Some agents live in the middle of a large state and would never consider adding another state’s license to their business plan. Those of us who live near state lines, however, often wonder if adding a neighboring state to our footprint is a good idea and a chance to expand our potential client pool.
The appeal of helping buyers and sellers moving across state lines without having to find a referral partner can be very tempting, but it shouldn’t be a decision made before looking at the full picture.
Here are the seven questions I asked myself each time I was thinking about becoming licensed in a new state.
7 questions to answer when considering multi-state licensing
1. Is my brokerage licensed there?
It may seem obvious, but making sure your current brokerage is licensed in your new area should be an important factor in your planning. If your brokerage isn’t licensed there, you will have to seek out a brokerage that is and have all parties (you, your current broker, your new broker) agree to the new arrangement.
Speak to your broker and ask what their licensing situation is and what their policies are on agents affiliating with multiple brokerages across state lines, as well as any errors and omissions insurance coverage that may have to be changed.
2. Will I have MLS access?
Some MLSs are state-specific, while others are regional, extending beyond state lines and typical boundaries. Find out the exact area that your current MLS subscription covers and compare that to where you are hoping to add business with your new license.
If the current footprint doesn’t extend to the new area you are hoping to serve, you will have to add another subscription and the associated cost that comes with it.
3. Am I ready for more paperwork?
No two states are alike, and neither are their real estate contracts. Part of your job as an agent is to know the ins and outs of the paperwork you place before your clients, and with multiple states in your coverage area, you will have to keep track of the differences between them.
Understanding and effectively communicating the different contract clauses and statutes can be daunting if you are not prepared.
4. Can I keep track of the different laws?
Similar to paperwork, different states can have very different real estate laws. Jumping from one side of the border to the other can mean drastically different agency, zoning, and even fair housing laws. Staying up to date on the ever-changing real estate laws in every state you serve will become a responsibility that isn’t to be taken lightly.
5. What is the real cost?
Adding a new state’s license comes at a cost, and it’s more than just the application fee or the exam. License renewals, continuing education and association dues are just some of the fees that you will likely have to pay to each state in which you are licensed. Those costs can add up quickly, and keeping track of what is due when and where can be a headache of its own.
If your current brokerage’s E&O insurance doesn’t cover your new licensing situation, you may have to consider adding your own additional coverage to ensure you are protected.
6. What’s my break-even number?
How many deals will the new state license have to add to your business every year in order to pay off the costs associated with it? Once you know all of the costs involved in adding another state, you can calculate your break-even number to help decide if the addition is really worth it to you.
Keep in mind that break-even number should also consider things like gas costs for traveling farther distances than before and a consideration for the time involved in traveling, learning the new expectations of the state, and peripheral activities like CE.
7. Where is my area of knowledge?
Don’t overlook how quickly you can find yourself accepting clients further and further away from your area of expertise when licensed in several states. You may be planning to just dip your toes over the border for certain situations, but in slower markets, an interested client farther away than you intended can look very enticing.
Decide how far your area of knowledge extends and serve your clients best by sticking to it and sending it out for a referral if possible. But remember, just because a neighborhood or town is outside of your current area of knowledge doesn’t mean you can’t learn and study the market in that new space to add it in later on.
Answering these seven questions will help you on your way to deciding if you are ready to add another state license to your business. They helped me clarify my decision when I expanded my business from one to four states within a few years and have helped others in my office as well.
Speaking with your broker and other agents can help solidify your feelings, but at the end of the day, only you can decide if another state is right for you and your career.
