Getting a real estate license - Posted by John Behle


#1

Posted by John Behle on November 16, 1998 at 12:23:43:

You can license with a broker and have 100% commissions. ERA a few years ago changed their whole strategy to be a 100% brokerage like Re/Max. There is still a small fee to the franchise of something like 6%, but Rob or another ERA agent can give exact details.


#2

Getting a real estate license - Posted by John Behle

Posted by John Behle on November 15, 1998 at 14:20:34:

There seems to be a constant question and controversy about getting a real estate license, and I am constantly asked about it.

I have a license. I keep it for several reasons. I think the “Pros” of having a license far outweigh the “Cons”, but I think most people make their decisions on the wrong criteria.

  1. GETTING ACCESS TO THE MLS. There is incredibly valuable information on the MLS that is not available to the general public through the internet or anywhere else. What appears on the internet is a watered down verstion of the MLS. I use the MLS to look for seller’s motivation, type of financing against the property, terms the seller is willing to accept, listing numbers (tells me how long it has been on the market). Sometimes there is a more precise address and even the legal description making further details more accessable.

You can access a lot of information without being an agent or it is fairly simple to establish a relationship with an agent to have access. It’s just a lot simpler to have 24/7 un-restricted access and to me more than justifies the fees.

  1. THE LICENSING COURSE. I believe un-conditionally that everyone should take the licensing course to understand the laws and details agents are taught. Yes, I know the licensing course (and license) is just enough to make most of them dangerous, but the intricacies of your state’s laws, policies and procedures are a must for you to know.

Whether you sit for the exam and get a license is another matter. You do not have to get the license if you take the course.

  1. ADVANCED AND CONTINUING EDUCATION. Some of the best education available in the real estate industry is put out for brokers and agents. Many of the courses are available to non-agents. Some of the higher level courses through the Realtors National Marketing Institute are not available or are at a much higher price. Some of the local continuing education courses are very worthwhile.

One of the best advantages of the education is to know the laws and practices that you can and can’t do. Too many new investors get drawn into illegal practices such as double contracting or loan fraud. Unfortunately, techniques are even taught in seminars and books that are illegal or extremely un-ethical and dangerous. The licensing course and other educational resources can help avoid this. As a general rule what you learn from someone who does not have a background as an agent or broker should be carefully checked against LOCAL laws, practices and ethics.

  1. MARKETING ACCESS. An agent has access to some incredible marketing and networking opportunities in the form of meetins, parties, educational events, etc. In my opinion, agents are the best source of deals - both in real estate and paper investment. I would never want to be without this resource. Exchange groups can be an extremely valuable source of deals - possibly THE BEST source (especially in paper). Most exchange groups do not allow access to non-agents. Only a few accept affiliate members, investors and clients of exchangors (with the exchangor).

Sources I market to and network with also have more respect and trust for the fact that I am a real estate broker and know what I am doing.

I would have my license for this alone. Just this one resource outweighs any negative points of having a license.

  1. COMMISSIONS ON DEALS. A minor reason is to be able to take commissions on deals or earn an income as an agent. For some potential investors it might make a good transition or a sideline. It’s not necessarily easy though, yet some of the same skills necessary to succeed as an agent are also very important for an investor.

I generally do not mess around with commissions as an agent and have never done the “list, list, list” scenario. I will take a referal fee on a deal that I direct to another agent. It is illegal for an agent to pay a referal fee to an un-licensed individual in most if not all states.

I’ve also never found being an agent to be especially helpful in getting the “BEST” deals. At least in my area, most agents would not know a deal if it jumped up and bit them on the nose. The fear that the great deals never see the light of day is highly overblown. I find deals as an agent the same way I would find them as a non-agent, except for the ease of access to the resources above.

NEGATIVE POINTS?

  1. DISCLOSURE. I don’t find disclosing that I am an agent and may make a profit to be any big deal. I don’t believe I have ever lost a deal because of it. Maybe it has to do with the approach.

  2. LIABILITY. Yes, agents have more liability on deals that go bad or could be bad for the buyer or seller. It’s simple - I don’t do those kind of deals and wouldn’t if I wasn’t an agent.

  3. OTHER AGENTS’ CO-OPERATION. Agents can worry about another agent doing a commission-dectomy on them. It’s simple to address that situation and make them feel comfortable. I’ll sign a “Buyer’s Broker” agreement (limited to only properties they bring me) or hire them into my brokerage.

The added respect and confidence they have for a broker adds to their feeling that I am a real live investor that is worth spending their time with. They know I can close deals, know what I’m doing and am realistic. It helps a lot.

So, there’s my two cents worth.


#3

Commission split on my properties - Posted by Ron

Posted by Ron on November 16, 1998 at 15:19:17:

I understand that the standard commission split for a relatively new agent is 50/50 with the broker. If there are two agents involved (buyer’s and seller’s), they each take half which, in turn, is split with their broker.
What’s the deal if I am listing or buying my own property? Will my broker still want 50% for transactions where I am also the principal? Is it possible for a new agent to negotiate a better split (at least on my own properties)? My guess is that I will buy and sell 12-15 properties next year on my own behalf. Will my broker get 50% of all those commissions?
If I am an agent, can I also do FSBO? Would my broker frown on that? Thanks.
Ron


#4

Re: Getting a real estate license - Posted by Rob FL

Posted by Rob FL on November 15, 1998 at 20:04:06:

I have had my broker’s license for 2 years and have found it very valuable for many reasons. As mentioned by John Behle, easy access to the MLS is definitely number one. I have a set pattern of scanning for certain property types every day. I can go look at them immediately after them get listed and I don’t have to be concerened with setting up a time to meet with some agent.

Having a license also allows you to lower the commissions which can save money on your bottom line. When you sell, you only have to pay half a commission, and when you buy you get half of the commission as a rebate.

Also, the Realtors associations continually keep their members updated on changes in the law, legal forms, HUD, etc. It also allows direct access to all of their approved contracts and legal forms at their realtor stores. The Florida realtors have a legal hotline where one can speak to an RE attorney about a deal for free (included with the annual dues).

The realtors association has some benefits similar to a job. You can get group medical insurance, travel discounts, 401(K), etc. (sorry no sick time or paid vacation, haha)

There are several negatives as mentioned by John Behle and Jim Piper but I believe that positives far outweigh the negatives. But it may depend on what state you are in.

In FL, you have to be licensed as an agent for 1 year before becoming a broker. I put my license with an ERA referral company for that year. If I found any buyers or sellers for them, they would pay me a referral fee. In 1 year’s time I went into their office only 1 time and that was to sign up with them. (no other work for them otherwise) I did my year with them and became a broker.


#5

What about …? - Posted by Ron

Posted by Ron on November 15, 1998 at 19:21:51:

I’ve been giving serious thought lately about getting a license so that I can get access to MLS data. (Isn’t there a way to get MLS access without being a realtor or appraiser??) My primary blocks are:

  • Don’t I have to affiliate myself with an existing broker to become licensed? I don’t want to be expected to drag families around looking for their ideal house. How do I get around that?
  • Major brokers routinely advertise their licensing courses. Do I have to take one of these courses, or can you self-study?
    Thx.
    Ron

#6

Re: Getting a real estate license - Posted by JPiper

Posted by JPiper on November 15, 1998 at 16:05:14:

First, I would like to say that I agree with some of what John has to say regarding real estate licensing. However, I?ve reached a different conclusion, and therefore will present some other factors that may provide additional food for thought. I should also state at the outset that I was licensed for a number of years, but have recently dropped my broker?s license. My wife still maintains her license.

  1. One of the important factors in licensing to me has been access to the MLS. However my main use of the MLS system has been as a source of valuation information?.comps. I have for the most part NOT used the MLS system as a source for deals. Having said this, 24 hour access to information has been indispensable for me in my activities.

  2. I don?t particularly view the licensing course as indispensable, or for that matter particularly good. I have been licensed in 3 different states in the past, so my view only applies to those courses I?m familiar with. What I do believe is indispensable is a knowledge of the laws and how they work in your particular state. The law is available through a variety of sources, amongst which is the internet. I would highly recommend reading your state real estate law, and becoming as acquainted with the law as possible for a layman. Taking the licensing course is not a necessity to this knowledge, nor is it the best source of knowledge in my view.

  3. Agents have not been the best source of deals for me. I would hasten to add that I suspect my business differs from John?s. If I were more involved in the paper business per se, I think it?s possible that agents might be a good source?..but that is not the case. My experience has been that the best source of deals has been from my own efforts to dig up deals prior to their listing in the MLS. Marketing my own deals without the aid of the MLS has also been my typical method. I don?t think a deal marketed with some form of creative financing ever requires a MLS listing or an agent to market. I have used the MLS to market some deals where I wanted or needed cash.

  4. A practical problem with a license is that your initial license in all probability will be an agent?s license, not a broker?s license. The broker in all probability will have an established office policy for agents. This policy may restrict your freedom in some ways. If your license is a broker?s license, you may have additional requirements imposed by the state which heighten the ?paperwork? burden, not to mention periodic audits, etc. These burdens were amongst the reasons leading to my dropping of my broker?s license in two states.

  5. Some states have laws that in my opinion are overly restrictive on the investment activities of agents. One state that I?m familiar with has a restrictive law in place regarding foreclosures?.a law that does not apply to members of the general public. Complying with this type of law would in some ways be similar to tying one hand behind your back versus your competitors.

  6. Disclosure was not a problem in the past in my investment activities. But there is a heightened expectation on the part of the court system regarding the obligations of agents. This area is a literal minefield waiting to be exploited by opportunistic attorneys.

  7. I definitely think it?s important to be regarded as ?real? by whomever you deal with, whether it be an agent or an owner, or anyone else. While I think that being licensed COULD possibly be a factor in this, I can assure you that I know many agents who are not ?real?. Being ?real? in my opinion is a question of knowledge and ?stance,? a word I have used in the past. As a perhaps overly generalized comment, I would say that the most successful investors that I personally know are not licensed, and yet have little difficulty in being viewed as ?real?.

There is no right or wrong answer to the question of licensing. I?ve done it both ways. There are advantages and disadvantages of each. As with most things in life, it?s important to evaluate the advantages and disadvantages in order to make a solid decision on what?s best for you.

JPiper


#7

See the post on “Ghost Brokers” - Posted by John Behle

Posted by John Behle on November 16, 1998 at 15:41:02:

You can avoid almost all commission paid and collect all commissions earned if you want. See post below.


#8

Re: Getting a real estate license - Posted by Ron

Posted by Ron on November 15, 1998 at 22:34:48:

Rob,

Couple of questions about your post:

  • Commission savings: If I am a licensed realtor, but not a broker, don’t I save 1/4 of my commissions (rather than 1/2)? I’d think that my broker would still get his 1/4 and the other realtor/broker would get 1/2.
  • Why would ERA (or other substantial company) want a realtor whose efforts are essentially limited to buying and selling for himself?
    Thanks.
    Ron

#9

Ghost brokers - Posted by John Behle

Posted by John Behle on November 16, 1998 at 12:19:02:

I’ve never spent much time doing the taxi routine in real estate. My first broker was a new home builder and I found selling new homes was simple. Sitting on the site or floor time in the office gave me lots of time to do my own thing. Once I learned what I needed to about investments, I went with 100% split brokers from there on.

The first 100% office was a Re/Max office. They were brand new - but costly. It cost me $750 per month to “do my own thing” and have a nice office, staff, support, etc. After a short while I found a broker that would let me work out of my home or my own office for $100 per month.

I did that for a while, then found a broker that was a friend who let me essentially take over his brokerage for free until I was able to take the broker exam (3 years in Utah). I later re-couped most of what I spent paying brokers through the agents that paid me to “hang their license”. At one point I had over a thousand a month coming in from agents that just wanted to “do their own thing”, including a time share office paying $500 per month.

This can be one of the side benefits of a license we haven’t discussed.

I did that for a while and didn’t have any problems. In retrospect, I would maintain much stricter supervision on the agents than I did. I was lucky (a broker is totally liable for his agents).

So, you don’t have to drive people around.

As far at the brokerage licensing courses, they will usually want some kind of commitment from you as to how long you will stay and what you will do while you are there.

Though there are many advantages to a license, I’ve never been interested in the residential sales game, yet I have found some of the training and networking quite valuable.


#10

Re: Getting a real estate license - Posted by John Behle

Posted by John Behle on November 15, 1998 at 16:50:58:

As I mentioned, the licensing course really only gives agents enough information to be dangerous in some ways, but at least in our area, it covers many hours of real estate law. Most beginning investors do not know those laws and run some huge risks. Reading those laws from a book or over the internet would be very difficult for the average investor. I feel the explanation, case histories, etc. presented in class are valuable.

I forgot to mention a couple reasons I recommend the course. 1) It helps to familiarize you with how agents think (and don’t). If you deal with agents, you can run into some pretty wild ideas. I’ve had them tell me “Contracts” were illegal or that certain types of offers I present are not legal - when they are totally full of BS. It can be nice to know the truth and put them in their place. It doesn’t take a great mind to pass the exam and most agents have little more skills than a appliance salesman. That being said, they mis-interprete what they hear in the licensing course or make up their own laws if it is convenient. It’s nice to know their ethics and procedures so you can call them on that too. Of course the licensing course isn’t the only place to learn that, but learn it somewhere. As I mentioned, you can take the course and choose not to license. If there is a question here, go to one of the schools in your local area and look at the materials to see how much you know or not.

Second, many new investors are at least a little intimidated by agents and brokers. Once you’ve been in the business a while you say “WHY!” I think the licensing course can help a great deal with the confidence to deal with agents if that is your strategy. It also helps you to deal with them successfully if you know when they are playing games with you, the seller, the buyer or the lender.

The MLS has been an incredible source of deals, but like Jim mentioned, it may be a matter of strategy. I’m not refering to just “Paper” deals either, but some of the most profitable deals can be through listed properties. It takes a different strategy and more sophisticated techniques than are taught in most of the courses. Most of the time I structure deals to sell outside the MLS to avoid the costs, but on some properties I find the MLS very valuable for re-sale - though I will usually use another agent that has more exposure in the particular area or type of property.

In my state, there are not any restrictive laws for agents. I know California has some due to some of the problems they have had - particularly in the area of foreclosures.

I abolutely agree that whether you are perceived as “Real” or not as an investor has little to do with a license. It helps some, but like Jim pointed out, being an agent doesn’t necessarily mean acceptance or respect as an investor. I believe it can help in areas like vocabulary and knowledge of laws and practices. Agents have some different terminology than you will find in seminars and vice versa. The better the communication, the greater the chance of success, but being perceived as “real” has to do with a lot of factors besides just knowledge.

Again, like I mentioned before, most of these items can be accomplished without the license, yet I see these as being reasons people argue for or against licensing. At times I would have dropped my license if it were not a broker’s license. It’s a lot more work to get. Another factor is personal transactions. I do some exchanging on my personal portfolio and for select clients. I need the license for that.


#11

Re: Getting a real estate license - Posted by Rob FL

Posted by Rob FL on November 16, 1998 at 20:24:01:

My term with ERA is long over. In FL you have to be a salesman for 12 months before becoming a broker. I signed up with an ERA franchise to do my 12 months. This broker had a “referral company” in which inactive agents like myself could hang their license and refer any business that they know of over to the broker who will then represent the buyer or seller and give me a small referral fee. Guess how many referral I gave them in 1 year. You guessed it NONE. I kept the good stuff for myself.

The only reason I signed with ERA was because I had to TRAIN under a broker for a year. (I saw my broker one time in the whole year, the day I signed up)