Disadvantages… - Posted by JPiper
Posted by JPiper on January 09, 2001 at 24:35:55:
A few years back I closed a real estate brokerage office that I had operated for a number of years, fired all the agents (to include my wife), and terminated my brokers licenses in two states. It was not a particularly easy decision, because I think there are valid arguments on both sides of the issue.
I think the argument for a license basically revolves around MLS access. While I understand that you do a lot of deals through the MLS, in my case I used the MLS primarily for comps. I?ve never viewed the MLS as a primary source for deals?.in fact, in my opinion it is way down the list as a source for deals. In my opinion the best deals are almost always outside the system. Notwithstanding my view of the MLS though, I think this is the primary advantage.
I think a secondary advantage of a license is the ability to receive a commission. My personal opinion is that this commission is really chump change. As you may know, my wife is a real estate agent. However, her license is really there primarily for the MLS access?not the commission. When I make offers on a listed property I don?t do it through my wife?.I do it through the listing agent. We forego any commission. We think this wins allegiance from agents/brokers. We don?t generally list properties?but if I were to list a property I would probably do it through an agent other than my wife?.again, to win some type of allegiance.
As to disadvantages?.I think they tend to fall within a couple of areas: One is disclosure, the other is liability.
Disclosure of your licensed status in an offer is not much of a disadvantage?.it never was to me. But understand that disclosure must be made in other areas as well. For example, all advertising by licensees must make disclosure of licensed status. This would include things like newspaper ads, radio and TV, business cards, postcards, flyers, direct mail, etc etc etc. If you are an agent working for a broker, then if your ad, card, flyer etc discloses your phone number, then it must also disclose your brokers name and number. Have fun with this one. As an agent it?s always possible that people calling your ad are going to call your real estate office?.not that any agents are ever going to steal your leads?.LOL.
Run an ?I Buy Houses? ad in the newspaper? It must contain a disclosure of licensed status. If you print your phone number, your broker?s number better be there too, along with the company name. How about that ?I Buy Houses? printed across your van??? Advertising to the public must contain disclosure of license status.
By the way, I?m only answering these based on the states? law I?m familiar with. There may be differences between state law?.I would suggest that you read yours closely.
There is a good chance that your brokerage company has a policy manual. In some states the state law may require a policy manual. Better read that as well prior to hanging your license somewhere?.because the chances are that there will be policies that you won?t like?and may be large disadvantages to your dealings.
Now, back to the disclosure. Disclosure in advertising REDUCES the number of calls. I guarantee it. I can?t tell you the reason why, but it does. I?ve run the same ads with disclosure and without?.and the results differ dramatically. Further confirmation of this comes from those agents who periodically advertise without disclosure (illegally), I suppose with the belief that there call volume goes up?.and it does. They?re out there?I run across them all the time when I call ads.
The other major problem area is that of LIABILITY. That license is like a license to be sued. Attorneys know that licensees probably carry E&O Insurance?..and therefore the agent/broker becomes a target. At one time it was believed that the most highly sued group of people in California were real estate agents?.that still might be. I?ve spend tens of thousands of dollars on E&O insurance to protect myself and agents against that liability. I used to say that having a license was kind of like having a legal gun to your temple. I?ve spent further thousands of dollars defending myself and agents against what were always proved to be rather frivolous suits by ill-informed attorneys. Only in America. Winning a successful countersuit by the way doesn?t get you your legal fees back. Everyone loses.
Then there is the liability that stems from the expectation that licensees must be held to a ?higher standard?. Could a licensee be held liable if he properly disclosed his status to a seller, did not list the property, instead bought it at a severe discount, and then immediately resold at a profit??? Well I know of a case where a licensee was sued for exactly this?and lost. The doctrine that would believe that agents have a ?higher? duty, and therefore must not take ?unfair advantage? stemming from their ?superior knowledge?. I?m not saying licensees cannot buy properties for resale?.but don?t ever believe that a case can?t be made by an aggressive lawyer who decides to go after you (and your insurance company). The insurance company may require you to turn this case over to them, and they may well settle rather than fight?.whether you like that tactic or not.
In one state I was licensed in there were provisions in the license law pertaining to foreclosures that were tantamount to tying one hand behind your back when dealing with foreclosures.
As a broker I wasted COUNTLESS hours and dollars complying with state laws, being audited by the state periodically for compliance with the laws, setting up procedures to comply with the law, to include a policy manual, etc etc etc. And we haven?t even spoken about operating escrow accounts in one state, trust accounts in another state?.and the requirements regarding these.
Steve, let?s just say I have never regretting giving up my licenses. Licensing will reduce freedom, not increase it. In fact, periodically I try to get my wife to give her license up?.so far unsuccessfully. But again, there are arguments on both sides, and you should start by carefully reviewing the license act in Maryland.