Disadvantages to Getting a License

9 Replies

I have heard some of the advantages to getting a license (e.g. access to MLS, saving on commission costs, access to viewing more properties, etc.) but I was curious: as an investor, what are some of the disadvantages to getting a license in the state of California? Thanks!

Even though it's not required by law, realtors may throw a tantrum if you don't mention you have a license when acting as a principal.

In NY it is required by law that a licensed real estate professional has to disclose it.  I don't know about California.

It is also required by law in Missouri to disclose you are licensed.  Not sure about the California specific rules.  Being licensed can be expensive to maintain if you do not plan to use it to generate income.  It really comes down to what you plan to do with it.

@Amir Kabiri  The disadvantages are that if you find a smoking deal out there (that isn't listed) and you know it's worth more than the seller will sell for, if you are licensed, you are obligated to tell the seller the market value, and THEN if they still want to sell to you at the discounted price, make sure you disclose that it IN WRITING, and both of you sign. 

However; if you are only acting as an agent for yourself  or if there's no commission being paid, and you are only handling one side of the transaction, it eliminates most of the risk. 

@Amir Kabiri

The pro's greatly outweigh any con's real or precieved.

@Amir Kabiri I was on the fence myself for a while, but after speaking with several investors and realtors, I've decided against obtaining a realtors license. My market is extremely good right now, it's very easy to sell a home. So the odds of selling it myself and saving realtors fees is very good. Second, the cost of having MLS access is outrageous! Do some checking into keeping a license active, fees to be under the broker, continuing education fees and so on, it's crazy expensive if all you want to do is be an investor. I've found many realtors are more then willing to give direct feeds of newly listed MLS properties and some are even willing to list a property with my contact info for a set fee. So, unless you want to sell homes for other people, the realtors license in my humble opinion is overkill.

Thank you guys for the helpful input!

@Karen Margrave So, just to clarify: if you are only acting as an agent for yourself, and there's no commission being paid, do you still need to disclose market value (or other required information) in making your offer? Thanks!

@Amir Kabiri  I don't want to get too deep in the weeds of exactly what has to be or should be disclosed, as I'm not an attorney. However; they always say that if you are asking if something should be disclosed, then it probably should be.  In studying for your license, you will learn about the Realtors Code of Ethics, etc. which covers disclosures. Ethics is one of the major subjects in the real estate test. 

To the point of your original post, it's been my experience that the value of having a license far outweighs the negative aspects. I am licensed, as is my husband and son. Good luck.

An alternative to being licensed in California is to be licensed in an alternative market. Let's say MA, CO or TX; These states have reciprocity agreements with other states, thus allowing you to work in those states, after paying a fee and taking a class and or exam, California does not (save Nevada).

If you plan to operate in CA but have access to alternative markets then It may be worth the effort to become licensed elsewhere. Things here in CA are very expensive; in essence, you can remain unlicensed in CA but be licensed elsewhere and operate in multiple states.

 I personally know guys who do this and nearly all travel related expenses are that of business, full wite off.

Downside, maintaining more than one license, learning laws and regulations in more than one state. Larger liability for errors, possibly a lot of expenses.

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