What are the downsides of getting your real estate license?

Real Estate Agent
7yFollow

What are the downsides of getting your real estate license?

Kyle Shankin
Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes

There are many posts and have heard several guests on the BP podcast advocate for getting your real estate license, but no one ever talks about the downsides.

I'm a southeast Michigan-based investor who is using direct mail and PPC marketing to find new leads. I'm considering getting my license solely so that I can more accurately comp out houses and make better offers and maybe be able to view houses on the MLS on my own schedule. I don't have any interest in starting a career as a real estate agent as I already have a job (though the plan is to go full time into investing when appropriate).

How would getting my license negatively affect what I'm doing currently?

2Reply
19 views

Most Popular Reply

Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

Thanks for the tag @Joe Splitrock.

@Kyle Shankin There are certainly downsides to having a license that people do not talk about.  Liability is the major one.  When you are licensed, you instantly become liable for knowing every law.  Ignorance is not a defense.  Also if you end up with a complaint before a real estate commission, fair housing commission, anything of that sort...you are by and large guilty until proven innocent, as opposed to the opposite you would enjoy a member of the public in a court room.

Fines for innocent mistakes can be drastic.  One agent in Massachusetts was fined roughly $100,000 for simply asking a client "So where are you from?"  You may have a license and not be in business....but in the eyes of the government, you have a professional license to practice a regulated activity, and will treat you no different than the guy making millions per year selling real estate.

Cost is the other overlooked item.  Licensing fees, continuing education, insurance, mls dues, board dues, sentrilock fees. It all adds up.

@Joe Sadusky You also want to keep in mind your broker needs to approve your wholesaling activities. They are liable for all of your real estate activities, not just sales. Also be aware that your e&o insurance does not cover you when you are a party to the transaction.  Id also contend that if you are using assignable contracts to wholesale, you are engaging in a de facto net listing, which is illegal in most states.  I always suggest to wholesalers to either not get licensed, or to double close on properties to avoid the net listing issue.

[email protected]301-893-4635Podcast Guest on Show #192
District Invest Group546 Reviews
WebsiteView Page
5Reply
See this reply in the discussion

24 Replies

Jump to latestLatest
  • Joe Sadusky
    Rental Property Investor · Levittown, PA · Member since 2016 · 109 posts · 97 votes
    7y

    Hey @Kyle Shankin, 

    I was in a similar situation as you. My wife is a licensed Real Estate Agent, but I was the one doing most of the wholesaling stuff. I recently just got licensed myself so I can help her expand as agent and we are going to be our own team.  The biggest difference between just being a regular person finding off market deals and a licensed real estate agent is DISCLOSURE.  Although your assignments will most likely be separate from your broker and your real estate affiliation, its required to be very forthcoming with your license status when talking with potential sellers even if you're not fully acting in your capacity as a real estate agent. 

    I don't find it to effect us negatively.  I've heard that most off-market sellers shy away from real estate agents and want nothing to do with them.  I have found that what we bring to the table as far as our knowledge of the local market outweighs the possible negative stigma of being a real estate agent. 

    Good Luck! 

    4Reply
  • Kyle Shankin
    OP
    Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes
    7y

    Thanks @Joe Sadusky, I appreciate the insight!

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Kyle Shankin it is not as simple as getting your real estate license. You need to join the local board and join a local brokerage. So you do need to become a real estate agent, although some brokerage allow you just to pay an "office fee" and not even produce. Other firms only want producers, so non-active realtors wouldn't be welcome. I am not a realtor, so not sure what those fees are, but if you want lock box access it is going to cost you.

    @Russell Brazil how does this work if people just want lock box and MLS data access but not being an active realtor?

    3Reply
  • Kyle Shankin
    OP
    Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes
    7y

    Thanks @Joe Splitrock. I had heard that there are fees involved and I'm aware that a broker has to hold your license. It sounds like I'd be looking for one of those brokerages who just require an office fee. Depending on the fee amount, it might still make sense to do if that helps me land more deals.

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Thanks for the tag @Joe Splitrock.

    @Kyle Shankin There are certainly downsides to having a license that people do not talk about.  Liability is the major one.  When you are licensed, you instantly become liable for knowing every law.  Ignorance is not a defense.  Also if you end up with a complaint before a real estate commission, fair housing commission, anything of that sort...you are by and large guilty until proven innocent, as opposed to the opposite you would enjoy a member of the public in a court room.

    Fines for innocent mistakes can be drastic.  One agent in Massachusetts was fined roughly $100,000 for simply asking a client "So where are you from?"  You may have a license and not be in business....but in the eyes of the government, you have a professional license to practice a regulated activity, and will treat you no different than the guy making millions per year selling real estate.

    Cost is the other overlooked item.  Licensing fees, continuing education, insurance, mls dues, board dues, sentrilock fees. It all adds up.

    @Joe Sadusky You also want to keep in mind your broker needs to approve your wholesaling activities. They are liable for all of your real estate activities, not just sales. Also be aware that your e&o insurance does not cover you when you are a party to the transaction.  Id also contend that if you are using assignable contracts to wholesale, you are engaging in a de facto net listing, which is illegal in most states.  I always suggest to wholesalers to either not get licensed, or to double close on properties to avoid the net listing issue.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    5Reply
  • Kyle Shankin
    OP
    Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes
    7y

    @Russell Brazil first off, thank you for all of that knowledge. Now onto the part of your response that made me spit out my coffee, fined $100,000 for asking where a client is from!? What rule did they break by asking that question?

    Do you mind sharing a ballpark of what an annual cost of all of those fees? I would imagine that, with enough volume, even a few thousand dollars could be considered as the cost of doing business.

    This certainly gives me a lot to think about.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    Originally posted by @Kyle Shankin:

    @Russell Brazil first off, thank you for all of that knowledge. Now onto the part of your response that made me spit out my coffee, fined $100,000 for asking where a client is from!? What rule did they break by asking that question?

    Do you mind sharing a ballpark of what an annual cost of all of those fees? I would imagine that, with enough volume, even a few thousand dollars could be considered as the cost of doing business.

    This certainly gives me a lot to think about.

    "Where are you from?"  It is a fair housing violation, discrimination based on national origin.....he might not of even meant what country are you from...but what state, or what city. He appealed, and the federal court ruled that discrimination need not have actually happened nor have even been intended for a fair housing violation to have occurred. The person who filed the complaint wasnt discriminated against, she just saw a pay day waiting. (like a year later too at that)  The case was Linder V Boston Fair Housing Commission. Its all over the net if you want to google it.

    Costs of maintaining a license vary state to state.  Id say $3,000-$4,000. 

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    2Reply
  • Joe Sadusky
    Rental Property Investor · Levittown, PA · Member since 2016 · 109 posts · 97 votes
    7y

    @Russell Brazil appreciate the insight and advice. 

    Our Broker has advised that since we are independently on the buying side of a transaction that we are OK to wholesale. Our family business also has a LLC and that company is listed on the assignment, not our individual names (not that I am sure if that even makes a difference?)

    We tell all prospective sellers that we are real estate agents, but are not acting in that capacity for this transaction. All sellers also sign an unrepresented disclosure agreement as an extra barrier of protection. 

    1Reply
  • Grant Rothenburger
    Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
    7y

    @Kyle Shankin

    Could take away time and effort from other things. That's about it.

    0Reply
  • MK Boatswain
    Contractor · Atlanta, GA · Member since 2019 · 12 posts · 4 votes
    7y

    @Russell Brazil

    I agree! I don’t want a Real Estate license because of the liability involved. It does r help my business at all. As a consultant I can work freely.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Russell Brazil how would that work if an agent wanted to work at your company, but only to do their own deals? Is that something most firms even entertain? Even if someone is buying or selling their own properties, doesn't a cut still go to the brokerage? For example I buy a property off the MLS. The selling agent get 3% and the other 3% goes to me, but I am assuming some of that is split with the brokerage.

    It just doesn't seem economical to be your own agent unless you do high volume or do other business beyond your own.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    @Joe Splitrock

    Yeah the brokerage is taking a cut. For a low volume agent at a big brokerage they might take 50%. High volume guys might keep 90% or more at a big brokerage. Small brokerages might have better split.

    I always figure youve got to be doing 5+ deals a year to make it worth it to get your license. I had my license for 10 years before becoming a full time agent, and I have little doubt that I lost money doing that after all the costs involved. I dont nessecarily look at that as a bad decision though, as when I made the choice of going full time, I had all the experience of managing a transaction already down.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    1Reply
  • Dutch Langley
    Flipper/Rehabber · Matthews, NC · Member since 2019 · 198 posts · 239 votes
    7y

    I like not being licensed....I can ask all kinds of questions and not get sued for doing so. My husband was a broker back in the day mostly for property management purposes. Costs involved for MLS, lock boxes, continuing education, etc, running to the property to show it, etc. I would rather have several great realtors to team up with and pay them their percentage.

    1Reply
  • Lori Greene
    Specialist · Huntsville, UT · Member since 2015 · 458 posts · 249 votes
    7y

    There are other ways of getting MLS access than becoming an agent, especially if you don't really want to be an agent.

    You can offer to pay part of an agent's MLS access in return for making you an assistant in their system and giving you access.

    Building relationships with agents is better than having MLS access anyway because then you don't have to spend all that time searching for properties, you have your agents spend that time.

    I have my agents set me up on auto emails of properties that are in the areas I want and below a certain $/sq ft and have certain keywords they've set up like motivated, fixer, TLC, investment, etc.

    As far as getting unlimited MLS comps anytime you want, I know where you can get them but I'm not allowed to post it in the forums. You can message me if you want.

    0Reply
  • Kyle Shankin
    OP
    Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes
    7y
    Originally posted by @Dutch Langley:

    I like not being licensed....I can ask all kinds of questions and not get sued for doing so. My husband was a broker back in the day mostly for property management purposes. Costs involved for MLS, lock boxes, continuing education, etc, running to the property to show it, etc. I would rather have several great realtors to team up with and pay them their percentage.

    I totally get that. In fact, I have 0 interest in even selling my own properties because I value my time more. I'd be looking strictly for MLS access. I'm thinking getting a license might not be for me. It's just weird because there are a TON of members on BP in support of it.

    0Reply
  • Shawn Krieger
    Member since 2019 · 151 posts · 20 votes
    7y

    @Russell Brazil I already have my salesperson certificate from New York State but I’m not listed under any broker

    Am I liable?

    1Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 956 votes
    7y

    @Shawn Krieger you can't practice and collect commission in NY as a salesperson without having a sponsoring broker.  That being said, you're can probably still be held liable for things being that you have completed the course and education.

    0Reply
  • Shawn Krieger
    Member since 2019 · 151 posts · 20 votes
    7y
    Originally posted by @Scott Wolf:

    @Shawn Krieger you can't practice and collect commission in NY as a salesperson without having a sponsoring broker.  That being said, you're can probably still be held liable for things being that you have completed the course and education.

     I always thaught I needed a sponsoring broker

    0Reply
  • Shawn Krieger
    Member since 2019 · 151 posts · 20 votes
    7y

    @Scott Wolf so what can’t I do in New York as a salesperson

    0Reply
  • Shawn Krieger
    Member since 2019 · 151 posts · 20 votes
    7y

    @Scott Wolf when you register on New York’s dmv for the salesperson liscense it asks you for your sponsoring brokers # so how do you get around that

    0Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 956 votes
    7y

    @Shawn Krieger in my original post, I wrote you CAN’T collect commission without a sponsoring broker.

    0Reply
  • Shawn Krieger
    Member since 2019 · 151 posts · 20 votes
    7y

    @Scott Wolf Lol I thaught it said can my bad

    0Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 956 votes
    7y

    @Shawn Krieger no sweat.

    0Reply
  • Cassidy BurnsBusiness Member
    Investor · Alexandria, VA · Member since 2016 · 859 posts · 460 votes
    7y

    @Kyle Shankin , I think if you don't want to start a career as a real estate license, there is no use in getting your license.  Find an awesome real estate agent that concentrates on real estate investing AND owns investment properties themselves.  They will save/ make you so much more $$$ on the deals that you purchase than you ever would make just brokering your own deals.

    Good luck! 

    [email protected]540-960-1507
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free