CA Salesperson Illegal to Wholesale?

16 Replies

I'm getting ready to take the Salesperson Exam to become a licensed agent in California. I took a test prep course yesterday taught by a real estate professional with many years of experience in traditional real estate sales. We were talking about compensation and the ways in which a salesperson in California can legally use his license to earn money. I stuck my hand in the air and asked, "What about wholesaling?" The instructor seemed almost disgruntled by my question and responded, "Wholesaling- wholesaling what!?" I replied, "Real estate." He just shook his head and said that it is not legal. Another person in the class turned around and muttered to me, "You can only do that without a license." Can someone please define where the legality lies? In California, can a licensed salesperson wholesale if he isn't working for a broker? What about if he is working for a broker? I keep getting mixed answers which is why I am seeking a definitive answer on the best REI forum out there. Thanks in advance for your input.

I don't think you'll get a definitive answer here. Wholesaling doesn't have just one definition. IMO acting as a principal (buyer or seller) is legal whether you're an agent or not an agent. If you're a principal, you can sell your interest in a contract.

I'd have to dig but I'm guessing it's a no go. I've seen others on BP mentioned that you need to double close vs wholesaling to remain compliant. The level of transparency and expectations on our fiduciary obligations, I can't really see how the BRE would think it's ok.

As for your instructor, sounds like an insecure instructor who can't admit that they don't know what you are talking about when it comes to wholesaling.

Ca is a very liberal state they may have some law against it but I highly doubt it.

Wholesaling as I define it means you have a principal interest in the deal. I find it hard to believe you would be bared from doing a legal transaction in your own name because you are an agent. If I were to do it I would be disclosing that I am an agent and that I am not representing anyone as an agent in this transaction.

Not legal advice just my laypersons understanding of the law.

Originally posted by @Chris Sweeney :
I'd have to dig but I'm guessing it's a no go. I've seen others on BP mentioned that you need to double close vs wholesaling to remain compliant. The level of transparency and expectations on our fiduciary obligations, I can't really see how the BRE would think it's ok.

As for your instructor, sounds like an insecure instructor who can't admit that they don't know what you are talking about when it comes to wholesaling.

Chris: what does "double close vs wholesaling mean". A double close is one buy escrow and one sell escrow, acting as a principal in both. Most people I know call that wholesaling.

Hey @K.@Account Closed .


Chris: what does "double close vs wholesaling mean". A double close is one buy escrow and one sell escrow, acting as a principal in both. Most people I know call that wholesaling.

What I meant was needing to double close vs. assign. I see what you mean by both being wholesaling. I would think the BRE would have a tough case if A and B formally closes and then B to C closes barring any issues restricting resale (REOs, short sales, etc. title restrictions).

Thank you for all the replies. I really like your pov @Ned Carey

I think what it really boils down to is disclosure disclosure disclosure. This is what the textbook I am studying for the exam states: "Whenever [a licensee] is a principal in a real estate transaction, he must disclose to a buyer/seller that he has a license."

Originally posted by @Account Closed :
Thank you for all the replies. I really like your pov @Ned Carey

I think what it really boils down to is disclosure disclosure disclosure. This is what the textbook I am studying for the exam states: "Whenever [a licensee] is a principal in a real estate transaction, he must disclose to a buyer/seller that he has a license."

I'd sure like to know if there is law backing that up, and if so what law. Does the text book reference anything? My guess, and it is a as, is that is CAR policy and not law.

Originally posted by @K. Marie Poe:
Originally posted by @Account Closed :
Thank you for all the replies. I really like your pov @Ned Carey
I think what it really boils down to is disclosure disclosure disclosure. This is what the textbook I am studying for the exam states: "Whenever [a licensee] is a principal in a real estate transaction, he must disclose to a buyer/seller that he has a license."

I'd sure like to know if there is law backing that up, and if so what law. Does the text book reference anything? My guess, and it is a guess, is that is CAR policy and not law. But the exam is given by the BRE. I wonder if that question is ever actually on a BRE exam.

Kristine Marie Poe there is no reference in the book but it's specifically written for the BRE salespersons exam. The author is John Henderson.

Originally posted by @Account Closed :
@K. Marie Poe there is no reference in the book but it's specifically written for the BRE salespersons exam. The author is John Henderson.

I'm studying for the exam. Looking forward to seeing what parts of the materials are actually law and what parts are CAR passing their policy and rules off as law. :)

Originally posted by @Account Closed :
Thank you for all the replies. I really like your pov @Ned Carey

I think what it really boils down to is disclosure disclosure disclosure. This is what the textbook I am studying for the exam states: "Whenever [a licensee] is a principal in a real estate transaction, he must disclose to a buyer/seller that he has a license."

If you are an agent of the seller (or the seller thinks you are their agent) I can see the need to disclose, to not disclose your status as a principal would no doubt be a violation of agency laws. But if you are not acting as an agent, there is no law that I know of, or that anybody has ever been able to produce, that says any disclosure is required in CA. I'm guessing that if you read closely, the text is making the underlying assumption the you are acting as an agent in the transaction, or that you are a member of CAR thus required to follow their policy.

I'd like to here some more from this as well. I'm in the process of obtaining my Salesperson license and would like to start in wholesaling as a way to get my feet wet in the business. Does anyone have hands on experience as a salesperson and a wholesaler in CA?

One important part that has been missed in this discussion is the managing broker. Licensee = salesperson.  A real estate salesperson must work under the supervision of a broker.  Does the broker you will be working for have guidelines as to wholesaling?  What is your definition of wholesaling vs the brokers vs the states?

This adds one more layer to what you must take into consider before acting:

- Law

- BRE policy

- Broker policy

Each one on has it's caveats that supersedes the next. Sorry for making it more complicated vs simpler.

I am also at the final stages of getting my real estate license in CA. Currently classes are finished and I'm waiting on a test date. My instructor who is an active broker in the area when asked about this he said that it is a very grey area currently because of the way the market has gone with all the foreclosures and bank defaults. He stressed the legality of being trustworthy and disclosures. My understanding is that in a salesperson role we are legally required to do our due diligence and get the best price plus provide all the information we have regarding a property, etc for the individual we are doing business with.... If we are buying a property at a "wholesale price" to then turn right around and resale the property for a profit to another person, investor etc... then we could definitely run into legal problems if the seller realized what was happening and later sued in order to recoup some more money that would have been the honest value of the property. BUT... And I stress this. If as a salesperson who is buying a property from an entity like a bank or auction then the idea of due diligence to an individual doesn't apply and the wholesale deal legality is sold. 

So the line is if you are being hired to be the sellers agent. If someone were to ask you about the sale of a property it would be your responsibility to disclose you intentions and the value of the property. If you are seeking out properties I would say something like I'd like to offer you a wholesale cash offer, if it's for you to purchase, you need to disclose its for you. The primary responsibility of an agent is to hold the interests of the client above their own. Without a license you have no obligations to disclose your intentions. A license isn't always an asset, in many cases it's a liability. Now if you consult your client to take a wholesale offer you should probably have them sign something that has them acknowledge that they were informed. After all it's about protecting your liability. This liability is why non licensed people have the advantage.

Hi,

I'm planning on getting my CA license soon.  Does the conflict with wholesaling apply to wholesaling in other states?  

I do have partners, is it possible to pass the seller off to them to make the offer?  

Hopefully taking the course will make this topic clearer.

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