Reforming Pre-Licensing Requirements for Real Estate Agents
May 27th, 2009 categories: Military Installations, Relocating
In this second of a four part series on Improving the Practice of Real Estate in the Commonwealth of Virginia, we’ll begin the look at reformation, appropriately, at the beginning. In other words, where Realtors receive their pre-licensing training or instruction, the traditional classroom coursework that must be completed prior to testing by the state for a Realtor’s license.
Current Requirements
As stipulated by the Virginia Real Estate Board (VREB), and set forth in the Virginia Code, § 54.1-2105, pre-licensing education requirements for those seeking a real estate license are:
1. Every applicant for an initial license as a real estate salesperson shall have:
a. At a minimum, a high school diploma or its equivalent; and
b. Completed a course in the principles of real estate that carried an academic credit of at least four semester hours, but not less than 60 hours of classroom, correspondence, or other distance learning instruction, offered by an accredited university, college, community college, high school offering adult distributive education courses, or other school or educational institution offering an equivalent course.
In other words, to legally practice real estate in the Commonwealth of Virginia you need:
- 60 hours of classroom instruction (you actually don’t have to be IN the classroom – online courses meet the requirement)
- Passing a written examination.
- Oh, I almost forgot, you also need a high school education, or its equivalent.
So, having passed the state test, without having handled a contract, toured a home, negotiated a contract term or clause, or spoken to a client, a brand new licensee can “practice” real estate. Is that adequate preparation to carry out a responsibility involving hundreds of thousands of dollars? Is there another profession whose qualifications are as minimal?
Can you imagine a surgeon performing surgery without having gone through the steps a few times, not to mention hundreds of times, prior to going solo? What about obtaining a driver’s license? How many practices has the student driver had before they are operationally ready? Before they are licensed?
One might argue that those are poor comparisons since a lack of adequate training or preparation in those professions might lead to death, whereas nothing that extreme might occur as a result of an error in a real estate transaction. And, they have a point. It may not result in a death, but incompetence and real estate “malpractice” could certainly costs tens of thousands, if not hundreds of thousands of dollars.
If you’re not satisfied with the comparison with a surgeon or a driver of a vehicle, what about teachers? Are they licensed to teach without student teaching many, many times while being supervised. What about an accountant? An architect? A bank teller? In each case, minimal hands on “real life”, supervised training is required prior to the ”students” being given the OK or being certified to operate on their own. Likewise, should this be required in our training?
In our profession of real estate, one may ask if this should be a pre-licensing criteria, or is it more suitably done after licensing, but as a first step of a mentoring program Realtors participate in once licensed and prior to operating on their own under the Broker of their choosing. Hmmm…that’s something to consider. For now, let’s begin by looking at improving pre-licensing training with a requirement of 60 college credit hours.
Learning is a never ending process. While there are many constants in a real estate transaction, there are some variables that may change depending upon the client, brokerage firm, financing involved, and other related factors. It’s important too remember that a standard curriculum can’t cover all the possible contingencies or circumstances a practitioner might face, however, it certainly should include many.
Current pre-licensing coursework provides students with little practical instruction of how to do their job. Its intent seems to be one of preparing students to pass a written test of concepts instead of preparing them to practice real estate. But, in examining how Realtors are trained prior to being certified or licensed to practice, maybe we’re not asking the right questions. Maybe we the should be asking, “What should pre-licensing instruction be designed to do?” What outcome are we looking for? Shouldn’t it be designed to prepare a candidate to do their job? If not, why not? For the sake of this series of articles, let’s assume that’s the objective. We want to prepare Realtors to do their job properly, plain and simple. In other words, to carry out their job related tasks in a “professional” manner.
Proposed Requirements
- A first step in better preparing our prospective real estate agents for their job begins with dramatically increasing their pre-licensing requirements. This can be accomplished through augmentation of the depth and breath of the classroom curriculum. While there is no substitution for experience, the increased use of case studies, and a more detailed examination of contracts and real estate practices, to include real estate finance among other topics, will provide candidates with a better base of practical problems and solutions to learn from.
- To adequately prepare Realtor candidates, the pre-licensing curriculum should be expanded from the current 60 classroom hours to 60 college credit hours. Not only would these college credit hours substantially increase students exposure to real estate material, but, doing so would also provide them with college level credit. In accordance with state guidelines, the specific content of the real estate courses “shall be in real estate brokerage, real estate finance, real estate appraisal, real estate law, and such related subjects as are approved by the Board.” Incorporated in this coursework should be 10 hours of “hands on” practice. This practice includes interaction with clients, both buyers and sellers, writing contracts, negotiating terms, and experiencing the entirety of a real estate transaction from beginning to post closing follow up.
While current pre-licensing training material provides students with a familiarity of real estate procedures (concepts can be identified if seen on a test), it does little to prepare these aspiring agents for practical problems they’ll face in a typical transaction. Increasing classroom time, improving the course material, and providing “hands on” practical experience with real estate trasactions, are three steps that need to be taken in order to improve the pre-licensing requirements for those training to be real estate agents.
Improving pre-licensing requirements for real estate agents is an initial step in attempting to improve our profession. By providing new agents an improved foundation to build on, they’ll be better prepared for actual real estate practice and carrying out their job. But, while they can now legally practice, how capable are they? Probably capable enough to be dangerous, but not capable enough to be on their own. And, that’s where the second step of the improvement process comes in, the use of a Mentoring program.
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What’s “short” About A Short Sale?
June 24th, 2008 categories: Market Trends, Real Estate News, Repairs
During the past couple of years the real estate community has been up to its proverbial eyeballs with short sale properties. But, for many, at first “blush”, the term short sale didn’t mean much other than another transaction opportunity with real estate. However, as many Realtors & their clients alike have learned, dealing with a “short sale” can be anything but short.
According to REALTOR.ORG, a short sale is, ”when the net proceeds from the sale of a home are not enough to cover the seller’s mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner’s commission.” In other words, the proposed sales price is short of what is required to pay off the home loan or mortgage. You might ask, “why would the bank/lender allow a home to be sold for less than what is owed. To put it simply, short sales are normally done prior to a home going into foreclosure in order to save money. Yep, to save money. According to the Virginia Association of Realtor’s special counsel, Lem Marshall, outside of the loss incurred to pay off the mortgage, lenders spend approximately $65,000 dollars on foreclosed properties. So, as you can see, to begin with, it makes sense for the bank to consider a short sale in order to head off further expenses resulting from the expenses of a foreclosed property. But, the benefits of a short sale aren’t simply financial. There are other benefits as well.
In the communities plagued with foreclosed properties, neighborhoods often begin to go downhill in a hurry due to the lack of attention to the foreclosed properties. Since these properties are no longer occupied, they are often neglected and rarely properly maintained. Often, they are vandalized.
Remember, banks aren’t in the property management business, nor do they want to be. But, unlike foreclosures, in the case of a short sale property, the occupants inhabit the house, and are there to look after the property. While they may have ceased making their mortgage payments, in most cases, the owners or tenants remain in the house until it is sold, or when repossessed by the bank in the case of a foreclosure. A short sale is also in the best interest of the home owner.
Homeowners facing a possible foreclosure can avoid the stigma, embarassment and credit problems a foreclosure entails. By opting for a short sale, homeowners not only can remain in their home, but the damage to their credit score is small compared to the penalty they face if their home is foreclosed on. Most lenders report “settled” upon successful closing of a short sale instead of the term “foreclosed.” Recent reports indicate the owners who complete short sale proceedings (who have missed 2-5 mortgage payments) have their credit score affected by only 30 to 60 points. Conversely, for those suffering through a foreclosure, their credit score will be penalized 140 to 200 points, or more. That’s a huge difference. So, as you can see, a short sale in lieu of a foreclosure makes sense for all parties involved. But, if that’s the case, why are so few short sales successful? Why is it so difficult to get to a Win-Win scenario? Who is to blame? More importantly, what remedy is their for a process designed to prevent property foreclosure, yet rarely does? We’ll leave those questions for Part II of our short sale discussion.
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