I'm getting my real estate license - Why don't more people do this?

[Valvore]

I have 2 homes and looking to buy another. Been doing slow live in flips with intent to sell for profit  but rents have gone up so will likely rent my 2nd place like I did with my 1st. Hoping house #3 will be a forever home (10+ years at least).  I also have been following my local market and real estate in general for years and do a lot of research myself on individual properties

I decided to get my Real Estate license for a couple reasons. I'm type A do would like to negotiate myself and always felt unsure about information or suggestions realtors gave me, even though we bough with a friend both times. Not a super close friend but a successful agent. I am hoping to work with their broker when the time comes for me to buy for myself. And the last big reason is that commission! 3% of a 500K house is a lot of money I could keep.

My question is, why don't more people do this? Is it hard to find a broker to work with when you just want to buy and sell for yourself? I've just started the class so maybe I'll learn why later but I'm feeling a bit big headed like I gamed the system.  $300 class to get thousands of dollars the next time I buy? Wish I did this sooner.  It will really come in handy if I end up selling too as the it's seller who actually pays the realtors comission.

TLDR: Why don't more people get their real estate license when they plan to buy/sell in order to keep thousands in commission and negotiate their own deal?

[GilesMM]

I have always made it clear to all my agents that I am in control of all negotiations. They convey only the information I authorize them to convey.

Buyers and sellers [/size][size=78%] who are their own agents can make for some queer deals. I hate dealing with an owner/agent. I want my agent to take to her agent and tell us what she is really thinking. This is how deals can come together.  Some agents actually hire other agents for buying  and selling for this reason.[/size]

[Midwest_Handlebar]

There are some costs to holding your licenses ~$1k a year, and the broker gets a portion of the 3% commission, but if you do enough volume it's worth it. It wasn't worth it to me for the first couple years of investing, but I got licensed in 2 states last year as I built up enough momentum.

It's not worth it for a typical home buyer buying once every 7-8 years from a time/cost perspective, but it will allow you to scale faster if you're an investor doing decent volume. 

[Valvore]

I have always made it clear to all my agents that I am in control of all negotiations. They convey only the information I authorize them to convey.

Buyers and sellers [/size][size=78%] who are their own agents can make for some queer deals. I hate dealing with an owner/agent. I want my agent to take to her agent and tell us what she is really thinking. This is how deals can come together.  Some agents actually hire other agents for buying  and selling for this reason.[/size]

That's exactly the point.  You dont get paid for your part of the work. People like us do the negotiating, I know what I want to offer and I do a bunch of research. I also understand not liking working with an owner/agent but you wouldn't necessarily walk away from a deal because of it. You would walk away from a deal for what it is not who presents it.

There are some costs to holding your licenses ~$1k a year, and the broker gets a portion of the 3% commission, but if you do enough volume it's worth it. It wasn't worth it to me for the first couple years of investing, but I got licensed in 2 states last year as I built up enough momentum.

Wouldn't even one home be worth it though if you know you're going to buy or sell? Example

Buy $400K home
3% commission = 12K
Broker takes what, 0.5 - 1%? = 4K max
Annual license fees = ~ 1K
License class + exam = $500

12K - 4K - 1K - 0.5K = $6,500 in your pocket

I could see how it can be more trouble than it's worth the lower priced the house but we are likely going to buy in the 600K range so it should really be worth it for me.

[Midwest_Handlebar]

In my case the broker gets 40% of the 3% sales commissions for the first 3 houses. After that it's a flat fee. It depends on what your time is worth. When I was buying 1-2 condos in a LCOL market a year it wasn't worth it. Once I increased my volume it was.

You need to have some experience filling out sales contracts, or someone that can mentor you. This could cause you more trouble than it's worth if you don't know what you're doing.

If you have the motivation and think it will deliver value in your life, go for it, but it does require significant time and some money.

[clarkfan1979]

I have always made it clear to all my agents that I am in control of all negotiations. They convey only the information I authorize them to convey.

Buyers and sellers [/size][size=78%] who are their own agents can make for some queer deals. I hate dealing with an owner/agent. I want my agent to take to her agent and tell us what she is really thinking. This is how deals can come together.  Some agents actually hire other agents for buying  and selling for this reason.[/size]

That's exactly the point.  You dont get paid for your part of the work. People like us do the negotiating, I know what I want to offer and I do a bunch of research. I also understand not liking working with an owner/agent but you wouldn't necessarily walk away from a deal because of it. You would walk away from a deal for what it is not who presents it.

There are some costs to holding your licenses ~$1k a year, and the broker gets a portion of the 3% commission, but if you do enough volume it's worth it. It wasn't worth it to me for the first couple years of investing, but I got licensed in 2 states last year as I built up enough momentum.

Wouldn't even one home be worth it though if you know you're going to buy or sell? Example

Buy $400K home
3% commission = 12K
Broker takes what, 0.5 - 1%? = 4K max
Annual license fees = ~ 1K
License class + exam = $500

12K - 4K - 1K - 0.5K = $6,500 in your pocket

I could see how it can be more trouble than it's worth the lower priced the house but we are likely going to buy in the 600K range so it should really be worth it for me.

To echo what others have said, it's not worth most people's time to take a real estate class and then have to pass a test for one transaction every 7-10 years. If you are going to buy multiple properties every year, you can scale faster, but it is still not necessary. You could still make the argument that spending time on finding deals is better spent than on a real estate class.

How much time do you think you will spend taking the class and studying, total?

[Valvore]

In my case the broker gets 40% of the 3% sales commissions for the first 3 houses. After that it's a flat fee. It depends on what your time is worth. When I was buying 1-2 condos in a LCOL market a year it wasn't worth it. Once I increased my volume it was.

You need to have some experience filling out sales contracts, or someone that can mentor you. This could cause you more trouble than it's worth if you don't know what you're doing.

If you have the motivation and think it will deliver value in your life, go for it, but it does require significant time and some money.

Ah, there it is. Thats the rub. Makes total sense. That high fee for the first few sales discourages people like me who what to do this haha. Since I'm friendly with my broker I'm hoping I can negotiate some sort of deal. 40% of the 3% commission would be a pain. 

You could still make the argument that spending time on finding deals is better spent than on a real estate class.

How much time do you think you will spend taking the class and studying, total?

96 hour class, study material is embedded in the class and I (probably incorrectly) think the test will be pretty easy to pass.

I am also wanting the freedom to see a place or call an agent with questions (and taken seriously). Even though my realtor is a friend and responsive, they always act slower than I would when I see something I want.

I'd think it'd be useful if a person buys and sells at the same time, as most do. So even with the broker fees it could save you. But I understand better now why it's not as common, a bit of leg work for lower savings than I thought. That broker fee sounds awful. I'm still going for it though andit should be a nice tool in my toolbox during FIRE.

Thanks everyone for the insight.

[englishteacheralex]

Our real estate agent did a lot for us that I wouldn't have been able to do myself, even if I had had a real estate license. He had a massive team of marketers and contractors that whipped our condo into shape and got it sold really fast. The 2.5% commission was well worth it.

[Dancin'Dog]

You really only need a real estate attorney for closing.  The agents are optional.

[secondcor521]

I'm in my fourth house.

Instead of getting my RE license, we sold our third house FSBO for about $1K and I bought this house without an agent.  There was an agent representing the seller, but I did everything my agent would have done myself.

[Mr. Green]

You really only need a real estate attorney for closing.  The agents are optional.

+1. We've bought 7 properties over the years and only used a real estate agent for 2 of them. Sold property twice and have yet to use an agent.

[Metalcat]

I looked into it, but here it takes a very long time and it's expensive to maintain a license. It's just not worth it if I don't want to actually work as a realtor, and I do not.

The benefit just isn't substantial enough.

[nouseforausername]

This

In my case the broker gets 40% of the 3% sales commissions for the first 3 houses. After that it's a flat fee. It depends on what your time is worth. When I was buying 1-2 condos in a LCOL market a year it wasn't worth it. Once I increased my volume it was.

Exactly. An agent has to work under a broker's license for X amount of time, and jump through additional state-dependent hoops.

By virtue of having a law license, some states make the path to being a broker easier (e.g., my state would let me sit for the broker's exam immediately without an experience requirement). But, there are continuing education reqs, a bond / other fees to maintain the broker license.

Coincidentally, by virtue of a law license (or being the property owner), I could also just negotiate and sign a sales K. myself in many states.

Not knocking the idea at all. But, it doesn't make sense to be a licensed realtor (broker or agent) unless you are a practicing realtor?

[iris lily]

You really only need a real estate attorney for closing.  The agents are optional.

agreed. Why bother to get real estate credentials?

In my state a title company handles the closing. I think I could buy an off the shelf contract and use it, although the requirements for my own state would have to be included. If buyer and seller sign it is a done deal.

Taking the real estate course is good for your knowledge base,  but it isnt going to get you nuts and bolts practical skills.

We sold one property recently without a real estate agent. Our close friend who is a crackerjack real estate agent did us a favor by looking over the contract.  We had worked with him for other small deals. He  didnt really care to list it since it wasnt his higher end type of property.

Later we sold our house using him, but since we found our own buyer, we worked at half commission for him to finish the deal. He provides cadallic service and we are old and like luxury service. Haha.

[zolotiyeruki]

You really only need a real estate attorney for closing.  The agents are optional.

How does that work, logistically?  Say I'm in the market, and I see a house I want to view.  Do I call the listing agent directly and set up a visit?
When I want to make an offer, where would I get the contract to send over?  Is that something the attorney would provide?  Is the contract scanned/emailed?  Faxed?

[Midwest_Handlebar]

One of the main reasons I got a license was to qualify as a real estate professional in the eyes of the IRS for bonus depreciation. Also it adds credibility, access to additional information on the MLS, and ability to collect commissions. There are many ways to save/make money in real estate and it's just another tool for me. 

[Dicey]

I've thought about it, mostly for information access. When I buy/sell a property, I'm paying for someone's experience, not just their shingle. Realtor, CPA, Financial Planner, etc.

[iris lily]

You really only need a real estate attorney for closing.  The agents are optional.

How does that work, logistically?  Say I'm in the market, and I see a house I want to view.  Do I call the listing agent directly and set up a visit?
When I want to make an offer, where would I get the contract to send over?  Is that something the attorney would provide?  Is the contract scanned/emailed?  Faxed?

There are boiler plate real estate contracts you can get on the Internet and probably even for your state.

But sure, your lawyer will provide a contract form if you pay him to do that.

If you want to see a house listed On the multiple listing service, I suppose it depends on the listing agent if they let you in or not without an agent. If you say you’re representing yourself they may or may not let you see it depending  on how hot the property is.

[Archipelago]

You really only need a real estate attorney for closing.  The agents are optional.

+1. We've bought 7 properties over the years and only used a real estate agent for 2 of them. Sold property twice and have yet to use an agent.

To piggyback on this thread of thought, I've purchased 2 investment properties without any agents involved on either side. Both times I got at least a 2.5% discount by not using agents. Actually, for the first transaction the sellers wouldn't have sold the property otherwise. It was simpler to do everything directly. We each had attorneys of course, but we handled all negotiations ourselves. Transacting property is not terribly complicated.

This route seems even more efficient because in addition to no licensing requirements & fees, there's not a tax liability for generating commission income from the transaction.

The obvious caveat is that this won't work on properties that are already listed on the market under a broker agreement.

[NonprofitER]

This topic comes up frequently in Bigger Pockets forums.

One of the main reasons to NOT get your real estate license (even if you're an active investor, purchasing several deals a year) is that in some states, having a license means you have a greater professional/legal obligation to act as a fiduciary - esp when it comes to being clear with sellers that you are purchasing the home under market value. This can get ethically murky if you're a buyer who is also licensed, trying to buy under market while being clear with the seller what the market value of the property is...

[Midwest_Handlebar]

There is no right answer to if someone should or shouldn't get licensed. It depends on someone's personal situation and goals, and you can be successful either way.

You really only need a real estate attorney for closing.  The agents are optional.

+1. We've bought 7 properties over the years and only used a real estate agent for 2 of them. Sold property twice and have yet to use an agent.

To piggyback on this thread of thought, I've purchased 2 investment properties without any agents involved on either side. Both times I got at least a 2.5% discount by not using agents. Actually, for the first transaction the sellers wouldn't have sold the property otherwise. It was simpler to do everything directly. We each had attorneys of course, but we handled all negotiations ourselves. Transacting property is not terribly complicated.

This route seems even more efficient because in addition to no licensing requirements & fees, there's not a tax liability for generating commission income from the transaction.

The obvious caveat is that this won't work on properties that are already listed on the market under a broker agreement.

I'm not saying anyone on this thread is doing this, but this comment made me think of something that I've observed that holds a lot of people back. New investors are often looking for that "perfect deal" and it has to be 10-20% under market, move in condition, meeting the 1% rule, "off market" deal that they don't have to pay commissions on, etc, etc. These requirements are so confining that they end up doing nothing and when they do find a property that meets these they are outbid by 5 other people. They then conclude that real estate investing is impossible or produces lower returns than the stock market.

What's more important is that you consistently dollar cost average over time into assets that you want to manage, and control your leverage/expenses while you do so. Let inflation be your friend over time. If you do that you'll have more money than you can spend, and more importantly, time freedom.

Basically don't let perfect be the enemy of good enough.

[Mr. Green]

You really only need a real estate attorney for closing.  The agents are optional.

How does that work, logistically?  Say I'm in the market, and I see a house I want to view.  Do I call the listing agent directly and set up a visit?
When I want to make an offer, where would I get the contract to send over?  Is that something the attorney would provide?  Is the contract scanned/emailed?  Faxed?

You can sign a napkin to buy property. RE agents are only truly necessary when buyers or sellers don't know what they're doing. The sale process is actually quite simple. Sign a contract. Buyer maybe gets a lender. Sale contract is given to a closing attorney and the lawyer and lender do 90% of all the heavy lifting. Agents are helpful to a seller if they don't know what their home is worth but the internet and analytics have largely made that obsolete. They can also advise in weird property situations to make sure a seller discloses anything they should but this is weak at best because time and again sellers have not disclosed things and there's little recourse for a buyer. Agents can likewise advise a buyer on all the things they should be thinking about in purchasing a home but an hour of surfing the internet will educate you on 90% of that as well. For much of the cookie cutter real estate without issues, a transaction simply isn't complicated.

[Dicey]

I've thought about it, mostly for information access. When I buy/sell a property, I'm paying for someone's experience, not just their shingle. Realtor, CPA, Financial Planner, etc.

[LiveLean]

I got my license in 2001, shortly after we bought our first house. I found the process of buying a home so frustrating, like I was being taken advantage of at every turn (wife and I were 29 at the time). When I found out that here in Florida I could get licensed by taking a two-week class (9-to-5) and passing a state exam, I got it. I never intended to be a Realtor and I haven't placed my license with a broker, done referrals, etc. But the education made me a better real estate investor as well as more knowledgeable for when I hire Realtors and buy/sell. (I have zero patience with lousy Realtors.) At least here in Florida, it's pretty inexpensive to renew a license, just $80 or so every two years and it's a brief online course/test. I doubt if it cost me more than $300-400 to get licensed in 2001. I've looked into it today for our two college-age sons and it looks like it would be $600 or so between the class, licensing fees, etc. Neither of them plan to be Realtors either, but it's a good background to have, especially since both plan to major in business.

The best Realtors are the ones who focus on a small area and work their asses off, not just on the nuts and bolts of buying/selling, but marketing and customer service. It's their only job and their full-time, longtime career. Here in Florida, I know so many people who are Realtors when the market is hot and something else when it's not. I would never hire them.

[Valvore]

Mini update:

I'm about 10% through my class. I really like that I did an on-demand online course so I can take modules when I want. I really like the format and content too. AceableAgent if you're curious. It is harder to remember some of the older subjects though because I can go days at a time without doing a section and it's lots of memorization. Luckily I know some of the information already.

Anywayyyyy, after this post and speaking with people I do understand some of the limitations being your own agent can bring and the benefits of having an experienced agent. To me, the control and cost savings are just too enticing so I'm still going for it. Maybe its my ego but from some of the agents I've met.. I think it's something I could handle.

The biggest drawback for me is the fee the brokerage company takes for your first few buys/sells. I was told there are online brokerage firms that do not take bigger commissions and I do have some friends in the business who may allow me to do buys and sells for myself maybe in exchange for being available to show places on the weekends for a time being (no kids, wont be working so I'll have lots of time).

When I finish my course, pass the test and find a broker to work with I'll try and remember to update this post to give all the details. That's also if I decide to sell or buy too because I'm still undecided too. Thanks Mustachians.

[cooking]

Don't forget that there are usually ongoing MLS fees too.  In most places that I'm familiar with, that's how you get access to all the information about listings, and how you gain access to get inside and tour them.

[Joel]

When we purchased our house in 2017, we used OpenListings which offered a 1.5% “rebate” of sorts since you more or less acted like your own agent. It was worth it for us. It appears that company is no longer in operations, but it might be worth exploring alternatives.