Can You Be a Real Estate Agent and a Mortgage Broker?
There is no better way, it would seem, to make more money in real estate than to find new avenues of specialties. Professionals in the real estate industry regularly wonder if a person can be licensed both as an agent and a mortgage broker. The short answer to this question is yes but with its challenges, regulations, and potential advantages. This article will outline the benefits, regulations, and practicalities of holding both licenses to help you decide whether this dual role suits you.
The Dual Role: Real Estate Agent vs. Mortgage Broker
To begin with, it will be important to try to understand whether one can or should be holding licenses in these two professions by first distinguishing between what a real estate agent does versus what a mortgage broker does.
Real Estate Agent
The realtor is the professional who assists buyers and sellers through their respective real estate transaction processes. They know the local market inside and out, from knowing price ranges to the pros and cons of the neighborhoods, school districts, and various other varied local factors that may affect buying decisions. They guide the clients through the process of buying or selling a house; this mostly includes term negotiations and documentation.
Mortgage broker
A mortgage broker acts as an intermediary between the borrower and the mortgage lender. They assist clients in finding the best mortgage products that will suit their needs by comparing rates and terms from several lenders. Similarly, a mortgage broker works closely with a borrower to help them qualify for loans and to complete the application process.
Similarities Between Real Estate Agents and Mortgage Brokers
While the focus of the two professions is different, there are a few notable similarities: both require strong communication, an entrepreneurial mindset, and the satisfaction of assisting others in achieving goals. Both professions also require deep knowledge of the real estate market and an ability to handle sophisticated financial transactions. Yet both differ in that real estate agents and mortgage brokers undergo similar education and testing concerning licensure. The majority of states require that a real estate agent or broker be no less than 18 years of age and have a high school diploma or GED. They are both required to take pre-licensing education specialized by the state for each respective jurisdiction and take state-issued licensing exams that correspond with their profession.
Differences Between Real Estate Agents and Mortgage Brokers
Yet, there are great similarities between the real estate agents’ licensing and regulatory requirements and those of mortgage brokers.
Licensing and Education Requirements
There is no consistency in the pre-licensing education among real estate agents and mortgage brokers across the states. In Florida, the requirement for pre-licensing education is a minimum 63-hour education for a real estate agent whereas it is only 20 hours of education for a mortgage broker. The registration with the NMLS Registry is also to be done by mortgage brokers and, in certain cases net worth demonstration is also necessary.
Regulations and Restrictions
Real estate agents and mortgage brokers are controlled by different sets of laws and regulations. For instance, even though both licenses can be held legally in most states, there are restrictions on how these licenses can be used in conjunction with one another. Real estate agents can’t originate FHA loans for their real estate clients, and some secondary purchasers refuse to purchase loans where the same person was acting as the real estate agent and the mortgage broker.
Can You Practice Selling Real Estate and Being a Mortgage Broker at the Same Time?
While quite legally feasible, this is usually not encouraged, especially when dealing with the same transaction. This sets up the potential for conflict of interest and may create problems with lenders or regulators. Many secondary buyers of mortgages, who purchase loans from primary lenders, will not purchase loans where the same individual serves as both the real estate agent and mortgage broker. Therefore, most dual-licensed professionals prefer to separate the responsibilities of one profession from the other. Either they practice only one profession at a time or in collaboration with other licensed professionals and share the work amongst themselves. For example, a real estate agent licensed as a mortgage broker may refer his clients to another mortgage broker for loan origination and vice versa.
Benefits of Holding Both Licenses
Despite that fact, there are a couple of advantages to holding both a real estate and a mortgage broker license.
Better Service to Client
By holding both licenses, you are offering your clients a one-stop-shop service. It can ease the process of buying a home because it allows the client to easily move through both processes of real estate and mortgage with one professional.
Increased earning potential
The dual licenses can bring in income from commissions related to real estate and origination fees related to mortgages. This also reduces dependence on one source of revenue, hence diversifying your income into two more stable streams.
Better Market Acumen
Through knowledge and experience in real estate and mortgage lending, you will have a further understanding of the market. This, in turn, will make you a more valued resource to your clients and differentiate you in an extremely competitive field.
Professional Growth
A dual license offers greater opportunities for professional growth and career development. You might find that knowledge in both fields can help you handle more complex transactions or might even lead you to specialize in a certain market segment.
Challenges and Considerations
The advantages are clear, but pursuing a dual license poses many challenges and considerations.
Regulatory Compliance
As earlier said, there are strict regulations that are in place when it comes to dual licensing, especially on the same transaction. Failure to comply with these leads to fines, legal consequences, and a dent in your professional reputation.
Conflict of Interest
This too can be looked upon as a conflict of interest while acting as a real estate agent and mortgage broker on the same transaction. Be up-front with your clients that you are acting in a dual capacity, and always be certain that what you are doing is in their best interest.
Managing Time and Resources
Getting a dual license requires much time and consumes lots of resources. Both licenses require you to pursue the required education and licenses, continuing education courses to keep your licenses current, and always keep yourself updated about changing issues within your industries.
Conclusion
Whether or not to pursue dual licenses as a real estate agent and mortgage broker depends upon your goals personal and professional. Having dual licenses will be a great asset value if you want to extend service to clients, create more revenue streams, and gain a deeper understanding of the market. However, the decision should be made in full consideration of regulatory issues and possible conflicts of interest.