The appraiser was correct. You must have a real estate broker’s license in Michigan if you engage in certain activities—including selling your own real estate as an investor.
Neither real estate law nor occupational law in Michigan contain such a provision but the rules promulgated by the Director of the Michigan Department of Licensing and regulatory affairs do. It’s important to remember that a lot of what we must follow as investors, etc. is not specifically spelled out in the law but in the rules created with the authority of the law. Most laws are very general. The specifics of what it really means and how it will be enforced is contained in the rules. This goes for Federal law as well.
Here is the Rule specific to this topic in Michigan:
R 339.22319 Licensure required for owner of real estate engaging in sale as principal vocation; acts constituting principal vocation; sale of real estate owned by broker or associate broker; licensee to reveal ownership or interest when selling property licensee owns or has interest in.
Rule 319. (1) Licensure as a real estate broker is required of an owner of real estate who engages in the sale of real estate as a principal vocation, unless the owner engages the services of a real estate broker. Acts constituting a principal vocation include any of the following:
(a) Engaging in more than 5 real estate sales in any 12-month period.
(b) Holding one's self out to the public as being principally engaged in the sale of real estate.
(c) Devoting over 50% of one's working time, or more than 15 hours per week in any 6-month period, to the sale of real estate.
Clearly, based upon this rule, everyone doing real estate investment must be a broker. (And, don’t forget, if you’re doing more than three seller financed deals per year, you must also be a licensed mortgage loan originator or use one under Federal rules.)
I would highly recommend getting your license. The education you’ll get from the pre-licensure class is invaluable and may keep you out of hot water. You don't know what you don't know and every state has different laws, regulations and rules. I’d also recommend you join a local real estate investor club and/or rental property owners association. They will have the information you need on this topic and provide an opportunity for you to network with those in the business in your state and area.
You might ask: Who and the heck cares and how would they find out? If you’re not doing a lot of deals per year, you might fly below the radar, but I’m not advocating that. But, if you’re doing a lot of deals or if a buyer becomes unhappy or takes you to court over a deal they are not happy with, you could end up in a lot of trouble—not only through fines for violation of the law but you could be required to make your buyer whole since the deal may be deemed illegitimate. In other words you could go from rich to poor in one quick hurry.
I strongly recommend every investor consult an experienced real estate attorney to get proper guidance on what licenses they need to do the types of deals they are contemplating. Happy investing!
