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Pros And Cons Of A Real Estate License

There are many different ways to find deals in the real estate world. One of the most popular methods is by obtaining a real estate license.  It has long been preached that a real estate license will give your business an added boost.  While it can certainly help at times it may not be as much of a slam dunk as you think.  A real estate license should be treated as just another tool in your tool belt.  It is helpful for the right deal in the right situation but doesn’t guarantee you additional deals.  If you are on the fence as to whether or not to get your real estate license here are a few pros and cons to help you decide.

PROS:

• Immediate Deal Access.   As a licensed real estate agent there is no more waiting around for deals. As soon as a property hits the MLS (multiple listing service) you can take action. Instead of relying on your real estate agent to contact you when a new deal hits you can act immediately. This gives you a decided head start on your competition. In most cases the buyer who is the most aggressive from the outset will get the deal.

• Increased Network. Getting your real estate license introduces you to a whole new network of people. The most obvious segment is all of the real estate agents inside your new office. Even if you aren’t obligated to be in the office all day you will meet new agents through office listings and other communication. You will also be exposed to agents outside of your office. Every offer you make is an opportunity to meet a new agent. With a few successful deals you can quickly become their go to buyer and agent and grow your business.

• Direct Involvement. As a licensed real estate agent you are directly involved in every offer you make. Instead of relying on your agent to put the deal together and communicate with the seller you are responsible. This is especially helpful on investment properties you are buying. Most short sales and foreclosures require excessive paperwork from the buying real estate agent. One error or omission with this can cause the deal to get rejected. As the buyer you are much more likely to put more care into these deals to ensure that your offer gets accepted.

• Commission/Fees. A hidden perk of a real estate license is the money you save on commission. If you close five to ten investment deals a year this can end up saving you tens of thousands of dollars in commission. This savings can directly lead to one or two additional properties every year.

CONS:

• Licensing Process. Getting your real estate license is easier said than done. While this process varies from state to state there are a few basic items needed. The first is a passing the local classroom requirements. This alone takes several weeks and dozens of hours of study time. After you pass the course you then need to prepare for both the state and national exam. These tests are meant to be difficult and passing is not a guarantee. In fact there investors turned agents who do not pass the exam in their first try. Just because you want your real estate license doesn’t mean you will get it.

• Fees. There are several fees you need to endure during this process. Before you even take the exam you are hit with fees for the course and the textbook. After you pass you need to pay for both the state and local exams. Assuming you pass you then need to pay for annual MLS access in addition to licensing fees and other reoccurring costs. If you are not closing deals and using your license the costs don’t make sense to maintain it.

• Disclosures. Not every buyer or seller wants to work with an investor who is also a real estate agent. You may think that you are making the process easier when in fact you may be doing the opposite. Every deal where you are involved in dual representation you need to disclose this to all parties. This can be tricky for rehab properties you have the listing where you are also selling.

• Lack Of Deals. A real estate license alone does not directly lead to deals. The MLS can be a great source for properties but will also have increased competition. Every time a new listing hits the market every agent on the MLS receives an alert. Depending on your area this will go to several hundred real estate agents. Getting a license can help push certain deals through but alone will not give you more deals than you can handle. If you are considering getting licensed for all of the deals you will gain you may be disappointed in the results.

Like many other areas of the real estate business you need to form your opinion. There are a large segment of investors whose business has grown directly because of obtaining their real estate license.  On the flip side there are several investors who feel the benefits of a license are minimal.  Before you decide to do anything you should know all of the costs associated and understand how a license will impact your business.  At that point if you feel it can help go ahead and take the next step.  If not there are other ways to help grow your business.