Broker/Agent/Investor Dillema

24 Replies

For the past few months I placed investing on hold to study for the California RE License.

My excitement of receiving the license in the mail is abruptly turning into disappointment. I got my license mainly for MLS access. The past few days I've been researching a Broker to hang my license with. After a multitude of turn downs for Brokers in the Sacramento area due to the fact that I want to be an investor and not an Agent, I found (thanks to BiggerPockets) an online broker (REeBroker) that seemed to fit my needs well. After talking with the Office Manager, they made me understand that once I hang my license with them, I have to run all my transactions through them. If I consider a Lease Purchase as an investor I still have to run the deal through their Broker first. Because I have to place the Broker's name and license # and my license # on all my RE marketing and, because I'm using the MLS through them I have to get the broker's approval for all transactions involving RE, whether as agent or not.

I'm very new at this, but, if the above is true, I just don't see how an active license is beneficial. I don't want to depend on a broker's approval as an investor. Can someone, please, clarify this? Is there a way around all this nonsense? Does anyone know how I can use my license to get MLS access without constant broker supervision?

I'd really appreciate all and any help in regards to this.

If you want MLS access, you must have your license with a broker. Or get your brokers license. The other thing is that if you are licensed and do your own deals, you must disclose that each time. Unless you are professionally selling real estate, a license can just slow you down.

@Aristotle Kumpis

It seems like, doesn't it?

Than, why so many investors promote getting your license? 

How do they do it?

Really? I've never heard investors telling others to get licensed. I'm licensed because I sell real estate for a living. If you get a brokers license, then you can do just about any transaction yourself. Sales license and brokers license are two different things.

But with all that said, you don't need a license to be an investor. You can buy and sell real estate without a license, as long as you are the owner. And that's what a lot of investors do. They buy property in their name, and flip it. You don't need a license to do that, at least in California.

Originally posted by @Attila Bertalan :

@Aristotle Kumpis

It seems like, doesn't it?

Than, why so many investors promote getting your license? 

How do they do it?

 I wouldn't get my license unless I planned on being an agent.  However, I have taken the class to get my RE license and even took and passed the state exam.  I didn't get my license because I didn't want to be an agent.  But what I learned in the class has proven invaluable over the years as a landlord and investor.  I recommend taking the class as a great way to begin learning about RE laws and regulations.

@Aristotle Kumpis

YES! There are many investors out there that have their RE license mainly to gain access to the MLS. You probably didn't read my post entirely because I got my license in the mail. I don't think that i would've passed the board exam not knowing the difference between sales license and broker license. But, nonetheless thanks for replying.

@Randy E.

I definitely agree with you! But, also, there is great benefit in having access to the MLS and still being able to invest while you hold an active license.

Originally posted by @Attila Bertalan :

For the past few months I placed investing on hold to study for the California RE License.

My excitement of receiving the license in the mail is abruptly turning into disappointment.... 

... they made me understand that once I hang my license with them, I have to run all my transactions through them.... 

Because I have to place the Broker's name and license # and my license # on all my RE marketing and, because I'm using the MLS through them I have to get the broker's approval for all transactions involving RE, whether as agent or not.

I'm very new at this, but, if the above is true, I just don't see how an active license is beneficial. I don't want to depend on a broker's approval as an investor. 

Can someone, please, clarify this?

Is there a way around all this nonsense? Does anyone know how I can use my license to get MLS access without constant broker supervision?

I'd really appreciate all and any help in regards to this.

 Fear Not! 

You are in the right place! 

That is quite a "can of worms" you've opened up!  

The reality is, as a licensed agent/investor you are just now breaking into the primary reason why people won't get a license. 

It's this misunderstandings about how this can work to your favor, and how this all fits together!  If you will allow me a brief minute, I will see if I can "clarify this!"

Seems like from reading the above questions, they revolve around three main points.  

1.  What advantage does the license provide if I have to go through the hassle of the Broker?

2.  How do I remain compliant with Local, State, and Federal Law with regards to disclosures (Agency, Broker ID, etc) and still remain powerful as an investor

3.  Is all this really necessary, and is there a better way?

Answers To Your Questions

To answer your questions 110% quickly, YES, you can get MLS access as a team member, or assistant, or some associate capacity, but that does not relieve you of the obligations of the Broker knowledge. BUT... There is an answer!

While it is true, for any AGENCY type of contracts (Listing contracts, Buyer Agreements, etc) where the Broker is responsible for overseeing the contract, then yes, they need to see the contract.  

On any contract, the problem is NOT having the Broker see it.  That's not what you are probably worried about.  You are probably worried about how to explain it, or the money involved, or having to disclose the amount because you fear that he/she will "have their cut."

This is where by simply educating yourself about the process, you will discover that nothing is further from the truth.  As a Broker myself, I would simply want to know that you aren't doing something that is illegal, nor attaching my name to something.  

Since Wholesaling and Investing on your own as a Principal is not illegal or unethical (National Association of Realtors® Code of Ethics Article 4), you can ethically invest on your own as a rehabber, landlord, or wholesaler.

Special Advantages as Wholesaling/Agent

As an Agent who Invests, a traditional wholesale (aka "Assignment of Contract") is considered personal property.  Not REAL property.  As the equitable interest is transferrable amongst parties and is not considered real property, then it is not subject to commission splits.

Let me reiterate this.

A 100k home... with a buyer broker agreement offering out 3% for any buyer you bring will pay you $3000 BEFORE your split.

A Wholesale transaction however, with a 3-5-10k Assignment Fee closes much faster than the traditional Buyer Controlled sale, and is not subject to splits with your broker.

Now I know that sounds impossible to believe.  To prove this... feel free to show me anywhere where an assignment is considered real property.  It is no different than selling a car.

Disclosures 

Yes, According to the National Association of Realtors Code of Ethics, you need to prominently display the fact that you are a principal in the transaction.  

This actually works to your advantage.  One obvious reason is that in a competitive situation, if all things are equal, the one who is a wholesaling investor/ Realtor® will have an obvious advantage over the Wholesaler from a bandit sign.

Do not be afraid to let people know you are an Investing Agent.  After 19 years, three things I have learned. 

  • Sellers dislike listing agents. If they could wave a wand and sell their home.. they would.
  • Buyers consider agents necessary evils.  If there was a way to find a home and get it bought quickly without all the hassle.. they would.
  • Sellers love, Love, LOVE Agents who BUY property.... They naturally (perhaps unfairly) assume it is safer.

So don't be afraid to show the fact that you are an agent.  Why not?  Use it to your advantage.  Use your company's resources to dominate your market. 

Is There A Better Way?

Is there another way to get MLS access? Of course. Do you need to be a Realtor® to be a great investor? No. However, believe it or not, if you remain open minded, you might just find out as I did, that by going through the hassle, and finding out the reasons WHY..

More important than why... HOW to make them work for you.. you will find as I did that you are far more powerful with a license than without.

Have a Powerful Sales Day! 

@Karl Krentzel

Thanks so much!

I can see how being an Investor/Agent would have a stronger more credible stand vs a Wholesaler in most cases. And, sure, using the Company's resources does have certain benefits as it pertains to knowledge, backup, assistance in marketing, although, having a Brokerage Logo on all my private investor marketing tools could deter some possible clients who don't want to deal with Realtors.

One of the issues you certainly touched when it comes to

...how to explain it, or the money involved, or having to disclose the amount because you fear that he/she will "have their cut." But, the fact that I have to run all my deals through a broker first just doesn't sit well with me. As an investor I can say yes to a deal on the spot if it makes sense to me but, as an Investor/Agent i would have to run it through my Broker first, as I understand this but I may be wrong. You seem like a very sharp guy, so I'm just looking for some clarification on HOW to make this work for me!

Again, thank you very much for sharing your knowledge!

Originally posted by @Attila Bertalan :

@Karl Krentzel

Thanks so much!

I can see how being an Investor/Agent would have a stronger more credible stand......although, having a Brokerage Logo on all my private investor marketing tools could deter some possible clients who don't want to deal with Realtors.

... But, the fact that I have to run all my deals through a broker first just doesn't sit well with me. As an investor I can say yes to a deal on the spot if it makes sense to me but, as an Investor/Agent i would have to run it through my Broker first, as I understand this but I may be wrong. You seem like a very sharp guy, so I'm just looking for some clarification on HOW to make this work for me!

Again, thank you very much for sharing your knowledge!

 Cool!  Two questions here, and judging by the quality of your questions, I am encouraged to know that you have not entirely thrown "The baby out with the bathwater" and are asking additional questions to clarify issues that are not immediately apparent.

So let's clarify these as easy as possible...

With regards to logos from your brokerage etc.  

Where specifically would you have logos that you WOULDN'T want the population to see?  The ONLY place I can think that you may not want to have your brokerage information on would potentially be a bandit sign.  (coincidentally, if Bandit Signs are your only method of getting business, MLS will easily replace that!) 

People do not care if you are an agent if you are buying the home.  They ONLY care if it COSTS them.  

Since you will not be listing the home in all likelihood, it is very unlikely that they will refuse to sell their home to you simply based on the fact that you are an agent.  

Do not take my word for it.  Think it through.  If YOU were a Seller, would YOU care?  So long as it didn't affect my bottom line, I wouldn't care if they were a neurosurgeon.

"Running All Deals Through Broker"

Remember, if you are an Agent/Investor, you are part of two separate worlds.  

You see, it is 9 times out of ten the LANGUAGE that the parties use that screw up everything between Investors and the Realtor® world.

Imagine being poor Columbus trying to come back to Spain and telling Queen Isabella about the "New World".  

What words could you use to describe America as Columbus "discovered" it to a world that had no knowledge of what the "New World" had, was capable of, or what worked in this savage new environment?

It is similar to you trying to explain things that you need as a Realtor®/Investor.  One of the most common misunderstandings is this concept of "running things through the broker".

What they are really saying to you is this.. NOT that you need to run your contract through your broker for approval of your personal contracts. 

What they are saying is that for any BROKERAGE INVOLVED listings, Sales, etc. then the Broker (through State Law) must review the contracts that the company signs.  

For your PERSONAL Transactions, because you are an agent, it is necessary that you let your broker know about your activities. They are legally responsible for you.  However, it DOES NOT mean that you have to have their "permission" or their "approval" to buy or sell something.

Do NOT allow the ignorance of the Realtor® community over language dissuade you from the very real power of having a license.   Explain clearly what you are trying to do.  Use the CORRECT words. 

Do not say "wholesaling".  Say "assignment of contract."  That is "Realtor® speak" for wholesaling.  

If you use the correct language, I believe you will discover that many of these challenges you are facing will simply vanish!

Hope that helps, 

Have a Powerful Sales Day! 

@Karl 

@Karl Krentzel

"Imagine being poor Columbus trying to come back to Spain and telling Queen Isabella about the "New World"."  I LOVE IT!

Lots of scenarios ran through my head yesterday; lots of brain cell burning and neurons transmitting at untraceable speeds, but, at the end, I came to realize that I would most certainly benefit by activating my RE License through a broker. I plan on continuing, growing my REI as a profitable yet legal, honest,helpful and ethically conscious business.I have nothing to hide and I believe that having the support of an experienced and success promoting broker would only benefit my endeavor.

I came up with the same (sort of) answers to my doubts as you just reiterated so, I wholeheartedly want to thank you for taking your time and clarifying it for me even better.

Thanks again and Have a Blessed Life!

Columbus...huh...LOL!!

@Karl Krentzel

Very informative post given by you Karl.  You seem like a very smart and educated person.

I always wondered if I should get a RE agent license. I am in the process of wholesaling deals only first in my RE investing.  Based on what I have read on your post, it seems that

the wording you use with a seller in vital. On how you approach the seller and state what

you represent, such as a representative for investors that want to buy houses and not present yourself as a wholesaler.

Thank you for information posted, it is very helpful to me.

For the states that I know of ANY real estate activity of a licensed individual has to go through their brokerage they are licensed with. The principal qualifying broker or their designated associate broker for the company etc. is in charge of overseeing the agents.

This investor topic poster it typical. They want MLS access but no responsibility of having the license. Investor related agent activities are some of the most frequent E & O claims brokerages face. Many investors will do anything to make a dollar on a deal. When the investor Is licensed at a brokerage the brokerage is on the line if things go wrong. New agents generally have no concept of this.

Frankly you are lucky to have found a brokerage interested in taking you on. Most brokerages have no interest in such proposals.

This is why I eliminated all agents at my brokers years and years ago. I do not have to babysit agents and prey they do not make a gigantic mistake and wait until the last second to fess up to it.  The new agents overvalue their worth to a brokerage. New and rusty agents need constant help finishing deals and then the broker gets a small piece for making the deal happen.

All of this just leads to a head broker working one on one with clients and doing their own investment deals. Some of my friends do not like selling and instead want to watch over agents. I love selling  and working with my commercial clients one on one so I am different.

Good luck. I hope it all works out great for you.

I am licensed but also an investor. I have found that some sellers prefer to offer me their properties because I am licensed and they know we are held to a higher standard. I feel licensing is a bonus but others may not. Of the last three deals I purchased, all three were off market properties and not listed in the MLS. I do work real estate though helping both buyers and sellers. Some deals are not worth purchasing as an investor but they are certainly worth pursuing as an agent. You have to decide what is best in your situation. If you end up deciding that having a license is a problem, see if you can place it in an inactive status within your state. In Florida, if an agent places their license in "inactive" status, they do not have to disclose they are an agent because technically they are not if in an inactive status.

@Joel Owens

"This investor topic poster it typical. They want MLS access but no responsibility of having the license. Investor related agent activities are some of the most frequent E & O claims brokerages face. Many investors will do anything to make a dollar on a deal. When the investor Is licensed at a brokerage the brokerage is on the line if things go wrong. New agents generally have no concept of this."

I hear you. I' also a Critical Care Registered Nurse which comes with a License and specific requirements with it. It was never my intention to hide form sellers that I am also an agent and I have no problems with getting the proper agent training. It was also in my agenda to run any agreement, buy or sell, that required my license through my broker. I was just surprised to hear that, even if, I should acquire an Investment property, contract or agreement as an Investor/Principal in the transaction, I would still need to have my broker's blessing. That part is still somewhat unclear to me. That being said, regulations are regulations and I will abide by them as I know that I have nothing to hide and only run an honest, fair and ethically sound business. Good luck to you to!

@John Thedford

Thanks for sharing your input and experience! I really appreciate it!

I am not going to second guess your broker or encourage you to do anything that goes against their policy. I will, however, state that if you buy off market properties there is no way for your broker to receive a commission from the seller. You might want to ask your broker if they expect a commission on properties not listed. Their answer may be no.

@Karl Krentzel have I ever told you how much I absolutely LOVE your posts? Well I do. 1) Because you always break it down plain and simple, straight with no chaser; 2) Your use of graphics gives me life; 3) I respect your knowledge.

Attila,

It might be a good idea to become familiar with your state's licensing laws.

When you go with a brokerage there is supposed to be an IC agreement ( independent contractor agreement ).

This spells out what duties you have as an agent to the brokerage for engaging in a relationship and hanging your license there. 

@Joel Owens

I will make sure to look into that and I will definitely ask about the IC agreement.

Thank you!

Originally posted by @Adrienne G. :

@Karl Krentzel have I ever told you how much I absolutely LOVE your posts? Well I do. 1) Because you always break it down plain and simple, straight with no chaser; 2) Your use of graphics gives me life; 3) I respect your knowledge.

 Thank You!!!

Believe it or not, I ACTUALLY have SOME Moderators get complaints because I put photographs or bolded words... 

You know... some flavor!

Truth is, if you see the bolded words, and the pics, you are 87.463% (according to a instant survey I made up for this post) more likely to read what I wrote, and then respond. 

I've found that if I do, you get more out of it!  

Thanks for noticing!

Have a Powerful Sales Day! 


With regards to logos from your brokerage etc.  

Where specifically would you have logos that you WOULDN'T want the population to see?  The ONLY place I can think that you may not want to have your brokerage information on would potentially be a bandit sign.  (coincidentally, if Bandit Signs are your only method of getting business, MLS will easily replace that!) 

Originally posted by @Karl Krentzel :
Originally posted by @Attila Bertalan:

@Karl Krentzel

So let's clarify these as easy as possible...

With regards to logos from your brokerage etc.  

Where specifically would you have logos that you WOULDN'T want the population to see?  The ONLY place I can think that you may not want to have your brokerage information on would potentially be a bandit sign.  (coincidentally, if Bandit Signs are your only method of getting business, MLS will easily replace that!) 

Are you saying that you have to put the brokerage logo/license info on all investor marketing material such as yellow letters, bandit signs, postcards, regular letters, etc.?

Disclosure as Realtor®

Great question @Ryan, the answer is... "it depends."

If you are a Realtor®, I'm not saying that... the National Association of Realtors® Code of Ethics Article 12 says that.  

Article 12
REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional. (Amended 1/08)

Hope it helps!

Have a Powerful Sales Day!

@Karl Krentzel I would like to start off by saying thank you for your time and thorough explanation of this great question. As a guy who is new to this site and uncertain of how I will eventually transition from being a Marine to eventually getting into the realm of real estate you have made my choice 10x easier. I still find myself blown away by the integrity and genuine nature of this sites owners and its members. I only hope that one day I can return the knowledge to new investors who will be in my shoes.  

Originally posted by @Raymond Sylverne :

@Karl Krentzel I would like to start off by saying thank you for your time and thorough explanation of this great question. As a guy who is new to this site and uncertain of how I will eventually transition from being a Marine to eventually getting into the realm of real estate you have made my choice 10x easier. I still find myself blown away by the integrity and genuine nature of this sites owners and its members. I only hope that one day I can return the knowledge to new investors who will be in my shoes.  

 Semper Fi! 

Just #PayItForward! That's what I say at the beginning of every one of my 480+ Podcasts on The Red Pill Investor... This is my way of "Paying It Forward" for all those who gave me the tips, the tricks, the strategies to get that contract SIGNED!!!

Have a Powerful Sales Day! 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here