One question that is asked frequently by house flippers and would-be house flippers is “Should I get a real estate license?”. Investors who flip houses profit by buying houses at low prices and selling them at high prices. They also buy houses that need repairs, fix them and sell them at a profit. Whether to get a license or not is a challenging but important question that rarely gets the answer it deserves. This article will address some of the pros and cons of obtaining your license. It is not an exhaustive list, but should give you food for thought if you are considering it.
Pros of Getting a Real Estate License If You Flip Houses
Access to Multiple Listing Service MLS
One of the main benefits of getting a real estate license if you flip houses is direct access to the MLS. You may be in better position to quickly contact other agents and work out a deal before the average person without a license. The MLS controls about 80% of the houses that get sold, so this is an advantage that should not be understated. Granted, many of the homes that are suitable for flipping never make it to the MLS, but some gems can certainly be found. Expired listings can also be searched for prospective homes to make offers on.
In addition to buying homes, a real estate agent also has access to list their homes on the MLS once the work for the flip has been completed. Although many flippers buy their homes without going through a real estate agent, most will sell their homes on the MLS in order to command top dollar.
Savings on Commissions
Real estate commissions for a sale can average around 3% of the sale price (but certainly vary), so having the ability to list your own home and keep the commission can be a boon to your business. If you buy through the MLS, having your license will also save you money on your purchase if you decide to go that route.
Do you want a long career in the real estate industry? One way is by getting a license. It will allow you to have the experience that one needs in the real estate market. Bear in mind that property market rules are always changing. The education you will receive in preparation for obtaining your real estate license also enables you to better understand the legal side of buying and selling houses.
For you to succeed in the real estate market, you need to do networking. One way that can open doors to networking with other industry professionals is by acquiring a real estate license. You may be in better position to establish contacts within the industry.
When you flip houses, the main benefit you are looking for is getting income. Getting a real estate license enables you to supplement your income. Do you have a family member or friend who is in the market for a house and don’t mind doing the work of an agent/broker? This can be a great way to pick up chunks of income on the side. Plus, if working as an agent is not your main income-generating activity (because flipping is), you don’t have the daily pressure of dealing with clients. You can just wait for the people you know to come to you. Of course, if you want to be proactive as a real estate agent in combination with your flipping business, you are certainly welcome to do that as well!
Cons of Obtaining a Real Estate License If You Flip Houses
In any deal, there are the benefits and the downsides. Similarly, getting your license has its cons. They include:
When deciding whether or not to acquire a real estate license if you flip houses, you need to know you will have more responsibilities. They include disclosing to potential buyers or sellers that you are a real estate agent with a license. That means you can’t take advantage of certain situations because you have a an obligation to uphold a code of conduct for the profession. That remains true even when you notice a chance to make quick profits.
Commissions Due to Your Brokerage Firm
Depending on the agreement you have with the brokerage you hang your license with, you may owe them a portion of your commission with every property you purchase or sell through the MLS. Some brokerages have flat rates and do not split commissions, so in that case you may have any obligation from each individual sale. Bottom line, It will certainly pay off to search around for a brokerage firm that will offer you the best deal before making a decision.
Increase in Paperwork
Once you get your real estate license, you may be required to do loads of paperwork compared to when all you had to was to flip houses. As a licensed agent, you will do your paperwork, for example, submitting forms to brokers, agents, lawyers in addition to writing your offers.
When acquiring your real estate license, you will be thinking about the benefits of the MLS. However, you also have to be a member of their local board, be part of a brokerage firm and pay fees.
If you flip houses, you will gain by having a real estate license. However, you will have to spend substantial time, money and effort to obtain it. You will also gain by having access to the MLS database. On the other hand, having your license won’t guarantee success in the real estate market and you must know how to use the benefits that the license bestows. Additionally, many investors have found success in the property market without being licensed. When it comes down to it the answer depends on your style as an investor and what factors are important to you.