Real Estate License As An Investor

Comments(3)

• 
  commercialking8th April, 2004

  Hi K-blake
  
  Yes there are advantages. You will have to take a course and pass an exam this will improve your real estate knowledge. You can collect a commission on properties you buy without the bank asking questions. This is a lot like getting 3% to put down in every deal. You will meet people and make contacts that you might not make otherwise.
  
  There are also disadvantages. You will learn that there is a certain "right" way to do real estate and that instruction will make it difficult for you to see alternatives.
  
  In Illinois, in addition, you are required to disclose that you have a real estate license in any transaction you do. Even if you are buying for your own account and not collecting a commission. When they passed this law a few years ago it became much more difficult to deal with owners directly. They all assumed that I was buying to flip and that they were asking too little for their properties. So I gave up the license, I never used the commission thing anyway. Meant I could no longer manage properties for others but that was ok, it was not my fave part of the business anyway.

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  compwhiz8th April, 2004

  I mostly agree with commercialking, but it all largerly depends on what type of investor you are. If you want to buy properties @ the foreclosure auction and then resell them, having a license will save you on the selling side of the commission. And you could get coop commission if you buy a property with another broker(although some distressed properties on MLS that are sold by the bank will not pay coop commission if the purchase is in the name of the licensee.
  
  I believe that requirement to disclose licensee status is present in many states, and it certainly is the negative part of the business if you are trying to deal with homeowners in pre-foreclosure. Technically speaking, it's illegal for a licensee to purchase the property below market value without letting the owner know that he could fetch more for it in the open market. For instance it goes something like this:
  
  
  You're an investor, and you go to the owner in pre-foreclosure, and you offer to buy his property for 70% of FMV. If you are no licensed, there is no law that saw you must let the owner know the true market value of the property, etc - just offer them the price, and if you can get them to accept it, it's yours.
  
  If you're licensed, you can offer the owner 70% of FMV, but you also need to inform them that they could get a higher price if they market the property on the open market, and to protect yourself you must have a clause in the contract that says the price paid is not necessarily the true market value of the property, and the owner fully realizes what he's doing and explicitly chose to sell to the licensee.
  
  Much more headache that way. So, there's no perfect way.
  
  Best to work in teams(husband/wife, brother/brother, dad/son,. etc) where one person is licensed and another one isn't, and that way you theoritcally can have the best of both world.

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  InActive_Account8th April, 2004

  I gave up my brokers license in Alabama because having one you had to have all personal transactions approved by the state board of realtors. And many times if they saw a good deal they would disapprove your transaction and send a buddy to buy the deal. Consider the politics involved! Just my opinion!