Do You Need a License to Flip Properties?
BY Raynor James
You often hear about people who are studying for their Real Estate License. Does this mean that you need a license to flip properties?
The answer to this question is a resounding no! A Real Estate license is issued by the licensing agencies of the individual States for the purpose of regulating agents. The definition of an agent is someone who is acting in the interest of someone else. If you are acting for yourself, you are by definition not an agent and do not need a license.
This type of reasoning is very clear in some of the wording of the individual State's license regulations. It is called "for another" language. It clearly states that you must be acting in the primary interest of another to be covered by the regulation. Other States do not specifically use the "for another" format in their regulations, but these States refer to "acting in your own interest" to exempt you from the licensing requirements.
In order to understand why it works this way, you need to understand the purpose of the licensing process in the first place. It is intended to qualify and regulate those that are offering their services as brokers and agents to the public. The bottom line is a matter of trust. Consider a doctor. When you know that a person has a medical degree, you often put your life in his hands based on the trust implied from the degree. When you commit your financial security to an agent, you need something similar to justify trust.
The purpose of the Real Estate license is not to prevent you from engaging in Real Estate investment for your own benefit any more than the purpose of Medical degrees is to prevent you from taking an aspirin when you have a headache. The only real important issue to remember is that you should make sure that it is very clear in all of your investment transactions that you are acting primarily for yourself. This is especially true in the case of Real Estate flipping where a third party might be involved.
The danger is not that you are going to be thrown into jail for practicing Real Estate without a license. What you need to worry about is that a party in the transaction will renege on a part of the deal by claiming you do not have a license and he is not obligated to complete the deal. If you have covered yourself by making sure that you are, indeed, acting for yourself and not another, that claim will not avail them at all.
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