REAL ESTATE AGENTS
To Get A Real Estate License Or Not To Get, That Is The Question
by Rob Arnold
I have probably had hundreds of investors ask me whether or not they should get a real estate license in order to invest in real estate. There is no quick and easy answer to this question. The answer really depends on what you plan to do in your investment career.
A real estate license is typically for someone who wants to work for other people to help them buy, sell, or lease their real estate. That is what a traditional real estate licensee (the legal term in Florida is “sales associate”) does. Most investors are not planning on working for others, but I do know many sales associates who invest in real estate as a side business.
There are really three main reasons to get a real estate license outside of doing traditional Realtor® services.
Reason #1 is to obtain access to the local Multiple-Listing Service (MLS for short). The MLS is the database used by nearly all residential Realtors to advertise their listings to other Realtors and to get their listings posted onto major websites like Realtor.com, Trulia, Zillow, etc. The MLS has information on all listings past and present in the area including solds and expireds.
It makes checking for comparable sales easy. MLS access can only be obtained by dues paying Realtors®, assistants to dues paying Realtors®, and licensed real estate appraisers. A few people have asked me to let them be my assistant, but our local MLS has a limit of 2 assistants per Realtor® because they know that people try to get around their licensing rules. There is also a way to be what is known as a “Thompson Broker” and join the MLS without being a dues paying Realtor®. To be a Thompson Broker, you still need a real estate license and the annual fees are higher than those of Realtors®, so the cost-benefit difference is not there.
Reason #2 is to legally get paid commissions or referral fees without being a principal in the transaction. In Florida unless you are a principal in a transaction AND you have “substantial consideration” (meaning money to possibly forfeit) on the line to tie up the contract, you cannot bring buyers and sellers
together and get paid a fee. You also need a real estate license to lease or manage rental property for another person. (Reference: Chapters 475.41, 475.42, and 475.43 Florida Statutes.)
Reason #3 is access to all the online contract forms. The FAR/BAR contract, all the various addenda, FAR listing agreements, and dozens of other Florida standardized forms. Most of the forms can even be filled out online and signed electronically as needed.
Here are a few of the other “pros” for obtaining a license.
Reason #4 The educational benefits from courses offered and trade magazines and newsletters. Until you take a real estate pre-license class you will be surprised was you don’t know about Florida real estate law.
Reason #5 Access to the legal hotline to answer all your real estate legal questions.
Reason #6 The technology hotline. They will actually spend hours fixing computer software issues
online at no charge.
Reason #7 Ability to show properties to yourself without needing another sales associate to accompany you. A big obstacle if you are making lots of offers on listed properties.
Reason #8 Favorable income tax rules regarding active vs. passive income and tax write-offs. (Ask your CPA.)
Reason #9 You can offer to list properties that do not make sense to purchase as an investment. Many times we offer to buy the property first and then list the property second - depending on the deal of course. With the license, you never have to turn away a deal just because the numbers or terms do not work.
Now, for the negatives for obtaining a license:
#1 Educational requirements - pre-licensing, post-licensing, continuing education, and several tests are mandatory.
#2 The costs in both time and money for the license, the application, and annual dues with the State, the Board of Realtors®, and the MLS. You only need to join the board of Realtors® if you want access to the
MLS though; you can still legally get paid a commission without joining the board of Realtors®.
#3 Having to abide by the State real estate laws and the board of Realtors® Code of Ethics. Just because you are unlicensed does not mean that you do not have to abide by the State laws. Plenty of investors have gotten Cease and Desist orders from the State for their “investment activities” and “consulting fees” that were really just unlicensed brokerage activities. Read Chapters 475.01 and 475.011, Florida Statutes for what constitutes brokerage activities and who is exempt.
#4 Disclosure of your real estate license to potential buyers and sellers. Some “gurus” say this is a negative. To me it is actually a positive. Why would a seller or buyer want to deal with some unlicensed investor (who might be a scam artist or time waster) when they can deal with someone that is regulated by the State of Florida? I use this credibility all the time when buying property and it often helps me clinch the deal.
#5 Courts may hold licensed people to a “higher standard” then they would an unlicensed person. Another “guru” negative for not getting a license. However if you are doing lots of deals and are advertising yourself as a professional investor, you are going to be held to a higher standard than a layperson anyway. If you go to court, you still lose time and money even if you prevail. Most of the people that I know who have been sued by a seller or buyer or partner in a bad real estate investment deal did not have a license. And often they got sued because they were ignorant of the various laws regarding real estate - laws that get taught in the pre-licensing real estate 101 class.
So what is my advice on getting a license? If you do not plan on listing and showing properties, do not get a license at least in the beginning. Do a few deals and find out if real estate investing is really what you want to do. After a few deals, then you can decide if you want to take the step of getting a license. Having the license is not for everyone, and there are plenty of successful investors that do not have a license. I have found it is better to get a license if you are doing many transactions on a regular basis or if you have a large portfolio of properties that you are working with. The more volume you do, the more you probably need the license. It does not necessarily need to be you who obtains the license though. I know many investment teams where a spouse, parent, child, friend, or partner gets the license.
I hope this article has been enlightening to you. I do recommend that everyone take the real estate pre-licensing course. You can take it at many of the local community colleges or real estate schools or even online. Even if you never get a real estate license, the course goes over many of the basics of real estate, the contract, and Florida law. The course can be a real eye-opener to investors on how to conduct business the right, legal way. If you need help determining whether or not you should get a real estate license, feel free to call me and we can discuss your situation. Until next time ... happy investing.
Reprinted by Permission. Copyright © 2017. Sand Dollar Realty Group, Inc. All rights reserved Rob Arnold is a Managing Real Estate Broker and Licensed Mortgage Broker Call 407-389-7318 or 877-389-7318 or visit www.SDRhouses.com/ www.WeBuyHousesFlorida.com