Do I Need a License to Broker Notes?

I get a lot of email.

And the topic we are going to cover in this article is a question that I get asked on a weekly basis – a lot of you have been asking about the licensing requirements in your State.

We have created a spreadsheet of the current licensing requirement for each State which we will be updating on a regular basis.

But before we get to the spreadsheet let me share with you an email I got about license requirements for note brokering.

Hi Brecht,
I really appreciate your follow up and your product. I made a decision that this is something that I want to do. I plan on signing up and getting started, however, I hit a little snag and wondered if you could give me some advise. I am an auctioneer and also a real estate broker in Massachusetts. Currently my license is with Keller Williams Realty. Upon speaking to Keller Williams, I was told that I would not be allowed to broker notes and keep my real estate license with them. The reason they gave was that I would be a facilitator and the E/O insurance would not cover me. I found a small brokerage house in Downtown Boston who is willing to let me broker notes. But they are unsure of the role of the Brokerage house would play in the transaction as well. I guess the question is, do I even need a license to broker notes? I am serious about this, as I already have three investors you want to purchase notes, all within the 1-5 million dollar range.
Thank you so much for your help.
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Your real estate license has nothing to do whatsoever with you brokering notes.

The reason they gave was that I would be a facilitator and the E/O insurance would not cover me.

This statement sounds like it is coming from someone uninformed and afraid. This is a classic CYA.

You would not be a facilitator as the trading of mortgages is not covered under the Massachusetts real estate licensing system (I am or was a licensed broker in MA, CT, NH and a licensed auctioneer in MA + RI). So while it may be true that the E&O wouldn’t cover your activities it is also true that one thing has nothing to do with the other.

You can associate with KW and they don’t have to have any involvement with your note brokering whatsoever. It can be your side business. Obviously you don’t want to use their name, office address, website, or anything else of theirs in your note business, simply do not involve them.

I’ve spoken at length with a number of professionals about this. There is a certain set that will claim that notes amount to a security and you need a securities license but I have not read or heard of anyone being prosecuted by the SEC (if you do then let me know in the comments).

One thing I know for sure is that this does not in any way fall under your real estate license or that of your broker – it ain’t real estate – it is paper. As long as you’re not mentioning Keller Williams as being a part of that business you should be in the clear.

If you would like a quick check on the licenses required in your state, below is a spreadsheet of the latest licensing requirements we could find for each state

This in no way applies to originating mortgages and you should check with a local attorney before making important business decisions with potential legal implications.

I’m not a lawyer and not giving legal advice.

But I hope this helps.

PS: If you have any information on the licensing required in your state that isn’t in the spreadsheet, please leave a comment below and we will update it as soon as possible.