Opinions Please!

9 Replies

Hey agents and brokers!

Does holding a license make wholesaling in particular (and investing in general) easier or harder? Do disclosure rules and standards of practice effect your ability to function as an investor?  I've heard arguments for and against.  I'd like to get the opinions of my fellow BP'ers who are also licensed.  

Let's hear from you!

Gary

I was a wholesaler for a few years then had to get licensed bc the company I worked for made me and I am glad they did.  I have made more money and had more opportunities because of being licensed.  It also gives you more credibility.  There is no downside.  Regarding disclosure, you should have nothing to hide so its not an issue. 

Curt,

I'm sure many of us who are considering becoming licensed to aid in our investment strategy find your comments helpful.  I held a license years ago and I'm seriously thinking about getting licensed again.

Thanks!

Gary

@Curt Davis   I couldn't disagree more.  How can you ethically be a wholesaler and an agent.  I just don't see how you can tell a seller the house is worth x dollars when you know it is worth considerably more.  As you yourself point out "it gives you more credibility". To me that means they trust that you are being truthful and ethical.  Now understand I am not throwing stones at you or saying you are personally unethical I just cannot understand.

I understand your approach may be that you disclose upfront that you are going to resell the house for profit and maybe they don't care, I don't know.  How can you tell them their $100,000 home is really worth $70,000.  Perhaps you can enlighten me.

Even though you disclose you are an agent and you are acting as a principal in this transaction it doesn't release you form acting ethically because of that trust they have for you as an agent who should know the true value of the property.

I know there are others who act as an agent and wholesaler but I cannot see how to do it without taking advantage of the seller.  Again I am asking how you can make this work not casting aspersions on you personally.

Perhaps Tennessee is less litigious than CA but I can see lots of issues here.  I have had my broker upset because I sold 11 lots for one seller in 4 days at full asking price set by the seller.  He sweated that because of how fast I sold them they were very under priced and the company would be sued.  They weren't but they were priced at market so went fast.

I would like to hear what makes wholesaling and being an agent ethical to you.

I should say I have nothing against wholesaling, double escrow etc.

@Martin Scherer

You are assuming too much.  I have never told a seller their home is worth say $50k when I know its worth $100k. I use my license in the manor that I sell investment homes that I do not own therefore I have to be licenses as I work with a turnkey company.   I tell the sellers what I can pay for their home and thats it.  Has nothing to do with giving them false information.  They know I will buy and resell.  I give them a number and its up to them if they wan to take it.   Also understand that when I buy homes from sellers I am not their buying or selling agent but simply acting as buyer myself.  Hope that clarifies a little better.

Originally posted by @Martin Scherer:

@Curt Davis   I couldn't disagree more.  How can you ethically be a wholesaler and an agent.  I just don't see how you can tell a seller the house is worth x dollars when you know it is worth considerably more. 

Easily.

A house that needs to sell in 30 days (or LESS!) is "worth less" than one that can sit for 3 months.

A house that will not pass an FHA inspection is "worth less" than one that will.

A house that is in foreclosure is "worth less" than one that is not.

A house that will require a short sale (taking how many months again?) is "worth less" than one that is not.

And so on...

@Curt Davis  I assumed or presumed take your pick since you said that "it gives me credibility" you were presenting yourself as a listing agent.  I have no issue whatsoever if the customer knows right up front you are buying and reselling on your own account.  As I said I have no problem with wholesaling property but the "extra credibility" issue bothered me.  Also are you disclosing in a double closing your profit to your end purchaser--required as an agent in CA?

My point really was I still do not see how being an agent is a help to your wholesaling if you are not playing on the "extra credibility" factor as an agent.  Yes you may occasionally get a call from a seller desperate to sell and wants an agents expertise giving you first shot at a deal.

Also understand I am not judging you or your ethics just trying to rationalize how playing on the trust factor of being an agent works with buying undervalue from a trusting seller.

I totally get going in saying "I can pay this much for your house" and the seller freely choosing to take that or not. I am all ok with that approach but not with going in and telling a seller his home is worth thousands under market when he has asked you for a CMA. It sounds like you are operating above board and with knowledge of the seller that you are wholesaling.

here we do not have to disclosure our profit when doing a double close. When we do assignment of contracts the buyer sees how much we make but we rarely do them. In almost all cases we purchase the homes then renovate them and them rent them out.   All I mean about how being am agent has helped is like you said I occasionally help retail buyers and sellers, I can and have listed homes for sale on the mls for investors looking to sell and I act strictly as seller agent. I have purchased my last two primary residences and got paid a commission for representing myself.  And I also have to be licensed to sell someone else's homes.  That's what I initially meant about how being a realtor has benefited be all around in real estate. 

I agree with @Martin Scherer  that there could be ethical issues wholesaling with a license, but only when acting as a seller's agent.  I never represent the other party when I am a principal in a transaction regardless of my end goal.

But @Curt Davis makes many good points (and doesn't represent the seller when he buys) which is why I encourage wholesalers to get licensed. It entitles them to commissions, allows them to retail properties, and in general, makes for a bigger tool box when approaching a deal. Moreover, there's more access to analysis tools like the full MLS application, etc.

From my experience, the biggest drawback to being licensed is that many sellers stigmatize real estate agents as profiting off of their property.  I find that that this objection can often be overcome when acting as the principal, but not always.  I get a lot of hang ups when I tell sellers I'm an agent.

Finally, states are starting to look at wholesaling as a work around to getting a license.  We may see them really crack down over the next few years.  It's good to have a backup plan.

@William Hochstedler   I agree with what you are saying.  My issue is not with wholesaling but the idea of being a person of trust simply because of being an agent.  That could come back to bite someone if there was no clear proof of knowledge by the seller of the agents intentions.

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