Some beginning investors may look at a licensed real estate agent and feel—let’s face it!—a little jealous. Easy access to MLS… No waiting for someone else to tour properties… The benefits seem obvious. Yes, there are drawbacks (like working under a broker), but the benefits of a real estate license are real.
While a real estate license is not required by all investors, some consider it an essential part of their investment strategy. But getting your license can be a lengthy process, involving coursework, exams and background checks — and of course, you’ll need to find a broker. Learn more about what separates the average agent from the great one and get all the details on how to get your license with our in-depth guide: How to Become a Real Estate Agent – An Investor’s Guide.
Our in-depth guide to the downsides of a real estate license walks you through the negatives. Now, we’re here to talk benefits of a license. Why should investors go through the expense of research, testing and licensing? here’s why.
1. MLS Access
Having a real estate agent’s license allows you to legally and legitimately use the Multiple Listing Service (MLS).
This has two major benefits for creative investors: First, you can watch a neighborhood up close and see a new property the moment it hits the market. You don’t need to wait for an agent to find a property for you, or for a public website like Zillow to pull out the data.
Second, you can dig into a wealth of historical data. Provides detailed information on MLS prices and comps. Yes, some of it is also available through websites like Trulia, Redfin, Zillow, and LoopNet, but the MLS is—and always will be—the gold standard.
Here are some questions the MLS can answer for you:
- How many homes sold in the last year that meet my investment criteria? Don’t waste time looking for something that doesn’t exist.
- What was the asking versus selling price for similar properties? This will help you save money while placing offers.
- What are the seasonal trends in prices for a particular area or property type? Some cities in areas with good school districts fluctuate from $30 to $50 per square foot from winter to summer. Parents don’t want to move their kids in the middle of the school year.
- How much is the owners owed? If you’re planning to make a low offer, you can get records that will give you a good idea of what they owe on the house — and if they can afford to take even less.
- In how many days can you expect the properties to be on the market? Do you need to propose immediately or do you have time?
- Who owns a specific property, and what is their address if they do not currently live there? You can send them a letter and see if they want to sell.
2. Relationships
Whether you’re buying or selling, a licensed investor has the power to make the job of another agent as easy as possible. You can pretty much have the listing agent turn over utilities for inspections, complete additional paperwork, coordinate with a closing attorney, and manage the title search.
Volunteer to go above and beyond the call of duty. Do everything in your power to make the other agent feel like you’re easy to work with.
Agents who go out of their way to make another agent’s job as easy as possible are rewarded with close relationships. And those close relationships are essential to a strong real estate investing strategy – if you’re well-regarded within your community, people will send you leads and tips.
3. Commission
We don’t want to overemphasize this point – commission is one of the less important licensing benefits. But that doesn’t mean it isn’t good.
As an agent, you will be able to collect commission on the deal. For example, if you buy a $100,000 home, and each agent receives a three percent commission, you will deposit $3,000. After paying the broker fee, you could be net $1,500 to $2,500. (There is a wide variation in broker fees depending on which brokerage you hang your license under.)
4. Real Estate Industry Education
A real estate license helps you jump-start your real estate learning experience. You’ll go through approximately 12 to 14 weeks of classes, and you’ll learn anything and everything related to becoming a successful real estate agent.
You will also learn branding, marketing, lead generation, contracts, talking to buyers, talking to sellers, and compliance, among other things. Unfortunately, there are a lot of real estate investors out there who don’t understand these basics.
This process will also help teach you how to do real estate the right way. There are a lot of cowboys out there who don’t know what they’re doing. Everyday they break rules and regulations. It makes all other legitimate real estate investors look bad.
5. Risk Mitigation
When you get your real estate license, you must hold that license under a broker. Guess who will be overseeing your real estate transactions, making sure you comply with all laws and regulations, and making sure you’re not doing anything suspicious?
Your real estate broker—who has a real estate broker’s license and insurance.
A licensed agent has less risk of legal issues and lawsuits – or simply losing money – because they have someone to oversee all of their work. Plus, you’ll meet a lot of people during the licensing process. The more people you constantly talk to, the more your mind grows and the more educated your decisions become. Therefore, you will make fewer mistakes, thus reducing your risk.
Connected: Newbie Agent 101: How to Choose a Real Estate Brokerage
6. Less start-up hassle
Once you have your real estate license, you know how to do things the right way. You’ve built your network, and you’ve met a lot of real estate agents. You now have a dependable real estate business.
Your broker should have a full fledged support staff at your disposal to assist you with anything and everything related to agenting. Compliance, transaction coordination, contract review, web design, marketing, lead generation, negotiating with buyers and sellers, training and education—it’s all at your fingertips.
Without it, real estate can seem like a jungle — especially to novices. You don’t know where to start, who to talk to or where to go. A real estate license keeps you on the right track.
7. Reliability
Another advantage of being a real estate agent — and specifically a Realtor licensed by the National Association of Realtors — is that clients and other investors know that you operate by a code of ethics. Realtors also have a code of ethics, which is more strict than the actual law. Even if you are not working as a realtor but are just trying to buy a property, you must comply with this code.
If part of your investment strategy includes contacting sellers on the market and convincing them that you are trustworthy, that’s a lot easier as a Realtor. Point them to your website and show them how long you’ve been in business—screwing them will do me more harm than good.
Connected: How To Be A Rockstar Real Estate Agent: 9 Tips For Extraordinary Success
8. Quick Access
With a real estate license and membership in the local MLS, you can enter any property you want. If the property is going quick, you can visit it on the day itself and beat the rush.
Plus, most listing agreements are signed two to four weeks before the property comes on the market. Marketing a property is expensive and time consuming, so most agents tell their contacts first so they can sell it before spending a lot of time and money marketing it. You want to be in that group.
For successful real estate investors, the number-one job isn’t to make a little cash on the side. Your job is to find and secure the best new deals. Direct access to MLS can help you find deals. And speaking directly with another agent—and giving that agent every reason to like you—can help you seal the deal.
Any other reason why people should get their real estate license?
I want to hear from you below.
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
