King County Real Estate Blog

You have probably already asked yourself "should I get my real estate license?"

    First and foremost, it is important to know that there is no clear cut answer to this question. Whether or not you should obtain your real estate license is largely dependent on how you plan to utilize this new tool in your tool belt. Some of you will also need to consider the laws real estate licensees must abide by. As an example, when working with a potential buyer or seller, an investor must disclose that they are licensed. For many this can add credibility in the buyer or seller’s eyes and aid in completing an attractive investment, but there are some individuals out there that disclosing their status as a licensee may detract from their negotiating skills (more on this later). This is one example of the many angles that should be considered in determining if obtaining a real estate license is right for you. Ultimately, to appropriately determine whether or not you should get licensed, you will need to consider the amount of upside it provides. To get your mind moving in the right direction, let’s look at some of the pro’s and con’s…

What are the advantages of being licensed?

Referral Fees: This is huge! Having a real estate license means you can legally receive a referral fee, which in real estate is traditionally 25% of the commission earned by the referred agent. As an investor, you are routinely meeting people who could be a referral. For those of you seeking out subject to homes or pre-foreclosures, let’s say the homeowner decides they do not need your service and are gong to decide to traditionally sell the house… well that’s a referral fee waiting to happen! As a real estate agent you have a great recommendation on someone who can help sell their home for top dollar in a timely manner (an agent in your brokerage for example). Or, if you have the time and are willing to learn, you can list the house for them for the entire commission (Prospera will ensure you have a co-listing agent hold your hand through the process).

MLS and Lockbox Access: As a licensed agent you can become a subscriber of the Northwest Multiple Listing Service and GE Supra Key. NWMLS is a great service for investors to help source potential investments, run CMAs (comparative market analysis – comp out a home), and altogether provide useful information that can be used when negotiating with sellers. For those of you entirely new to investing in Washington, the Northwest Multiple Listing Service (NWMLS) is the state’s largest database of listings; it’s where real estate agents have their listings and privileged info available only to agents for all agents to see (and the general public in reproduction of the basic information). GE provides a service that allows licensed agents to gain access to the lockboxes agents use on their listings. Many modern phones with infrared technology are able to access these lockboxes with the appropriate installed software.

Many investor agents have luck finding deals by calling on canceled listings, searching for the word “short sale” (as one example) in the marketing or agent remarks, or just simply searching for listings that have been listed for a long duration that may be willing to accept a substantially reduced offer. If you’re about to make a presentation to a seller then you can present comps you have pulled from the MLS to help prove your case in regards to the value of the home. These are just a couple of examples of what access to the MLS can do for your investing.

Commissions: Depending on the scenario and financing, licensed investors can gain a commission on the purchase of MLS listed homes. However, lenders never want to see a buyer receiving a commission on their own purchase so this does not always hold true.  On the selling side of investing, one of the absolute best ways to get coverage on your properties you need to sell is to make them available to real estate agents working with buyers. Many investors rely upon selling their investments for sale by owner (FSBO) to avoid paying a realtor a commission to list the home on the MLS, but being licensed allows you to list your own home with the service that has the best coverage (the MLS), WITHOUT paying another agent a listing commission.  When listing on the MLS, you should still count on paying a commission to a buyer's agent, but if you cannot move the property FSBO then the backup plan of a traditional listing just got a lot more attractive by cutting the commissions in half.

That will do it for Part 1.  Stay tuned for how being licensed assists in your access to information, marketing, and negotiations....

Continued From Part 1

Access to Information: Having your license and being a member of the MLS provides easier access to information that will help you make more educated and profitable investments. Much of the information needed is public information, but this can often be timely to track down and be less organized and easy to use. The MLS provides the ability to run comps, see area statistics (median/average prices, average time on market, number of homes sold in an area, etc), and get an overall feel for a particular area of interest. Title companies also provide access to additional property and neighborhood information to licensed agents. Ultimately, being licensed allows access to more information in a timely manner.

Marketing Aids: For starters, the aforementioned information at your disposal can help in the verbiage of your marketing material. In addition, some title companies will provide labels to be used for your mailers at no charge (labels are the names and addresses printed on labels that you simply stick onto your envelope). As a licensed investor, you will be able to contact the customer service department and ask for a spreadsheet and labels for a particular search criteria. For instance, you can narrow down by area, mortgage amount, owner occupied, etc. This is great for sourcing potential investments, but can also be used when searching for a renter or lease option tenant. When I have a rental or lease option that needs to be filled, I send out postcards to the 100-300 closest non-owner occupied homes. Often times neighbors are looking to move or get into a lease option, and more often have friends who want to move to the area.

Negotiation: As a licensed agent you are now an “expert” to sellers on home values. As I mentioned earlier, state law mandates you disclose your status as a licensed agent, and for some this may be detrimental to their negotiating power. However, those that are hindered by their licensed status are quite possibly the “vultures” that give many investors a bad reputation and cause new laws to be enacted to protect distressed home sellers (my apologies if you by chance are hindered by being licensed and are NOT a vulture). For the rest of you, your status as a licensee gives you a professional edge in discussing price, process, etc. Though being licensed does not necessarily mean you are more knowledgeable, it typically appears that way to uneducated sellers.

These are just some of the most basic examples of how being licensed can help your investing business.

What are the disadvantages of being licensed?

Cost: Obtaining a real estate license does cost money, but the rewards can quickly outweigh the costs. When making your decision on whether or not to get licensed, figure on a cost of up to $395 for the required education, $146.25 for the state licensing fee, and $138.25 for the state exam fee. In addition, membership with the Northwest Multiple Listing Service costs $360 annually, and a subscription with GE to gain access to lockboxes costs $12.54 monthly (when used through your cellular phone). Outside of this, the other costs to consider are renewal fees and cost of required education for license renewal which is infrequent. On the topic, Prospera Real Estate is a Rockwell Institute Satellite School which means Prospera can pass along great savings on the education. Rockwell is known for their students having an exceptional 90% pass rate on the state exam at a very cost effective price… need I say more?

Time: It takes time to get your license. 60 hours to be exact. Although this can be done on your own time through internet courses (which Rockwell provides). There isn’t much of a concern on a time limit for completing the education once signed up (Rockwell is friendly to work with and they can generally be accommodating if you are having trouble finding the time after months have gone by). Other than the education and physically taking the time to pass the test, whatever other time you spend is in utilizing your license to be a more well rounded, educated, and profitable investor.

Continuing Ed: ***This should really fall into the Pro category as education is an important aspect of being a profitable investor. But for the sake of the time and cost, I’ll put it here.*** Once you obtain your license, you will be required to renew it by your second birthday after the day you become licensed, and then once a year thereafter. 60 hours of continuing education is required for your first renewal, then 30 hours for each renewal thereafter. As with your initial education, this can be completed online through Rockwell for those of you who prefer that method. There are also many free classes and seminars that offer clock hours for attending.

So, what’s an investor to do?

The bottom line in the debate on getting licensed is that it is case dependent. If you are investing in real estate, then you must consider getting licensed and examine all of the additional streams of income this can open for you. If you determine that the pros outweigh the cons then go for it. If you determine that the profit it provides in regards to referral fees, additional deals you may not have found, commissions earned (and saved), negotiating power, resources, etc does not scream “get license,” then getting licensed isn’t for you.