The real estate market has been rebounding; trade gurus have marked cities like Austin, Dallas/Fort Worth and Raleigh as areas to watch out for and many U.S. cities have seen an influx in buyers. It's certainly an exhilarating time to be in the real estate business.
But, it isn't without its share of challenges as the business is subject to ever-changing market regulations and stiff competition.
There are 2 million real estate agents in the U.S. — how can you stand out amongst them? One quick and effective way is by ensuring your real estate business has the correct licenses and permits.
Business licenses can be complex, but they are essential to your success, even if you are operating virtually. We’ll explain why licenses are important, how to check which are applicable to you and how to go about getting them.
Do Real Estate Agents Need a Business License?
A real estate business license ensures you are lawfully allowed to represent buyers and sellers in property transactions within your desired state and locality. Operating without the appropriate licenses can result in jail time or fines of $1,000–$5,000.
The process of buying and selling a home is probably one of the most complex, emotional and stressful transactions an individual or family does because it involves a large sum of money, loans, dipping into savings and multiple stakeholders. Ninety-eight percent of customers prefer to engage with agents who are honest and have integrity — having the correct licenses ticks these boxes.
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Lastly, having the correct business license will help you grow your professional network. You can use your business license to increase the visibility of your LinkedIn profile, rate higher on Yelp Business or secure accreditation from groups such as the Better Business Bureau.
What Kind of Business Licenses Do Realtors Need?
For a real estate business, the most prevalent are state licenses and permits. The most common license required is the Real Estate Sales License.
If you already have a real estate sales license and wish to expand your business, you can apply for a Real Estate Broker License, which allows you to start your own brokerage firm and hire other real estate agents. However, each state stipulates the time you spend as a sales agent before you can be eligible for a broker license. For example, California requires you to work as a sales agent for a minimum of two years, while Texas mandates you work as a sales agent for at least four.
If your real estate business deals with interstate land sales of 100 or more, then you must register with the Federal Housing & Urban Development (HUD).
How Can I Get a Real Estate License in the USA?
Though the requirements vary from state to state, getting your real estate license is quite straightforward if you are above 18 and have a GED or high school diploma. Can non-U.S. citizens get a real estate license too? The answer is yes! If you are a lawful permanent resident of the U.S. (have a Green Card), you can get your real estate license.
Whether you're a citizen or permanent resident, the entire process can take approximately three to six months. Here are the steps you need to follow.
Form a Legal Entity
To start out your real estate business, you will need to form a legal structure. Our Real Estate Business Guide can help you explore all the legal entities for your business. A limited liability company (LLC) is usually the preferred choice for most real estate business owners, and it's available to non-U.S. citizens too.
Understand State Licensing Requirements
Since there is no national real estate license, you'll need to meet your state’s specific licensing requirements. Association of Real Estate Law Officials (Arello)’s state directory lists out each state's real estate governing body and regulations.
Sign Up for Pre-licensing Classes
While each state has different education hours and course requirements, all require you to complete an accredited pre-licensing course. California, for instance, requires 135 hours of education, while Texas requires 180 hours of coursework covering topics like Law of Agency, Real Estate Finance and Law of Contracts. Your state might also stipulate the passing score for the course’s exam and whether a proctor is mandatory. Expect to pay between $200–$1,000 for your courses — it’s the biggest financial investment you’ll make during this process.
Schedule and Pass Your Real Estate Exam
The licensing exam can take anywhere between 1.5 to 3.5 hours to complete. These tests cost between $15–$60 and require a passing score of 65–70 percent. California’s licensing exam consists of 150 multiple-choice questions with a time limit of 3 hours and 15 minutes; Texas requires you to answer 110 multiple-choice questions in 150 minutes. Make sure you get an official certificate or proof of completion of this test.
File for Real Estate License
Submit your test results, along with your license application form and fees, to your state’s real estate commission. Most states will require you to undergo additional vetting procedures like background checks, criminal verification and fingerprints.
Partner with a Brokerage Firm
A majority of states require you to partner with a brokerage firm before you venture out on your own. Think of a brokerage firm as a mentor who can help you master the business. It typically takes one to two months to find a brokerage firm that will sponsor you, so it’s best you start narrowing down your options before you complete your course.
A few things to check while researching brokerage firms are:
- What type of brokerage firm is it? Is it a national or local boutique firm? Do they have a specialization?
- What sort of mentorship or guidance will they offer?
- Does the firm require you to undergo additional training?
- How are commissions set up?
- Will you have to do your own marketing?
Renew Your License
Your real estate license isn’t lifelong — most expire within two to four years. To ensure that your business is always legal and abiding by the law, check your state’s license renewal schedule. Almost all states require you to complete a form of licensing education prior to renewing your license. These courses are an excellent way to stay up-to-date on changing market regulations.
Be Legal: Have the Correct Real Estate Licenses
Running your real estate business without the proper licenses is risky and can leave you subjected to fines or unwanted consequences if there's any confrontation with the authorities. Set yourself apart, increase your business's credibility and stay on the right side of the law by securing the appropriate licenses and permits.
Incfile's Business License Search Tool can guide you in the right direction while providing a comprehensive overview of licenses, permits and tax regulations your business could be subjected to.
Swara Ahluwalia
Swara Ahluwalia is a freelance content writer with experience in the technical, B2B and SaaS domain. She also has curated content for various lifestyle brands. In her downtime, you will most likely find Swara training for her next marathon or spending time with her two daughters.
