How Being a Real Estate Agent Gets Me More Deals

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There are a lot of questions on the BiggerPockets Forums on if it is worth it to have your Real Estate license.  I have been a Realtor since 2002, when my father got me in the business.  My father has been a Realtor since 1978 and he has always had a few rentals and done many fix and flips.  When I first started in the business I loved doing fix and flips, but wasn’t so keen on selling houses to strangers.  I sold enough houses to get by, and focused on the flips since those were much more fun.  I always thought it would be smart to buy rental properties, but I was young and not very good at saving money. 

Then in 2008, I started selling REOs and completing broker price opinions for banks.  I loved the REO side of selling houses and I have become very successful at it the last few years.  I am a HUD listing broker as well and love HUD, I can’t buy HUD homes myself, but I have a great article on how investors can great deals ion HUD homes here.  I think the reason I love REO is because I can communicate through email and I am a natural introvert (another popular forum discussion).  With REO came more money, more savings and a desire to grow that money into something more.  I did a lot of research on franchises, business, the stock market, bonds and decided rental properties were the best investment out there.

When I was doing fix and flips with my father, we bought most of our properties at the public trustee auction and it did not matter if we had our Real Estate license or not.  When we sold our homes, we saved 3% on each transaction, because we did not have to pay a listing agent a commission.   When I started buying rental properties for myself in 2010, I bought everything off MLS and saved a commission on each purchase.   We are buying more flips off the MLS now as well, we are now saving a commission on the buy side and the sell side.

Even though we save a ton of money on commissions by being agent, that is not the biggest advantage to having a Real Estate license.  The biggest advantage is having a huge advantage buying properties over those that do not have a license.

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Commission Splits

There are no set commissions in Colorado or most states, but most of the deals we purchased off of MLS offer a 3% commission to the selling agent.  I will use 3% for this article, but commissions can vary on each property.  I also mention we save the full 3% on each deal, this may not be true for everyone.  We are able to keep 100% of our commissions because we pay a flat yearly fee to our broker.  Brokers offer many splits to their agents, some may be 50/50, 70/30 or higher depending on what services they offer and how much business an agent does.  There are also limited service brokerages that will hang an agents license for a small monthly fee.  They offer no office, no receptionist, but they are cheap and great for a Real Estate agent who does a few deals a year for themselves.  If you are thinking about getting your license, remember you may not be taking home that entire commission.

Saving Money on Commissions

I will take you through an example of how much we save on a typical flip.  The savings is similar on a long-term rental purchase, except there won’t be any commission on the sale since we are holding the property.  Let’s assume we purchased a flip on an REO property for $100,000, fixed it up and then sold it for $170,000.   The bank offered a 3% commission to the Real Estate agent that represented the buyer on this property.  Sometimes banks do not like it when the buyer is also the Real Estate agent and they may have stipulations they won’t pay a commission in these instances.   We use an LLC to purchase our flips and my dad will usually sign for the LLC and I will be the agent on the deal.  That way the agent is different than the end purchaser and the bank will pay a commission.

On the purchase end we can structure the deal so we get paid $3,000 for our commission or we will waive our commission and pay $3,000 less for the property.  The benefit to getting the $3,000 is the extra cash in our pockets for repairs or other investments.  The benefit to reducing the price is, we won’t have to count the commission as income and pay taxes on it.  It saves money in the long run to reduce the price if that is an option.   However, many brokers will only allow agents to take no commissions on one or two deals a year.  We can do it as much as we want, since we are on a 100% split and the monthly fee brokerages may allow you to make as many no commission deals as you want as well.

On the sell side we save the 3% as well since we are the listing agents and do not have to pay someone else to sell the property for us.  Again, commission are negotiable and you may be charged more or less for an agent to sell your home.   Three percent of $180k is $5,400 that we save by not hiring another agent.  We structure this as a no commission deal, since we will not have to pay taxes on the income again.   Total savings is $8,400 on this one deal alone.  We flip about ten homes a year, and it is easy to see we save a lot of money by being agents.

Finding Deals

The biggest reason I would suggest every Real Estate investor get their license is because of the advantage it provides when finding deals.  I still buy most of my long-term rentals off of MLS and we buy flips on MLS as well.  We purchase short sales, a few REOs and even a few fair market sales off the MLS system.  As an agent I have access to MLS and an investor without their license does not.  Most properties listed in MLS are listed on other sites like Zillow, Realtor.com and others, but the information is not as accurate or updated as quickly.

I search my MLS hot sheets multiple times a day to look for good deals.  The hot sheets show me any new listings that have come on the market since the last time I searched my hot sheet or any other time I specify.

As soon as I see a good deal, I set up a showing, go see the house and make an offer if it is worth it.  With help from my staff this entire process can take less than an hour if the home is vacant.  If the home is occupied, I may have to wait a couple hours for the showing to be scheduled.  It does not always work, but many times the person who sends in an offer first has a huge advantage. 

On a short sale, the sellers will accept the first offer that comes in, even if it is low because they just want the house sold and know they aren’t getting any money out of the deal.  In a rising market like we have in Colorado, I occasionally see fair market sales priced below market.  If I can get a full price, cash offer in first I have a great chance of getting it accepted before any other offers come in.  It is trickier with REO, since many banks have guidelines that a property must be on the market for a certain amount of time before they will look at offers.  There are some banks that will look at offers that first day and if I am first, I may get my offer accepted before more offers come in and a highest and best situation arises.

If I were not an agent, my time frame for making an offer would be much longer.  I would have to do more work to find new listings on Zillow or another website.  Once I found a great deal, I would have to contact my agent.  I would have to wait for them to find time to set up the showing and show me the property.  Then I would have to wait for them to write the contract and I would have to come in and sign the contract, before it was submitted.  I have to hope they understand they importance of time and getting that offer in ASAP.  Even if they are a super fast, great agent, it may take them half a day or an entire day to get all that done.  Someone else could have already submitted an offer and had it accepted before my offer was submitted.

Knowledge of the Market

As a Real Estate agent MLS also provides me with a wealth of sold information.  I can look up sales from 10 years ago if I want to, as long as the sale was completed through MLS.  MLS is a great tool for me to determine value quickly, and easily.   I am also constantly around houses as a Realtor, I am constantly determining values for my sellers and buyers and I almost always know the market without having to pull up sold info.  Knowing values is the most important thing for a Real Estate investor to know an being a Real Estate agent gives me a huge advantage.

Connections in the Business

As a Real Estate agent I am constantly talking to lenders, other agents, title companies, buyers and sellers.  I found my portfolio lender, because other agents referred me to them.  My portfolio lender is awesome and will give me as many loans as I want as long as I qualify.  That may change at some point, but without them I would be struggling to finance properties, especially now that I have 10 mortgages.

Other agents have referred me to sellers looking to get out of their homes, because they know we buy flips.  I know the best title companies, the best lenders and the best Realtors.  I also know which companies and Realtors to steer clear of, because they may kill a deal with their incompetence.

Credibility

Another advantage of being a Real Estate agent and especially a Realtor is people see my name and know I work by a code of ethics.  As a Realtor I have to abide by a code of ethics which is much more strict than the actual law.  Even if I am not acting as a Realtor, but trying to buy a house, I have to abide by this code.  If I am contacting off market sellers and trying to convince them I am trustworthy, it is much easier as a Realtor.  I can point them to my website, show them I have been in the business for over ten years and screwing them over would hurt me a lot more than it would help me.

Disadvantages to Being an Agent

There are some disadvantages to having a Real Estate license and being an investor.

  • The biggest one for me, is I am limited to what houses I can purchase, but this won’t apply to 99% of agents.  Since I am a HUD broker I cannot buy any HUD homes no matter who has them listed.  None of my immediate family or any agents and their immediate family can buy a HUD home either.  Bank of America will not allow me to buy any of their listings or even short sales because I list REO for them.  There are a few other companies I work with that have the same policies and I can never buy an REO that I have listed.  It is a clear conflict of interest for me to purchase I home I listed that I determined value on for the banks.
  • I have to disclose I am Realtor when I market to sellers.  I don’t think this is a big disadvantage, but some people on the forums think they get a better response if they are not an agent.
  • Some people feel a code of ethics is too restricting for Real Estate investing, I do not feel this way.  If you are a Real Estate agent, it is easier for buyers or sellers to file a complaint against you with Real Estate commission or whatever body governs Real Estate in your area.
  • The biggest reason most do not get their license is the cost and time it takes.  Getting a license is not easy in most states, it takes hours and hours of classes and tests and the tests are not easy.  Once an agent has their license, they have to take continuing education, keep insurance, pay for MLS, pay board dues, pay to hang their license or split their commission.

Conclusion

It can cost thousands of dollars a year to be a licensed Real Estate agent, but one or tow deals a year will easily make up for that money.  Not only are you saving commissions, but the biggest advantage is the deal you get, because you were faster than everyone else.  To a flipper, one deal can mean $20k, $30k, $40k or more in profits.   To an investor buying long-term rentals, one deal can mean thousands of dollars a year in cash flow.

Do you have your license? Why or Why Not?

Photo: Andreina Schoeberlein

About Author

Mark Ferguson

Mark is Real Estate Broker and investor in Greeley, Colorado. Mark invests in long-term SFR rental homes and also does 8-15 fix and flips a year. Mark started a blog this year that focuses on investing in long term single family rentals.

42 Comments

  1. I also have my license, and I agree with this post 100%. I am going to enjoy the commission I get on the REO I am currently purchase (my first time getting a commission on a purchase. The classes to get my license were much easier for me to work into my schedule because I took them at my university for college credit (I graduated with a real estate minor), so it fit my time schedule well. My broker is a HUD registered broker, but I was not aware that as an agent there I could not purchase HUD homes, oops. Is this a national or state by state law? I’m assuming it is national, which is really unfortunate. Thanks for the heads up. Good read.

    • Hi Luke, thank you for the comment! this is a national rule for HUD listing agents. Your broker Should have been very clear to all his agents that they cannot but HUD homes. He can lose his account with HUD if one of his agents buys one and HUD finds out.

  2. I also have my license, and I agree with this post 100%. I am going to enjoy the commission I get on the REO I am currently purchase (my first time getting a commission on a purchase. The classes to get my license were much easier for me to work into my schedule because I took them at my university for college credit (I graduated with a real estate minor), so it fit my time schedule well. My broker is a HUD registered broker, but I was not aware that as an agent there I could not purchase HUD homes, oops. Is this a national or state by state law? I’m assuming it is national, which is really unfortunate. Thanks for the heads up. Good read.

  3. Thank you for laying out the pros and cons of having a real estate license and the information about HUD restrictions. I am in the middle of getting my real estate license in NY and getting access to the MLS was a driving factor for me. I am in the middle of a huge life transition and I am taking advantage of being downsized to relocate back to NY near my family and start my own business. Real estate has always been a passion of mine and it is time to take the leap. I believe we are most successful when we are passionate about our careers.

    • Eileen, I couldn’t agree with you more. I think you have to be passionate about your work to be truly successful. I love going to work every day, it is always different and I make my own schedule.

      Maybe getting downsized is the best thing that could have happened to you!

  4. Steve Johnson on

    Mark,

    I’ve been contemplating getting my license and this article is a really good example of why it is beneficial. My only concern with getting my license is it just doesn’t sound like something I want to spend time doing. I don’t have the want to be having to sell homes to people for a commission. If it is true that I only would have to do a few sales a year to keep my license current maybe it is worth it. I’ll do more research into it.

    • Hi Steve, Thanks for the comment. Each state is different, but in Colorado you don’t have to sell any homes to keep your license active. You just have to take continuing education and have somewhere to hang your license. The broker you hang your license with may have requirements for how much you have to sell.

  5. Great article Mark. I am contemplating getting licensed but was wondering if this will limit my exit strategies with some deals. I currently do several lease options with some of my rentals, would I be allowed to do this is I was licensed?
    Thanks
    Mike

    • Hi Mike, ,This would depend on State laws. In Colorado agents can do lease options, but it is frowned upon by the Real Estate commission. They do not have any state forms for lease options and it is pretty clear they don’t like lease options. I would check with your state laws and Real Estate governing body.

  6. Steve I totaly understand where you are coming from and I felt the same way prior to get my license. I think the biggest thing for you would be finding the right broker to work under. I work under a small broker that charges less than $35 per month to hang my license w/100% commision stucture if i decedie to sell a home. There are now numbers I have to meet, calls to make, showings to schedule etc. Now if you get with some of the bigger companies you may not fit end. As a matter of fact one of my best friends is broker at one of those large companies and he was one of the companies I interviewd before setteling with the one Im with. But if you find the right fit I think you would enjoy being able to faciliate the majority of deals (one way or another) that you come across:

  7. Karin DiMauro on

    Another great blog, Mark! I got my license about a year and a half ago primarily to be able to move faster. My mother is my broker, which works out incredibly well (I don’t have to worry about listing and selling, and she and I are partners in investments).

    Although Mom is licensed, she lives about an hour and a half away from me. Now, I can find a property on the MLS, set up my own appointment, do the comps, and write up an offer without trying to coordinate schedules w/her. I let her know what I’m looking at, she double-checks my comps and the contract, and away we go!

    There are pros and cons to having a license, but in my situation, it’s worth it. I also like the continuing education. Oh, and yes, the savings on commissions really do add up!

    • Stephen, That would take an entire article to explain fully. Here is a brief synopsis.

      1. in 2002-2007 I was doing flips and selling a few houses through traditional sales. I never really liked traditional.
      2. I was asked to do a broker price opinion(BPO) randomly by a small company and had no idea with a BPO was.
      3. I researched BPO and found out it had to do with REO and started thinking about getting into REO.
      4. I started calling banks to figure out how I list properties for them. A few pointed me in the right direction and told me to sign up with asset managers and portals like res.net.
      5. I started getting a few listings and things ballooned from there.
      6. I was accepted into NRBa(national reo Brokers association) and that really got me in the door.
      7. I started going to conferences and meeting new people in the industry.
      8. I was working with 30 companies listing properties and over 50 doing BPOS.
      9. HUD changed their selling process and hired new companies to sell their homes.
      10. One of the companies called me because I was working with their sister company. They needed me to work with the on a HUD in Sterling CO, about 100 miles from me. I said no problem.
      11. They gave me 16 listings that week and it went crazy from there.
      12. Things have calmed down now and I work with another HUD company as well.

  8. Mark,

    Great article. It makes a lot of sense and reinforces what I already believed to be true. I plan on getting my licence soon. One question I have though is if you have been an agent for so long, why are you not a broker yourself? You obviously have the experience and time to qualify for a broker license. You said you had other agents working for you does that mean they pay you or also pay the same broker as you? Thanks

    • Hi Pete, Thank you and it all depends on situations.

      I happen to be in a great situation with my broker. He lets us pay a flat fee every year for everyone on our team. We have five licensed agents on our team including myself and my dad. Anything anyone sells on our team is 100% commission to us and we decide how to split it with the agents. It is like a mini brokerage inside a brokerage without dealing with the headaches of being a broker and having to manage all the other agents, staff, building etc.

      I have thought about opening up my own office, but many of the banks I work with only have a relationship with the broker of offices. If I left there is a chance I would lose some of my accounts including HUD. I could probably get them to switch with me, but its not worth the risk.

  9. Here’s the disclosure:

    I am an Agent, and I’m very sorry about being knowledgeable and experience. I hope you won’t hold it against me that I know my craft. But, if you’d rather deal with someone else, just say so…

    How’s this Mark?

    • Nice! Haha.
      I think disclosing I am a realtor gives me credibility right off the bat. I’ve talked to a few investors I’ve sent direct marketing to that asked me right away if I was a real investor. They had other investors tell them they had to cash to buy, but when it came down to it they didn’t have the money and couldn’t buy. When they see I am a realtor they at least know I am in the business.

  10. I have had a licence for seven years and currently have an affiliate agreement with Coldwell Banker.

    What broker would you recommend as a flat fee broker with no commish spits? I don’t need and office or secretary, just access to the MLS to list and look-up properties.

    Keller Williams?

  11. Thanks for the very detailed article on this. I’d really like to obtain my license but I hesitate to get it where I live because I’d much rather invest in Colorado than Wyoming. Would I be able to get a CO license if I lived in WY? Obviously, being a realtor in the market one knows, i.e., lives in, is ideal, but not wanting to invest further here is what has really kind of held me back from getting my license.

  12. Is this HUD thing new?
    I am a registered HUD agent and have literally put in thousands of offers for my company and a handful in my own name. I have also purchased 9 of them via these offers.
    I also always collect the buyers commission on these.

    Just recently I saw one asset manager started putting a conflict of interest addendum on their places. It does say that no one working for the listing broker can buy a HUD house.
    Not sure if this is a change, something that was just not enforced, or if the fact that my office doesn’t LIST any HUDs that it doesn’t apply.

    When we first got the NAID and I wanted to put in offers my broker and I called the asset manager for the property and asked about doing it and about the commission and they said it was fine and I could get the commission.

    On every purchase I sign all the paperwork as the agent and also as the authorized signer for the LLC taking title. At the closing the attorneys know I’m the purchaser and the agent and always have me fill out the broker surveys and hand me the check to deliver to the office.
    This is just to point out I’m not hiding anything or doing anything underhanded (Like say the investors that pretend to be owner occupants or something), it is all out in the open and above board.

    I did just send my broker an email asking about if he knows of any change and a copy of that addendum I saw for his interpretation.

      • Hi Mark!

        Thank you for the clarification.
        I was pretty scared there for a moment!

        HUD has been a good deal source for me (though pickings have been slim recently) so that would have been annoying if that avenue was closed.

        Thanks again for the quick response!

        • Glad that was clarified! I was scared there for a bit, too. Sounds like I’m good to go, thanks, Mark!

  13. With my HUD hysteria I forgot all my other questions. 🙂

    How do you disclose being an agent when you direct market to sellers?
    If I was doing direct mail for my investment LLC, which I am a partial owner of along with non-licenced parties, I wouldn’t think about adding that to a letter or postcard.
    Certainly if someone contacted me and we started talking about the house I’d disclose that early in the conversation and make sure to have them sign off on that with any offer.

    Curious to know what others do in this respect.

  14. Larry Littrell on

    Hello Mark!
    I have been going back and forth on this. I am starting my REI career part time and on a budget. I have been thinking about getting a flip under my belt then using the funds to pay for a year of expenses (school,license,desk fees,MLS fees, etc.) I think you have shown the value in having a license. I would like to be able to list and sell my homes as well as act as a Broker for my friends and my large family but taking buyers to see 100 houses and having “floor time” requirements are out of the question for me.
    Thanks!

    • Hi Larry, There are a ton of different ways to make money as an agent. I don’t like showing houses and I am never on floor. If you don’t like doing those things, don’t do them, spend your time in other ways to make money.

  15. Hi, Mark

    I am a real estate broker. But I am very much intrested in real estate option to purchase.
    Do you see any advantages of option to purchase for brokers, compared to traditional listing and selling deals?

  16. Everlena Jackson

    Great article and I’m a Realtor as well thanks for the insight of the advantages it opened my eyes to some of the benefits of being licensed. I’m a newbie entering the world of REI and starting out with wholesaling looking for my first deal and learning so much from BP.

    Much success,
    Everlena

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