Should I get a license just to represent myself?

Question

I'm thinking of getting a realtor license (in PA) to represent myself on purchasing rentals/investment properties.

The benefits are meaningful:

-Main benefit: Get 3% of the purchase price as cash (or a portion of the 3%)

-Flexibility of showing yourself in when shopping, no need to schedule with a buyer's agent

-Write up as many low ball offers as you wish without having to deal with a buyer's agent

Some questions come to mind:

-What are the one time costs for getting a license?

-What are the ongoing costs of keeping a license?

-How to find a broker? and how to avoid paying them half of the 3%?

Below is a description of what I think are the costs of being a realtor in PA:

one time:

Education: ~$300 (varies, you can shop around)

Exam provider fee: $54 (have to pay to the state)

Background check: $10 (have to pay to state police)

ongoing:

Sales Person fee: $107 every 2 years (have to pay to the state)

Local REALTOR associations: ~$300-500 (not clear if this is necessary or not or what benefits it provides, seems like some brokers force you to have it though)

MLS access: $250 per year (not necessary but probably worth it to access better data)

Lock box key: ~$200 per year (not clear if this is required for entering properties)

Alternatives to getting a license:

There is a startup in CA that offers a flat fee buyer's representation (they give the buyer the 3% commission minus a flat fee of $1K-$5K depending on the home value). This would have been perfect although they're not in PA yet.

Another alternative would be to find a broker agent who would be willing to somehow split the 3% with me (a non-broker agent would usually not be allowed to do any splits as their broker wouldn't let them). I think Redfin offers a buyer's agent service with a small split to the buyer, but it's really small.

Does anyone have any thoughts on this? I'm sure some of the high volume investors on here have at least considered finding a way to capture some or all of the buyer's commission. Please share your experience or thoughts!

Thank you!

Salvatore Lentini · Answer

@Eran Stalkol - I say this in a lot of my answers but there is no 1 right path in real estate.  There are just different paths.  Investors that get their Realtor license and it works out for them will say you should do it.  Investors that did not get a Realtor license will say there's no need.  I took the path of not getting one.  The pros did not outweigh the cons for me because the biggest pros (getting access to MLS and submitting offers) was something I knew I could solve by finding the right Realtor.  I found a Realtor that focused on working with investors.  I was able to have her set up whatever email alerts I wanted.  New listings would automatically email to me everyday.  Whenever I needed comps, I emailed or called.  But more importantly I was able to get detailed opinions on certain properties and areas because of her years of experience (which I did not have).  As a newer investor, your ability to pull comps and assess the value of another property you are looking at can be about as valuable as listening to the Zestimate on Zillow.  Having an experienced Realtor on your team letting you know that that particular neighborhood is mostly subsidized housing or high crime or the school district has been going downhill etc. is immensely valuable.  I bought dozens of residential properties that way... and a number of pocket listings (which you won't get if you don't have a relationship with a Realtor).  I've since moved on to multifamily and commercial properties and now I work with commercial brokers and/or find deals through networking. Another huge reason I decided against getting a Realtor license is the time commitment to getting one, the time commitment to keeping one, getting a place to hang your license... all of that is taking time away from me finding and acquiring deals.  It's the same reason I put down the power tools after my first flip.  Do I want to be a contractor or do I want to be a real estate investor?  Do I want to be a Realtor or a real estate investor?  I hire people to handle the things I am not an expert at (bookkeeping, accounting, legal, SEO, email marketing, property management etc), and frankly don't want to become an expert in because it detracts from my ability to become an expert in the one area that I want to be an expert in... Real Estate Investing.

Charlie Cameron · Answer

@Eran Stalkol You make some interesting points.  I'm not necessarily disagreeing but I want to clarify how much an agent actually takes home.  Also to be clear, the listing brokerage SETs the commissions.  From what I understand most states (40ish?) allow commission credits from the Buyer agent as credits/rebates.  But they cannot pay some of their commission to an unlicensed person.  That all make sense?  Now math!

Let's use 5% commission for a deal, split between agents.

Buyer's broker receives 2.5%.

Buyer's agent may receive anywhere between 30%-80% of that, if they haven't capped.  Let's say the average agent keeps 55% after commission split and fees to broker.  That part is not optional, either.

The agent will hold 30% of that or so to pay all taxes.  (Leaving out any agent-paid lead generation or other expenses.)

For the 100K property, that's netting under 1K.  For the 800K property, that's almost 8K.

For the 800K, I think most agents would be happy to split commission for something like a referral - they are given the lead and don't have to generate it themselves.  Something you are leaving out is the effort it takes to generate and cultivate leads and the uncertainty of how many deals an agent will do each year.  Very intangible but important.  If you will be a frequent repear customer, the agent will do more in terms of discounts (as legally possible) because you are a consistant lead.

Noah Scott · Answer

@Eran Stalkol I would echo what @Jonathan Greene stated: the most important part is having access to the properties whenever you want. Being able to schedule a showing for a go-and-show (available to show whenever with automatic agent confirmation) 15 minutes before you want to see the property is a blessing. No matter how great the buyer agent you are working with, we can all get busy with other clients/deals/etc. that may disrupt your ability to see a property. In my market, for a competitive listing, the ability to see a property as soon as you want could well be the difference between getting it or not.

You are decently close to the yearly costs associated with holding a license. If you decide to join a local Realtor board, then you can factor in CE classes (every 2 years). Additionally, most offices will have some form of a monthly fee associated with holding your license at the brokerage. There are many that are more investor-agent-friendly, you just need to do some research about your area.

Ask 10 different people on BP about becoming an agent as an investor and you will get 10 different answers. My 2 cents: It is worthwhile as long as you understand your responsibilities for disclosure when talking to sellers. You can land yourself in some real hot water as an agent-investor if you are going direct to seller and don't disclose your licensure.

Mike Hyder · Answer

I had my license years ago while working full time.  The struggle was time.  I provided for my family with the full time job but wanted a side hustle.  The hours needed to build my real estate business was a challenge.  Looking at properties, networking (going to functions, volunteering, working open houses for agents who are busy, manning the agency's phones etc) left little time for the wife and my young son.  The agency where you will hang your license will require that you put in time - otherwise you are taking up space.  I would identify if there is an agency that allows you to work as an agent part-time, wave any fees they may charge, etc.  You may have to offer more of a cut in your commissions, answer the phones more often, in order to make it worth their while.  As you get busier and your reputation grows, you'll have more flexibility.

Jonathan Greene · Answer

The only thing that matters about having a license are two of the most important things.

1. Access (to both the MLS and the houses)

2. Listing fees (if you know what you are doing as a listing agent) and offers

The most important part of getting licensed as an investor is to have access whenever and wherever you want it. Not just to the MLS, which will save you immeasurable money on understanding comps, but to the homes. There aren't a lot of agents who like showing investors 100 dumps to buy one.

If you are a good agent, most brokerages will let you list your own flips and although you will still pay your split as a secondary residence, you won't have to pay the percentage to an outside listing agent. BUT, if you don't know what you are doing as an investor or agent, do not ever list your own property. And being able to write your own offers quickly is paramount instead of waiting on an agent who doesn't care about your 80k dump that you can flip because he or she isn't thinking of the flip.

The money is all relative, it's about what you are going to do with the license if you get it. How will it help you as an investor.

Eran S. · Answer

Thanks so much for the responses.

I agree with the points around access and better data, especially the access, some of the best deals go on the first few days so those scheduling delays can certainly hinder.

My goal would be to find a broker who would just facilitate my deals, I wouldn't need a desk or any additional services, I would just represent myself, no other clients. Definitely taking the advice to do research to find the best fit.

I expected the typical realtor's talking points: the buyer doesn't pay the commission, it's not always 3%, you're trying to cut in on someone's living, etc. I put a couple of paragraphs below with my opinion about it, feel free to disagree, happy to hear the other side.

Thanks again for the responses

The buyer doesn't pay the commission directly, it comes from the seller's proceeds (which originate from the buyer), and the buyer may have leverage which would allow them to capture some of it. Additionally, the current commission structure makes little sense: similar level of effort by the buyer's agent is compensated so differently. For example, when the realtor works on a $100k house vs. $800k house, say the net commission for agent is 1.5%, on the $100k house they'll make $1500 vs. $12000 on the $800k house. I think the buyer of the $800K definitely has room to negotiate some commission rebate (same story with the broker's portion, same effort 8x more revenue).

Also, some folks make assumptions about investors buying dumps and making a ton of offers before actually closing. Nothing wrong with buying dumps and offering a ton of low balls, but the reason I'm trying to capture the buyer's commission is because it's significant, I wouldn't do it for a 80K house, nor would i try to negotiate a portion of the buyer's commission when it's so low. I definitely agree that the buyer's agent's effort is worth a $2-3k commission, but not $20K.

I don't see why the buyer's agent would be willing to help buy a $200k house for the full commission on $200K but wouldn't be willing to help buy a $800K house and splitting the commission with the buyer 50/50. And whether it's 3% or 2.5% (or whatever the seller of that property decided to pay each side) isn't the point, the same logic applies.

John Barrows · Answer

Just remember that once you have a real estate license, every word you say can be used against you in a court of law.

A Real estate license is a license to represent people professionally. You'll have to be very careful when talking to people, especially if the person is listed with another agent. You'll also be liable for what you say to others in a conversation talking to people about real estate. Think about lawyers. They consult with you, tell you a few facts to digest then you hire them. You'll not be a lawyer but, you'll be filling out the paperwork and be judged as if you were one.

Sometimes, it's just better to pass on the license and be able to talk openly with any buyer or seller without having to make disclosures. While not licensed, you can pay/negotiate under the market for any property without disclosing what the real market value of the property is at that date and time. Many people who are licensed DO NOT make FULL DISCLOSURE and intentionally under price properties for their own interests. That, in and of itself, is a law suit waiting to happen.

If you are seriously considering real estate as a career, it's a great job with great pay and wonderful people within the business. I would highly recommend a career in real estate. If your going to be a flipper, get a broker to find out what the market is doing and continue with your pursuit of finding properties to flip on your own as well.

Charlie Cameron · Answer

@Eran Stalkol So as an investor buyer, the seller generally pays for commissions.  Also the buyer's agent doesn't get to determine how much commissions are paid for a listing.

That being said, as a buyer/investor the only advantages I can think of to being an agent is pocketing more cash, access to MLS, faster access to the listing agent, and access to data/tools.

But what is your ONE Thing?  Is it to be an investor?  To be an agent that happens to also invest?  Start with your top goal and work backwards from there: you certainly don't need to be an agent to be an investor and in fact it may work against your goals (time wise / distraction).

I got my license to build up more cash to purchase more apartments - by doing so I can move close to financial freedom faster and also provide myself with an employment transition opportunity.  But this is on the side so I had to ensure I had a broker with maximum flexibility.

One other thought: it is always okay to ask for discounts.  But also think about the situation for the agent you are working with.  The agent isn't going to work for you very long if you want to nickel and dime them and throw out a billion low ball offers on already cheap properties, when they could make more working for an experienced investor who values their time or a homeowner who will close the deal.  Just Charlie's ramblings.

Zackary Shephard · Answer

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Should I get a license just to represent myself?

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