Is it worth it to get your real estate license to flip houses or wholesale?
This is a popular question, especially for newbies. Back in 2017 when I was first starting out, I wondered the same thing. You’ll find opinions that support both sides. What I discovered is it depends on what you intend on doing. Hopefully this article will help steer you in the right direction. This way, you can make an informed decision on whether or not you need a real estate license to flip houses or wholesale.
I’ll start with my story. I was a lost puppy when I first got started. Both sides (license vs. no license) were very convincing. I ended up getting my license initially. Well, sort of. I signed up for an online course by Real Estate Express which was great. It took roughly 40 hours to complete and I learned a lot in the process.
Wholesaling Does Not Jive with Real Estate Brokers
I passed the state exam and starting interviewing with brokers. Most of them gave me a weird look when I tried to explain wholesaling. I specifically remember trying to explain the wholesaling process to a broker at Keller Williams. I’m pretty sure I explained 5 times and each time he gave me a blank stare and came back with, “why wouldn’t you just list it for sale?”
Most Brokers are Cool with Flipping Houses
House flipping on the other hand is a little less foreign to them. Some brokerages worked with investor-agents who flipped houses and some did not. But neither were against the purchase of real estate for personal use. House flipping as a side hustle was pretty common and there are benefits that come with being an agent.
This was at a time when I didn’t know what I wanted to do. Wholesale? Flip Houses? Maybe even be an agent part time and list houses for sale? Then I met with Jake at @Home Realty. Good guy, very down to earth and respected my intentions as an investor. I ended up placing my license with @Home Realty but it was never active. They offered a referral program and I was able to refer leads.
I asked him, “do you need a real estate license to flip houses?” – “do you need a real estate license to wholesale houses?”
The short answer, no. The long answer, it depends. Jake had some agents that flipped houses.
The benefits of having your real estate license as a house flipper
You have MLS access: Having access to the MLS gives you valuable information about market activity in your area. This can give you a leg up on your competition and you’ll be able to react quicker when something gets listed. This used to be a bigger deal many years ago. Today sites like Zillow, Redfin and Trulia give you similar access even though they might be 12-24 hours behind.
You can list your flip and save on seller side commissions: This is the biggest benefit, in my opinion. If you are unlicensed, you will pay both buyer and seller agent commission when you list your flip house for sale. In my state, that’s 3% on each side totaling 6%. If you list and sell yourself you will save at least 3% in commissions. If you are selling a house for 300k that’s $9,000!
You have more options with your leads: If you do your own marketing and source your own leads, you will have the option to list the house for sale instead of purchase it yourself. This comes in handy when the seller’s asking price is too high and the numbers don’t make sense for a flip. Instead, you can offer your services as a seller’s agent and represent the seller in the sale of their home.
You Don’t Need a Real Estate License to Wholesale Houses
In fact, I would advise against it if you intend on wholesaling only. When you run a wholesaling business, you are essentially a marketer. The end goal of wholesaling is finding motivated sellers who prefer to sell their house quickly, for cash, instead of listing it for sale. This could be because of a recent hardship or because the house is in need of repair. Many of these sellers are actively seeking out “We Buy Houses” companies or responding to outbound marketing such as direct mail.
From there, you put the house under contract and sell that contract to a cash buyer.
Many seller’s that fall into this category are trying to avoid agents. They are embarrassed about the condition of their house and they are looking for an easy out. They don’t want to clean the house or prepare it for the open market. In other words, they are not interested in speaking with agents. If you carry your real estate license and you are trying to wholesale, it might send a confusing message to the seller. In some cases they might think you are being deceptive and trying to get a listing!
Real Estate Broker’s Don’t Want You To Wholesale
Very few real estate broker’s will be ok with their agents wholesaling. For one, they won’t make any commission. You might be able to set up an agreement to pay your broker from your assignment fees, but the way that brokers are governed in many states may prohibit this.
As an agent, you must follow a strict code of conduct. Anytime you enter into a contract to buy or sell property, you must disclose that you are an agent. Wholesaling requires a completely different contract and different set of disclosures. This can get real messy if you are a real estate agent. If you do you have your license and you want to get into wholesaling, I would highly recommend you speak with an attorney who specializes in real estate. I’m not saying you can’t do it, but I would advise against it.
Conclusion: You do not need a real estate license to flip or wholesale houses. However, it can come in handy if you only intend to flip houses.
Related: Is Wholesaling Real Estate Legal?
