Broker's License

I just got my California real estate broker's license in the mail. As you can see, the certificate is rather cheap and non-official looking. I guess that's what you get in a state with a $20B+ deficit every year.

Anyways, I got the license mainly so that we could collect the buyer's agent's share of the commission when we hopefully find a good home to purchase this year in San Francisco. Real estate professionals always tell people that having an agent represent them is "free." Well, that's kinda true, but only because it's already been priced in by the seller.

For those of you unfamiliar with the business of real estate, here's how things usually work. First, the seller of a property usually enters into a listing agreement with an agent. This agreement typically stipulates that the seller will pay some percentage of the sales price as a commission to the listing agent if the property is sold within some period of time, usually 6 months (indefinite or automatically renewed listing contracts are not allowed). The listing contract also specifies that the listing broker is to share that commission with the buyer's broker. In San Francisco, the total commission paid by the seller is usually 5%, with 2.5% offered to the buyer's broker. Technically the commission is negotiable and this is actually spelled out explicitly in bold in the standard listing contract. However, in reality, almost all transactions involve the standard commission rates.

Notice that because the seller pays the entire commission to the listing broker, who is then obligated to share that commission with the buyer's broker, if the buyer does not have anyone representing them, the listing agent is entitled to the entire commission! In San Francisco, where real estate is absurdly expensive, most places we've been interested in have been around a million dollars. At that price, the buyer's agent share of the commission would be around $25,000, not exactly chump change.

So starting last October, after a failed attempt at purchasing by using a Redfin agent (they offer to rebate half of the commission that they earn by representing you back to you), I decided to work towards getting a broker's license, which would let me represent anyone (including myself) in a real estate transaction and collect the commission. People often assume that one must obtain a real estate salesperson's license first and work as a salesperson full time, for several years before being eligible to be a broker. However, in California, there is a convenient exception that allows anyone with a bachelor's degree to forgo the experience requirement. The other requirements remain, namely passing 8 "college-level" real-estate courses and a broker's exam administered by the state's department of real estate. After shelling out a few hundred dollars to some online real estate courses and maybe 100 hours of very boring reading, I finished the course requirements, and really wished they could have just waived those as well for people with PhDs.

I took the exam a few weeks ago in a testing center in Oakland. The exam itself was 200 multiple choice questions, split into 2 sessions, each 2.5 hrs long. The first session started at 8:30am and the second at 11:30am. This was quite annoying as I finished the first part in less than an hour and had to just wait around for the second part. However, at least this particular testing center (there's a total of 5 around the state) offered computer-based testing, which was nice. Scantrons and #2 pencils would have been way too reminiscent of high school. In addition, you get your results right away after you finish the second part. Nothing like instant gratification (or disappointment).

The exam is pass/fail and you just need 75% to pass. They only give you your raw score if you fail, so I don't know how close I was to not passing. However, I do know that I missed quite a few questions on the first half of the exam. That break between the first and second half presents ample opportunity to psyche yourself out. I noticed several of the other examinees were actively availing themselves of this opportunity.

Well, now that I have my license, I better put it to good use. So if any of you are intersted in buying or selling property in the bay area and have any questions, let me know. By the way, because I have not and do not plan on joining the national association of Realtors, I can't call myself a "Realtor", as it is a trademark. Given the image of Realtors these days, that's probably not a huge loss :)