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What Should MLOs Know About Real Estate?
December 1, 2021

What Should MLOs Know About Real Estate?

by The CE Shop Team

As an MLO, What Should You Be Aware of in the Real Estate Industry?

The mortgage and real estate industries are tightly intertwined. While mortgage professionals assist in finding, selling, and closing a loan deal, real estate agents are in charge of finding, selling, and closing a property transaction. Your client will need both a mortgage professional to find their perfect loan and a real estate agent to find their perfect home. As a mortgage professional, you already know how to find your clients the ideal loan — but what about the real estate side of your transactions? Let’s break down what you need to know about the real estate industry as an MLO.

Real Estate Industry Titles

There are a variety of roles one can hold as a real estate professional. To be able to refer your clients to someone who can best serve their real estate needs, it’s important to know the differences between the titles below:

  • Real Estate Agent
    • A real estate agent is a licensed professional who represents buyers or sellers in real estate transactions. This title is the most commonly used to refer to real estate professionals, though it’s worth noting that entry real estate licenses have different names from state to state. Regardless, all real estate agents must work under a licensed Broker to represent clients.
    • The job responsibilities of a real estate agent include advising clients on the current housing market, showing properties, assisting in the process of buying or selling a property, and preparing documents for real estate transactions.
  • Real Estate Broker
    • A real estate Broker is an independently licensed real estate professional who represents buyers or sellers in real estate transactions. They have completed the licensing requirements to work independently and hire real estate agents.
    • A real estate Broker’s job responsibilities include writing contracts, listing new properties for sale, advising buyers and sellers in their home search and purchase, and keeping clients informed of market changes.
  • REALTOR®
    • A REALTOR® is a licensed real estate professional who is also a member of the National Association of REALTORS® (NAR). Not every real estate agent is a REALTOR®, but every REALTOR® is a real estate agent. REALTORS® must adhere to a Code of Ethics and complete Ethics CE courses on a regular basis.

Still feeling fuzzy on the differences between real estate agents and Brokers? Watch this quick, comprehensive video for more details:

When to Involve a Real Estate Agent

Now that you know the difference between real estate agents, Brokers, and REALTORS®, you may be wondering when MLOs and real estate agents start to work together. The simple answer is during the homebuying process. We’ll break down the steps below to give you the full picture:

  • First, the homebuyer will work with you to determine their budget, appropriate down payment, and to get preapproved for a mortgage loan. If they haven’t found their real estate agent yet, this is a great time to refer your client to a trusted real estate professional.
  • Next, they’ll work with the real estate agent to find their next home.
  • Once the perfect property has been found, the real estate agent will advise the client on their offer. They will research the current market and other homes in the area to determine the best offer to make.
  • The offer will be accepted or rejected by the seller, and the client will either rejoice in their purchase or continue their search for their ideal home.
  • Since your client is getting a mortgage, the lender will require a home appraisal to ensure the home value is on par with the purchasing price, which will happen after the offer has been accepted.
  • The last step in the homebuying process is closing on the property. This ties all loose ends including a final walkthrough, reviewing the closing disclosures, and handing the title from the seller to the buyer.

MLOs and Real Estate

Holding Multiple Licenses

Are you getting excited about the wonderful world of real estate opportunities? It’s possible to hold both a real estate license and an MLO license at the same time. A single person does not usually act as the MLO and the real estate agent on a single transaction — and if they do, that fact must be disclosed. Most mortgage companies will not allow licensed real estate agents to act as the Mortgage Loan Originator for the same client in any loan transaction.

These regulations were put into place with the SAFE Act of 2008, along with rules that protect consumers and reduce fraud in the mortgage industry. Mortgage professionals stick to using one license at a time because a majority of buyers on the secondary mortgage market will not purchase closed loans of borrowers who were represented by someone acting as both the real estate agent and Mortgage Loan Originator on the same transaction.

There are actually some instances where it is illegal to act as both an MLO and a real estate agent, including when the borrower is using an FHA loan. MLOs cannot originate FHA loans for their own real estate clients, for example. Technically, an MLO is allowed to originate conventional, jumbo, or commercial loans, but you’ll have to disclose if you do want to act as the MLO and the real estate agent on a single transaction. If your MLO company is separate from your real estate company, you’ll also need to provide affiliated business disclosure. With all of this said, if you’re interested in pursuing your real estate license, check out our online real estate Pre-Licensing courses.

It is crucial for mortgage professionals and real estate agents to understand each other's industries given how intertwined their services can be. With many different titles, loan options, and a fast-moving market, learning about the real estate industry is particularly critical for MLOs looking to best assist their clients. After all, the mortgage industry wouldn’t be what it is today without the real estate industry booming alongside it!

Ready to Further Your Education With The CE Shop?

If you're curious about earning your real estate license, we can help! Otherwise, our Continuing Education courses are written by mortgage experts with decades of experience. Stay up to date on your requirements with our 100% online curriculum that’s one of the most diverse and groundbreaking in the industry. And if you want to network with your peers, join our Facebook group and get connected!

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