I’ve made no secret of my opinion that current real estate licensing is a catastrophy and that it is ruining the industry and hurting the public. I’ve written about fixing it before, but here’s my solution to the problem (and it doesn’t call for eliminating all requirements and making things worse.)
The purpose of requiring a license to do something usually begins with the noble idea of protection. Protecting people from being hurt from others doing a job they are unable to do well (or something like that). There is also some accountability that comes from licensing. It requires a license to cut and color hair (for profit), give a massage (for profit) or represnt people in court (for profit). Without these licenses the public would even more full of people with screwed up hair, having their back messed up during a massage and losing the lawsuits against those who did it to them.
Licensing can be a good thing. If my roof needs to be replaced I want a licensed roofer replacing it so I know they know what they are doing. If I hire an attorney I want to know they went to law school and passed the bar and are licensed to represent me. Does this mean that everyone who has a license does a good job? No, of course not… but here’s the thing;
Having a license should mean that you know more about that subject than most people do. And most new agents don’t have a clue how to perform the task of representing people in buying and selling property. Often they have never owned a home and haven’t even gone through the process of buying or selling a home for themselves. They have no training about what to expect or how to use leverage in negotiations for their clients. They don’t know much at all about the actual practice of being a Realtor.
So here is how to fix the problem…
Begin by replacing the real estate license with a degree in Real Estate Practice. This would be a two-year degree which would include five seperate areas of study-
History and Framework of Real Estate– this would include the history of how real estate began being transferred, how it is currently transferred, the make-up of the Division of Real Estate and how laws are passed and directors are seated, etc.
Real Estate Law– education regarding law and the practice of real estate contracts. Learning the contracts, HUD and closing documents, title reports, mortgage laws and types of loans. Learning case study, zoning and building issues, community development, attending city counsel meetings, city planning, etc.
Practice– learning the ins and outs of real estate development, how to figure cap-rates, how real estate cycles effect appreciation, floorplans, new trends in home design, how to work with different types of buyers and sellers, what to expect in different situations and how to deal with them. How to market properties, home inspections, appraisals, home warranties, geological issues such as septic tanks, private wells, earthquake and flood issues, etc.
Agency– learning what it really means to represent someone, including scenarios and implications of different types of agency. Learning how to educate clients, negotiate for them, and assist them through the enitire process of transferring real estate.
Apprenticeship– working with local, experienced agents and brokers in their day-to-day business. Learning by application and witnessing the process first-hand. Like getting a learners-permit to drive a car- having someone there to help you learn the process and then do the process with their guidance. They would also attend closings, inspections, title searches and escrow proceedures.
There should be separate requirements (or different course classes) specifically for commercial real estate and property management. These should be treated seperately and not lumped-in with residential real estate. And all licensees should be required to be Realtors and adhere to the code of ethics.
After going through the required two-year course the person would earn a degree in Real Estate Practice and be licensed to sell.
Think about working with an agent who holds this degree. They would have more knowledge than most (including most current agents), they would have actual practice in the business and would have learned about and seen what to expect during the transaction and they would have actually gone through a certain number of deals.
If being a licensed Realtor were treated with magnitude it deserves there would be a different level of professionalism in the industry and the consumer would be much better protected. Would there be fewer Realtors- who knows?
But I am convinced that there would be better ones.