BiggerPockets

I've always wondering why wholesaler's don't become realtors?

Sure there is more work involved but you can make 3 to 6% on most of your deals, which might be better than the 'assingment fee'. Also, you are able to reach retail buyers on the MLS who might be VERY willing to buy the properties you find because they are cheaper than most others.

Do more rules apply? Are the brokerage/operating expenses to high?

It just seems that after a while of people knowing that you are a person who finds really good deals, people that aren't " motivated" to sell would start using you as well. You can still contact motivated buyers and align them with your investors.

Any thoughts?

Yeah, I think you may have missed my point a little.

I'm not saying they should 'look' on the MLS for good deals. I'm saying why don't they use their marketing techniques (bandit signs, mailers, birddogs, etc) and then when approaching the home owner, tell them they are a realtor and that they have investors that only by from them. Then, once the property is listed, they email the listing to the investors and sell the property that way.

I guess some seller's might just want the property SOLD rather than LISTED, so that might be a reason.

Yeah, 1 or 2% isn't a lot, but its the same as $1,000 or $2,000 on a $100k deal. And you dont' have to worry about if there's " room in it for the wholesaler" .

good point.

Richard is right ! here is what i posted to a similar type of post:

See link of entire post : http://forums.biggerpockets.com/viewtopic.php?t=18771&highlight=

Real Estate Advocate-
Can you expand on that? Have you done this a lot? I just have to wonder, if fiduciary and ethical duty of the agent is to get the client the most the market will bear, how do you get by that to sign him at 70%? Isn't that a violation of what agents were intended to be?
Or are you then not representing him? Just buying the property? Then why is he calling you?
Are you advertising? Are you finding disclosure to not be a problem for you?
I am not questioning you, just curious because I am licensed and if anything it hinders me from being able to do what I like. If you have found a way around this - I'd love to hear about it.

REAdvocate, in your example, couldn't that have been done without a RE license? I have a deal I am working on now for 4-plex units from a builder, I put them under contract via my LLC with earnest $ from my LLC and will assign some of the units I can not keep to my investors for an increased price/assignment fee.

As for the questions asked by Minna, I hope you can come back to the post and answer them. We all would like to hear what you have to say.

If REAdvocate buys the houses at 30% listing himself as the selling agent [the person who produced the " ready, able and willing buyer" ], then his only fiduciary responsibility is to himself, right? This would be no different than finding a buyer for a FSBO house, and collecting a commission from the seller.

Or am I missing something here?

Sounds to me like that article says it all for agents.
Either disclose your involvement/ownership to all parties or be in violation.
Seems simple to me.
Good job on remaining on the ethical side TrustOne!

Snice,

Point well taken, the fudiciary responsibility may very well be just with yourself, as you are not employed by the seller or the end buyer.
Again, I am looking at this from the ethical responsibility, and the Code of Ethics is not intrinsically clear regarding wholesaling as an agent or a broker.

Everone,

I have just shot off an email to the (CA) Orange County Association of Realtors Commitee for Professional Conduct to get their take on this as well. I will post both my email to them, as well as their responses when I get them back.

Scott Cook

I have just heard back from our professional standards committee..
First, My original email to them, and then their response.

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Mac,

I would like to get your take on wholesaling investment properties from a professional conduct standpoint. This is hypothetical, and I have not done this, but I know of other investors that do this without a RE license.

For instance:
Approaching a FSBO that is for sale and offering to purchase. On the purchase contract it would name me as the buyer, and or assigns, thus making it an assignable contract. I find x buyer to purchase the contract without representation by any agent including me. I disclose to all parties involved that I am a licensed agent thus meeting the requirements of Article 4 of the Realtor Code of Ethics. We do a double close through the title company and the property is passed through me to the end buyer. The issue is the spread that is created that would go to me. The FSBO is priced at $220,000 and I assign the contract to the end buyer for $235,000 effectively creating a spread of $15,000 for myself. The FSBO is adamant about not listing the property with a Realtor, and the end buyer is an investor that does not want to be represented by an agent. I cannot find anything in the code of ethics with the exception of Article 4 that pertains to this, and I believe that Article 4 requirements will have been satisfied by the disclosure to all parties.

Ref:
Article 4
REALTORS® shall not acquire an interest in or buy or present offers from
themselves, any member of their immediate families, their firms or any
member thereof, or any entities in which they have any ownership
interest, any real property without making their true position known to
the owner or the owner's agent or broker. In selling property they own,
or in which they have any interest, REALTORS® shall reveal their
ownership or interest in writing to the purchaser or the purchaser's
representative. (Amended 1/00)

Where does this fit in with professional conduct? What if any rules from the Code of Ethics could possibly be violated?

I look forward to your earliest response.
Thank you and best regards,

Scott Cook

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Hi Scott,

By disclosing that you are a licensed Real Estate Broker and that you were acting as a principle only not as a agent you would probably be adhering to the code of ethics in actuality. However you may not be adhering to the spirit of the code of ethics. That would depend on disclosures you shared with the seller to help establish the value of the sale as well as the disclosures you provide to establish the value to the buyer so that he will purchase the property in a short period of time.

I would also recommend that you consult an Real Estate attorney due to the fact there may be a requirement to disclose to the original seller the amount of money that you sold the property for to the new buyer since it was a pass through escrow.

A few years back there was quite a bit of this type of thing going on and it caught the attention of the legislatures and if I recall right there were some laws passed for full disclosure purposes.

Sometimes it is easier to be an unlicensed investor then a licensed one.

Hope this helps

Any further questions please don't hesitate to contact me.

Mac

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I still think that we have some ambiguity here. Any RE Law professionals on the site want to chime in as well?