All Forum Posts by: Jason A.

Hi Sandra,

Sure. Sounds like the way it works everywhere. No buyer's agent, no buyer's agent commission can, will, or should be paid. There's nothing to forego. Anyway, congratulations on your purchase.

If there was no buyer's agent (or dual agent) agreement involved, then there was no commission to "forgo". I'm not sure what you meant by "I asked the listing agent to forgo the buyers agent commission".

Hi Sandra,

A seller's agent is legally bound to act in the best interests of his seller at all times. That listing broker was (or should have been) putting his client's interests first and negotiating for the best price and terms for his client. Of course, while acting in fairness to all parties.

In Massachusetts, there is a possibility of "dual agency", where an agent can represent both buyer and seller, but only with the express and informed written consent of both buyer and seller. It's a slippery slope and dual agency is fairly unusual.

We have a Mandatory Licensee-Consumer Relationship Disclosure form that all real estate licensees must present to a consumer at the first personal meeting to discuss a specific property. It specifies in detail exactly who is representing whom.

In your case, it sounds like either the agent, in his zeal to get the deal done may have lost sight of who he was representing (a huge no-no), or you may have not realized for whose interests the agent was legally bound to (and perhaps did) promote.

Let's turn it around a bit. Suppose you were the seller. How would you feel if you heard about a buyer who was so happy with the deal she got from you that she was willing to give your listing broker (your agent) a gift (maybe cash?). Would that give you a warm and fuzzy feeling that you had been well represented and served by your agent?

This is a hard one, because if they are true professional tenants, they will be very good at not only covering their tracks but also maintaining a completely innocuous outward appearance.

One fundamental thing you must do before anything else is to positively establish the identity of your applicant. A professional will know how to pose as someone else. Do this first.

Another thing most professional tenants have in common is experience in and knowledge of "the system". There will typically be a record of multiple court appearances and filings, records of affiliation with tenant advocacy entities (including Legal Aid), records of multiple frivolous Board of Health complaints, etc. This information is sometimes difficult and time-consuming to uncover.

As someone recently pointed out in another note, the online services that are supposed to flag tenants who have been evicted often do not because if a tenant has been through mediation (now required before a court appearance in many states) and came to an agreement, that disposition will not appear on the record as an eviction. Often, you will need to dig deeper to get at the facts.

I used to do my screening the "old fashioned" way. For example, I would make a personal appearance at the local courthouse (local to wherever the tenant is currently residing or resided in the past). I found all the information I needed there regarding cases filed, disposition of those cases, the attorney being used, etc. Given the fact that it appears this information is still obscure (I wonder if PACER even reports housing court information), it probably still makes sense to take this step.

It's an arduous procedure (there are a lot of other things as well), but think of the value of the asset(s) you are trying to protect. One bad tenant can literally bankrupt you, especially if you are a small-time operator with only a few units.

The others have said it well. Do you really want to purchase a property with a known bad tenant (who might well be the very reason the property is for sale)? If so, you need to have a solid, practical understanding of your landlord-tenant laws to understand what you are getting into cost-wise, time-wise, and angst-wise. Do you really want to close on the property with that tenant still in place? If so, do you have the resources to fund an eviction and all its collateral expenses while continuing to pay the carrying costs of the property? It's wise to never underestimate the cost of an eviction (or an ongoing bad tenant), particularly if you are in a "tenant friendly" (what a great term) state.

You might consider making your offer subject to the seller removing any tenants before closing. That's how I do it nowadays for residential deals, although I concede others may disagree because they have more of a stomach for it. But too many years of unfortunate experience as a landlord/investor in my state has brought me to this conclusion.

Steve, you hit the nail right on the head! And landlords who own the fewest units are the most vulnerable to total destruction, especially in "tenant friendly" (let's not be too harsh and call them "anti-landlord") states. I know nothing of Hawaii landlord-tenant laws, but my strong hunch is that Hawaii is very likely one of those "tenant friendly" states.

Landlords with dozens or hundreds of units and distributed risk have a somewhat better chance of not being totally knocked out of the game by a tenant or two from hell. But someone with a few units, such as an owner-occupant of a multi-family will pay a dear price for not doing their homework before turning over the keys.

Reminds me of the cartoon with Wile E. Coyote standing on the railroad track and pulling down a window shade to protect himself from the oncoming train.

Here's another consideration. Did you know that tenants performing illegal activities in your units can subject you to forfeiture? Depending on the circumstance, in some cases it can be seize the property first, ask questions later. Do you really want to put that expensive asset of yours at risk just because the tenant applicants seemed like such nice people?

Not to beat a dead horse, but think of it another way. How much is the property worth? Say $500,000? Maybe the price of a 2015 Rolls Royce Phantom? How much screening would you do before your turned over the keys to your new Rolls Royce Phantom to a total stranger to rent?

Yes, definitely, especially for higher priced properties. Presentation is everything, and you might find it surprising how little thought or money most sellers put into it. View the MLS listing photos for comparable properties to see what you're up against. In many cases, you'll immediately see the benefit.

On the other hand, it's probably not cost effective for the lower-priced properties. For those, I would recommend cleanliness. Get the place professionally cleaned from top to bottom. It's worth every penny.

Hi Louis,

Here's the website that tells you about the various licensing requirements for Michigan:

Michigan Broker Licensing

Here are the steps involved in getting your salesperson's license:

Michigan Salesperson Licensing Steps

Looks like you will need a sponsoring broker to back you before your salesperson's license approval is finalized. 

That "online broker sponsor" thing in Texas is wild. I've never seen that before, and I wonder if this is an option available in any other state. 

The idea behind the requirement for a broker sponsor seems to be that a salesperson cannot act on his/her own due to lack of knowledge or experience. Thus, the legal requirement for a sponsoring broker, who is held responsible. It would appear that these online sponsors are taking a tremendous liability risk be allowing virtually anyone who passes a salesperson's exam to effectively go out there and do whatever seems ok to them. I've never read the fine print on these arrangements, but at least around here, "sponsoring broker" means just that, and that broker will be held to answer for the actions of his/her salespeople.

Anyway, all that aside, let's look at your original question: does licensing make sense if you just want to out and flip properties for yourself?

For the answer, you need to do a cost/benefit analysis. Consider the cost of licensing courses, exam fee, licensing fee, renewal fee, continuing education costs. If you want the benefits of MLS, there will be a subscription fee and sometimes more (such as separate listing fees), depending on the requirements of whatever MLS you join. If you affiliate with a sponsoring broker (which as a salesperson, you will legally need to), that broker may have his/her own set of fees. Also, as a licensed person, you will be assumed to have "superior knowledge" in dealings with principals in your flip deals, which has the potential to come back and bite you if for example you purchase a property way under market price from someone deemed to have inferior knowledge. There might also be legal requirements for certain disclosures you'll need to make when doing your flips.

In return for all that, your main benefits would likely be access to the MLS and a discount on buying and selling commissions for your flips. How many transactions per year will you do? Add up the potential commission savings and see if it's worth it. My guess is that unless you are doing a lot of transactions per year and/or you are flipping some expensive properties, the costs will outweigh the benefits.

There are lots of extremely good reasons to become licensed, as I explained in one of my other notes. I did, a while ago, and am very glad I did. But it may not be an optimal strategy for a novice real estate investor merely as a mechanism to save a few $$ on flips.

Sorry for the length of this. I think I need to start a blog to put it all in one place. This seems to be a question that comes up often.

BP is not for quitters, and neither is coffee.

Coffee is for closers.

So is BP.

[extra Alec Baldwin]

Yes, definitely. I got my broker's license many years ago while working another full-time job and am very glad I got it back then. In most states, licensing requirements typically get more difficult and restrictive as time goes on. In MA, it's fairly easy to get a salesperson's license after taking 40 hours of state-approved training and passing an exam. But a broker's license now requires 40 more hours of state-approved training, at least three years of experience working with a broker's office (as a licensed salesperson, of course), and a passing grade on the broker's exam. Check with your state's licensing board to see your current requirements. The point I am trying to make is: the sooner you can get licensed, the better.

There are a lot of advantages. Training, particularly from the National Association of Realtors, is generally excellent. I took several CCIM (commercial real estate) courses and they were among the best, most useful, and profitable hours I have ever spent learning anything. Secondly, as a licensed agent or broker, you will likely be able to obtain an effective discount when buying or selling, particularly via the MLS. Thirdly, being in the industry, mingling with your colleagues, and doing deals as an agent or broker will give you a very different perspective about the real estate business that I think is difficult for a non-broker to appreciate or comprehend.

A downside I can think of is that once you are licensed, you will officially be considered to have "superior knowledge". For example, if you are acting as an investor (and not a broker), a court might take an especially dim view of your having directly purchased some widow's or elderly person's house for substantially under market. However, buying that same property for under market value if the person had a listing broker, bank, or lawyer involved might be a different story, because there is expertise available to them. It's good to note here that in all cases, full disclosure of your status as a broker or agent is a good thing and sometimes required by law.

Well, I wandered a bit, but, in summary...yes, I think getting licensed is a good thing on balance.