How Real Estate Licensing Should Be

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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.

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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.

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12 thoughts on “How Real Estate Licensing Should Be

  1. I like the idea of a degree requirement for real estate agents. The one thing I missed in your proposed “studies area” is:
    Marketing!!!!!

    Boiled down, the only thing a seller really wants is to sell their house for a fair (some case not fair) price. Marketing of that property is a huge part of the selling process.

    I don’t know if Agencies have “minimal marketing requirements” for all contracts, but they should. They should also post these requirement so the seller knows exactly what the agent/broker will do to properly advertise the property.

    In my neck of the woods, I see agents that put 10 pictures for each listing no matter the selling price. Other agents place 1 picture no matter the selling price. I don’t want to get into the quality of the pictures they post on the web but…

    Jeez, some pictures agents post are upside-down, others I cannot tell if the picture is a bathroom or the garage. It’s not like the upside-down picture wasn’t noticed as some stay “wrong” for months. On the other hand, the seller should take some responsibility and demand the pictures are high quality and “show correctly”.

  2. Sounds great, but wouldn’t that negatively impact all of the latest and greatest “”buy/sell your house over the Internet without an agent” startups?

    The short time I’ve been in this business, I have noted:

    1. Too many “agents” focus on winning the lottery instead of building a long-term business. This often requires going beyond one’s comfort zone and actually transforming oneself.

    2. The real professionals make it look so easy that those of us new to the industry often assume it is. Of course, a ten year hot market also made it easy for a while.

  3. Where do you get that, John? Just because someone operates as a counselor doesnt mean they cannot provide great service. Their model is irrelevant.

  4. Loan officers do not have to be licensed in any State, as far as I know, not in NJ, anyway. No background checks, nothing. What’s THAT all about?

  5. I like where you’re headed with this; however, the degree needs to be a 4 year accredited university degree, complete with general ed requirements. This will at least *lessen* the number of air-headed ‘realtors’ who cannot even compose a proper sentence or perform basic critical thinking.

    All one has to do is observe most of the agents working in ANY agency to realize how few of them have even basic reasoning skills. Indeed, too many are obviously mentally challenged, not just educationally challenged.

    People who have succeeded in earning university degrees at least have demonstrated a certain level of intelligence and professionalism–flakes and crazies don’t usually survive a 4 year university.

  6. My wife is a successful agent without any education and, in our experience, requiring a 4 year degree would be like requiring a PhD to teach high school – serious overkill. The truth is that a career in real estate is not difficult or well-paid enough to warrant a four year degree. If a degree would be required at all, I say that it’s similar to a mechanic or other vocational position, where a 2 year degree is sufficient.

  7. I must respectfully disagree, Doug. We are talking here — or should be — about what is good for clients, and that is not a matter of agent successfulness; it is a matter of client security. (Just because an agent sells well does not mean that that agent is the best choice for a client; car salesmen sell well too, yet we would not trust them with our houses and economic futures.) Real estate is the hugest investment of most people’s lives, so it is only right that clients should have a fully-educated individual representing them. Real estate should not be a vocation like auto mechanics. The reason so many clients have problems is because so few agents go beyond vocation.

  8. When you’re dealing with literally millions and millions in commissions to be earned in many decent sized towns, it brings the horns out on some agents. At the end of the day, people (agents) are going to do what they want to do, for better or worse. Realtor Associations, if serious, should enforce ongoing training and education. Last year our Association made us pick up a video, and as the office manager, I had to tell them that we watched it, all of us. Hmmm. It was the hugest waste of time.

  9. Doug,

    Nice attempt at a flame, but “hugest” is, in fact, a proper word. (You’re talking to an English major, by the way.) In addition, your response commits at least two logical fallacies.

    You’ve given two good examples in that one post of how education is so important. It can get people out of emotions and into logic and professionalism.

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