Does a Real Estate License impact buying pre-Foreclosures?

[Christopher Stanis]

Hey BP!

I know there are plenty of arguments for getting a real estate sales person license, and a few against. My question though, is does having a real estate license affect my ability to purchase and buy off-market pre-foreclosures? I do a lot of my own marketing and have distressed sellers reach out to me often. Specifically, I'm looking at buying and flipping vacant land, and buying houses and selling as a lease to own option. 

I have rentals and investments in both PA and NY. Thanks!

[Braden Smith]

Hey @Christopher Stanis. Having a real estate license can and will affect you as a real estate investor. 

First and foremost, you must disclose to everyone you speak with and meet that you are a licensed agent. Disclose, disclose, disclose... that's the number one rule. When you have a license you are bound to all the rules and regulations that go along with having that license and that includes disclosing the fact that you are a licensed agent.

If you are planning to buy and sell land off market, you will just need to make sure that all parties are aware that you are a licensed agent but only acting on your own behalf and not representing any other interest but your own. Make sure to have language in your contract that states something along the lines of: "When this agreement was fully executed SELLER acknowledges that BUYER is a licensed real estate agent and that the BUYER is not representing any party but their own interests in this transaction."

If you are wholesaling the vacant land, that can be trickier... Wholesaling in general is frowned upon by all real estate commissions and associations because it removes the agent/realtor from the equation and in turn cuts the broker out also. Every realtor has a commission split with their broker, such as a 60/40 split where 40% of every commission earned is paid into the brokerage. When you wholesale property you are not earning a commission and therefore not paying that 40% into the brokerage. As you can imagine, most brokers will not be happy about this. If you plan to get a real estate license you will need to make sure you have a brokerage lined up that will allow you to do the things you are looking to do.

The same is true for the lease options. You will need to make sure that any brokerage you might hang your license at would not have a problem with it and the way you plan to do it.

In addition, once you have the license you are then held to a higher standard and will be treated as such in any and all legal matters that may arise. If and when a legal issue comes about (which they often do in the real estate world) you will be expected to know the rules and play by the rules. It will be on of those "you should have known better" type situations. It's a fine line you walk being both a realtor and investor, and it can be a slippery slope at times. 

Good luck with your endeavors! And Happy New Year!