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How Does Real Estate License Reciprocity Work?

Published: 09-04-24 Category: Marketing

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Whether you're active in commercial or residential real estate, the concept of real estate license reciprocity has attracted considerably more interest these last few years.

As many businesses and homeowners relocated during the years after the arrival of the COVID-19 pandemic, many real estate agents realized that expanding their territory outside their home state could help maintain valuable relationships while expanding their potential for commissions.

This type of agreement allows licensed real estate agents and brokers to legally manage property sales and rentals in more than one state without obtaining another license.

Some states that may not have formal reciprocity agreements may instead waive certain requirements to become licensed if you're already a licensed real estate agent or broker in another state.

If you're interested in expanding your territory into another state or simply curious as to how these agreements work, we'll teach you everything you need to know.

While we'll primarily focuses on commercial real estate, many of these reciprocity principles also apply to residential real estate.

Understanding Potential Opportunities

Reciprocity in real estate licensing is an arrangement between two or more states that allows a licensed professional from one state to obtain a license in another state under simplified conditions.

This system recognizes that real estate fundamentals are often similar across states, although specific laws and practices may vary.

For commercial real estate professionals, reciprocity is particularly valuable. Commercial transactions often involve properties or clients in multiple states, making the ability to operate across borders a significant advantage.

You may also appreciate a reciprocity agreement that allows you to move across state lines with minimal paperwork and/or expenses, especially if you're already living in a county adjoining your destination state.

However, not all agreements are identical, so we'll look at these next.

Types of Reciprocity Agreements

There are a couple different types of real estate license reciprocity.

Full Reciprocity: Some states offer full reciprocity, meaning they accept licenses from any other state without additional education or testing requirements. This is the most flexible, affordable arrangement, but it's relatively rare.

Only these five states offer it:

Alabama;
Colorado;
Maine;
Mississippi; and
Virginia.

Although you may be required to take a state-specific exam if you relocate to one of these five states, you'll want to ensure you know the differences in real estate law before you open your own office or join a residential or commercial real estate firm.

Partial Reciprocity: If your home state is included in a partial reciprocity agreement with a destination state, you'll be able to transfer your current license to your new state after you complete its education and/or examination requirements.

A partial reciprocity agreement may be simple or complex, and costs are different for each state.

Here's an example of how this agreement would affect, for example, an Oklahoma-licensed real estate agent who is moving to Arkansas.

The OK-licensed agent could request a waiver of the general section of the AK real estate licensing exam. If the OK-licensed agent can say “yes” to these three questions, he or she would only need to take the AK Law portion of the exam.

The agent has passed a uniform, general, or multi-state section of a licensing exam in another state that the AK Real Estate Commission considers to be acceptable;
The OK real estate exam requires a 70% minimum passing grade, similar to the AK exam; and
The agent is licensed in OK at the time he or she takes the AK exam.

No matter which state you may be headed to, the process for obtaining a reciprocal license will probably include some or all of the steps outlined below.

Obtaining a Reciprocal License

If your move depends on whether you can continue your career as a CRE or residental agent, you'll want to research agreements between your current (home) and future (target) state before you begin packing.

Most states require a formal application process, even with reciprocity. This usually involves submitting proof of your current license, undergoing a background check, and paying a fee for processing.

Additional requirements vary by state. These can be as simple as passing an exam or may require considerably more effort.

Depending on the state, you may need to:

Pass a state-specific law exam;
Complete additional coursework that's specific to the target state;
Provide proof of recent real estate activity in your home state; or
Obtain sponsorship from a brokerage in the new state.

Once granted reciprocity, you'll need to maintain your licenses in both states, which may involve separate continuing education (CE) requirements and renewal processes.

States With No Reciprocity Agreements

Move to any of these states, and you'll have to start from scratch:

Alaska
Arizona
California
Delaware
Hawaii
Kansas
Kentucky
Michigan
Missouri
Montana
New Jersey
New Mexico
South Dakota
Texas
Vermont
Washington
Wyoming

Whether you relocate to a state with full, partial, or no reciprocity, obtaining a second license can be a major benefit for your income and career.

Benefits for CRE Professionals

The benefits of real estate license reciprocity for CRE professionals are many:

Expanded Market Access: Reciprocity allows commercial agents to access more markets by pursuing opportunities across state lines. This is particularly valuable in metropolitan areas that span multiple states.
Competitive Advantage: The ability to operate in multiple states can set an agent apart in the competitive commercial real estate market. It's well worth identifying regional and national businesses with a presence in all states in which you're licensed, as you'll be able to present yourself as an agent who can handle all of their CRE needs.
Increased Networking: Working across state lines can provide you with more opportunities to attend business events, join more CRE organizations and groups, and earn more referrals.

Real estate license reciprocity is a powerful tool for commercial real estate professionals looking to expand their reach, make some more money, and better serve clients across state lines.

When you're ready to begin listing properties, you're already at the right place.