or agent does not need to be a Realtor, that is a professional organization but since the NAR sponsors the MLS, you may not get access, you'll find many commercial brokers are not Realtors.
Your broker, as a Realtor will be a member of the local board of Realtors and they govern the relationships between brokers, in doing so they set a co-brokerage fee to be divided for commissions, but each broker is free to set thier own fee structure, but, if a property is listed on the MLS as a condition to do so, that board may require a fee being split under the co-brokage agreements, but some may allow an exclusive listing without fees to others, which means others won't be showing or mentioning such a listing.
It's highly unlikely a broker would allow you to do only such exclusive listings trying to get 6% or full commission and there is also the split with the broker to hang your license under them. SInce they want sales (and listings that sell quickly) the broker is motivated to use the MLS on the co-brokerage agreement in that board area. If I were your broker, I wouldn't allow your scheme as it really hinders the owner in providing the best marketing path to get thier property sold.
You can be a Realtor or an agent under a broker and invest for yourself, you can read here on BP about thos issues and the requirements to disclose your being a licensee or agent.
As far as a way to earn, yes, being an agent probably has advantages over trying to go out on your own, especially with limited capital as an investor. There are brokers who provide additional training, they can generate leads and business for a new agent that an investor starting out just would not get. But, you'll be spliting commissions not hauling in full commissions on every deal but it is possible.
Study well! :)
I did exactly what you're doing when I started out. Try and work with some investors as clients and you will learn how they do things.
One thing that I did was take classes to become a broker as soon as I could. I didn't like paying the fees to the broker that held my license. Most states have requirements that you need to meet to become a broker, but it's worth it.
Good luck with it and save as much $ as you can.
Wow Bill Gulley! Thank you for that extensive and informative reply, that gives me a lot to study and think about. I wasn't quite sure how the whole agent broker thing worked, I guess you can tell I'm a complete newbie to real estate. So what exactly is a Realtor? You said it was a professional organization. And what is the NAR?
Thanks for the info Rob K. I'm not doing it yet though, I'm just thinking about it. I am completely new to real estate.
P.S I love that logo you have "Enjoy Capitalism". Awesome.
Terry H. Having a license is the first step in becoming an agent. The next step is to put your license under a broker, where you sign an employment agreement. The commission is divided between the SO - selling office, and the LO - listing office, with each usually getting half. NOTE, it doesn't go to SA- selling agent. The Broker then pays you your portion of the commission, based on your agreement. Often new agents start out on a 50% split, until they reach a certain dollar figure, and then it's increased. If you are the listing and selling agent, you get that portion of both sides of the commission.
There's also things that can be taken out of your share, like OE Omissions and Errors insurance, advertising, signage, etc. Each office sets up their own standards regarding those things.
To join MLS you have to be a member of the local Board of Realtors. You can choose to not pay the fees for the actual Realtor designation and only use MLS should you choose. Membership fees are annual fees, and then you pay the monthly fee for use of MLS.
Having a license doesn't stop you from acting as an investor. However; most brokers will allow an agent to have one sale etc. per year, of their own property, that isn't subject to commissions, but thereafter, you are required to list all your own properties for sale through that office, and pay commission established by the broker.
When you go interview with Brokers, those are some of the things you want to ask about. Also, find out what type of training they have available to new agents.
A Realtor is a Designation from the National Association of Realtors. The NAR is kind of like the political arm of the MLS that represents members with legislation that's being passed, advertising that you see on TV telling people to use a Realtor, etc.
Good luck!
Thanks Karen Margrave. So my plan after I get my license is to first purchase a small multifamily and live in it with my tenants. I would then like to become an agent. After gaining some experience (and capital) I would then like to become a full time investor. Do you think that plan would work out? Before I purchase the multi family should I first set up a business? How would that affect me as far as becoming an agent?
@Terry H. Great question. I took the RE Salesman course back in "07" and finished the whole process, but unfortunately that was the time when things got crazy in the market, so I had to put it on the back burner. Now I am going to take the coarse again (refresher) to get my license and join up with a broker to learn how things work on the inside.
Like J Scott said this is definitely the best way (as i see it for me) to learn process as you create revenue though commission, become familiar with various areas, how to close deals, and become familiar with the market.
Also look up RE Investment groups in your area and visit the meetings, there is a lot of networking there to be done.
This is what I have done as well. It's a great way to earn and learn simultaneously. That said, don't put the cart before the horse. I wouldn't worry too much about business entities for investing until you're closer to buying something. Right now you want to focus on learning as much as possible about the everyday stuff and doing as many deals as possible to build your capital.
Terry I think you're trying to fit too many puzzle pieces together from different puzzles haha.
Being an agent first or setting up an entity or purchasing a multi will not necessarily hinder the others, and could all be done simultaneously. Best will be to talk to a broker in your area to find out their take on what they would and wouldn't allow if you worked for them.
Also realize that an entity is not vital to invest, I personally have 5 properties and every one is in my personal name. I find all of the entity stuff bogs down my ability to invest so I don't do it. I carry insurance and that is my protection.
I'm not advocating one way or the other just saying there are other options and there are threads on BP with the different ones with hundreds of replies to go through.
I would say if you decide to go the agent route I would find a broker to talk to while doing it or right before and ask them the questions about how they would want things if you worked for them. You'll get good specific local advice, and who knows you may talk your way into a job at the same time. Good luck and keep asking questions as you go, we're all here to help.
Matt Devincenzo is right, you're going to overwhelm yourself with trying to figure out details that aren't necessary right now. Your real estate license is in your name, and will be under your broker. You don't need a business entity for that. Whether or not you want to have a corporation to hold your properties in is something you should discuss with an accountant or attorney.
Being an agent and learning the ropes is always a benefit. It allows you to learn the entire process of the business, from taking a listing through selling, title, escrow, insurance, financing, marketing, dealing with buyers and sellers, other agents, and so much more.
Once you're working as an agent, look for those agents that aren't just successful, but conduct themselves as professionals. There's often agents that manage to put a lot of 'deals' together, but didn't make sure all the i's were dotted and t's crossed. Learn to do things right, and build your reputation, because in this business, integrity matters.
So if I'm newly licensed, and I want to be an agent, first I need to find a broker. Then I have to come to an employment agreement with the broker, right? So technically I would be an employee of the broker. Does that mean I have to fill out an application and sit through an interview? Do brokers have any requirements for someone working under them as an agent other than that person having their salesperson license?
Actually, I find that I'm the one interviewing the broker, as the agent. Many of the franchised brokers will want a big slice of your earned commissions for "training" you - if you dont want/need that training, that money is wasted. Others collect a monthly fee and a flat-fee on every transaction.. a common model in my area is $25/mo + $250 per deal.. the remainder of the buy/sell side commission goes to the agent. Some brokers want 30% on all deals, some want 80% on the first two deals in a month + "desk rent", "technology fees", etc.. you should be the one making sure that that the broker provides is something that you need.
Theres nothing wrong with signing with a broker that charges 80% on your first two deals, if they're giving you the training & leads to get a decent amout of sales, that you wouldnt get on your own. If you just want to run deals for yourself, you dont need that kind of support, and they may not want you running your own deals under their brokerage. You should really be the one asking the questions at the interview..
Terry H. What brokers are looking for are agents that want to learn the business (if they aren't experienced), are aggressive, have the discipline to do the job, works well with others, and is willing to put in the time to get established, etc.
What an agent should be looking for (if you're inexperienced) is an office that has some type of training program where you can learn the basics of contracts, listings, will help you with your first transactions and walk you through them, etc., one that does marketing and gets their name out there, and has good exposure for your listings. Also, for new agents floor time and opportunities for open houses helps.
You want an office that has a good reputation in the area, as sellers usually hear about agents and offices through others. Look at which offices do the most marketing, etc. Where are the top producers?
In effect, you are interviewing each other. Brokers have to pay their bills and they don't want dead weight.
The Realtor designation is used by only members of the National Association of Realtors (NAR).
Reading past, you commented that you would be an employee of a broker....no, you are an independent agent, the broker will give you enough leeway to act as independently as possible in meeting the business relationship. But you will be following instructions as an agent.
Commission splits vary, some have different levels that you can buy into like paying a flat amount to earn different commission levels in the company, meaning that 3/6% is split differently.
As others have mentioned, it's a good way to start out. Don't be so concerned about the backroom structure of a brokerage relationship at this point, get the basics and the big picture.
And, you don't need a company at this point. :)
We can never tell what is going on in your life from just reading a forum post. If you are looking for a career, you could not find a better opportunity than getting a real estate license and selling real estate for commissions. You don't have to be a super star to earn a hundred thousand dollars per year selling real estate.
What a great place to learn. You learn about public records. You learn about disclosures. You learn about getting sued without being the defendant. In Florida( in most states) , you have to work for a real estate broker. Most tradionial brokers split the commission 60/40 or 50/50 or something like that. In Florida, there are plenty of brokers that will let the salesman keep all of the commission but $500. If you placed your real estate license with a broker like that, you could earn a$10,000 commission and put $9500 in your pocket. I presume there are brokerages all over the country that do the same thing.
If you don't have some other career in high gear, get your real estate license and start earning commisions
Thanks for the info @Ron Climer. Being a real estate agent sounds like a great career opportunity for me.
So becoming an agent doesn't require hiring a real estate attorney or accountant like when you an investor right, or does it?
No, it's like a job interview..... :)
Terry,
In case it was not clear in earlier posts, the governmental licensing mechanism that you're going to need to get licensed for is:
Real estate salesperson (the license that allows you to negotiate on behalf of another)
A real estate broker (or brokerage company) is the actual party that contracts with the client (homebuyer or seller) and the salesperson performs their duties under the broker's license.
Realtor, NAR all refer to an independent trade association that is not part of the licensing requirement and is optional (although hard to live without) to join. You can legally do everything you need to do with the real estate license, affiliated with a broker. The terms "Realtor" and real estate broker or real estate salesperson mean different things, as outlined above.
Last, I recommend you contact your state department of real estate or visit their website and download license application instructions and if they have it, the broker compliance manual and other guidelines for operation of a brokerage office.
Here in California, (which I know is not where you are) the department of real estate provides tons of free info on their website to licensees and prospective licensees ( www.dre.ca.gov ) because they are understaffed and want people to find out as much as possible on their own.
Hope that helps,
Joffrey
Another question about being an agent. Since you're working independently as an agent, it's not like you're collecting a weekly paycheck, so how do taxes work? Do you need to obtain a federal tax ID number? State tax ID number?