Question for people who flip and are licensed

7 Replies

Regardless of state law (most of which require lots of disclosure), as a real estate agent or broker, do you disclose what you plan to do with the property after you purchase from a non bank or government owned property.  Someone asked me last weekend if I could get sued if a person gets mad if they find out I resold a property for more than I purchased it for.  As a realtor, I have to disclose everything.  I wonder if I should have the seller sign a statement saying I'm going to resell this property after I rehab and the seller understands that they could do the same but they are agreeing to sell as is.

Maybe I'm over thinking because I'm studying for my broker's license and getting hit over the head with all the things I shouldn't do and the consequences for screwing up.

There is a very fine line when it comes to wholesaling as a licensed real estate agent.   Full disclosure is key if you are licensed.   

Generally, when you disclose your license they will ask if you intend to resell it, in that case, don't mislead them. If they don't ask there is no requirement to disclose anything other than you license.

Last one I bought, the bank asked me if I was going to sell it, I don't have an active Broker's license anymore, didn't have to disclose the license, but they knew me! I said "Everything I have is for sale except my kids, you can have them for free!" I told them no, that at that time I was going to hold it, but if the opportunity arose, I might. So, that didn't go any further.

Point is, they "feel like" if there is money on the table, they want it, my feeling is, they should be sophisticated enough to get their best price regardless of what buyers intentions are. But, many aren't.

So, bottom line, no, you do not have to disclose your intentions, only your license status. If asked, that's a different matter, now your making representations that they may make a decision on that influences the accepting an offer and with a government entity or a bank, that can be an issue. :)

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Originally posted by @JOAN DICKIE :

Regardless of state law (most of which require lots of disclosure), as a real estate agent or broker, do you disclose what you plan to do with the property after you purchase from a non bank or government owned property.  Someone asked me last weekend if I could get sued if a person gets mad if they find out I resold a property for more than I purchased it for.  As a realtor, I have to disclose everything.  I wonder if I should have the seller sign a statement saying I'm going to resell this property after I rehab and the seller understands that they could do the same but they are agreeing to sell as is.

Maybe I'm over thinking because I'm studying for my broker's license and getting hit over the head with all the things I shouldn't do and the consequences for screwing up.

Joan, that is an AWESOME question!

I wrote about that on my blog one time, "Real Estate Agency for Realtors® who Wholesale!".  Things ARE different for Realtors® who Invest than the unlicensed!  For example, in my home State of AZ, a licensee who improperly discloses could result in treble damages of your gain.  

For example, if you wholesale a property, and make 10k, and improperly disclose, the damages CAN be 30k!!  Ouch!

Fortunately, the NAR Code of Ethics is pretty clear on the advantages of the Wholesaling Realtor®. As a matter of fact, Article 4 is a blueprint on how Investing Realtors® can act. 

If I were you I would pay particular attention to Article 1 (Treat all parties honestly); Let them know you are acting as a principal in the transaction; this is obvious.   However, what is lesser thought of is Article 2 of the Code.  (Avoid exaggeration or misrepresentation of the facts)  which means that we need to be honest about the values, and stop padding the CMA or facts with irresponsible comparables.

Finally, Article 4 of the Code of Ethics is a very specific "How to" for agents when it comes to the issue of "Flipping" or Wholesaling real estate for the Realtor®. Not only did my article cover it in specifics for Wholesaling; but the National Association of Realtors® did write a very good article on the issue of Investing for Realtors®.

Anyway, thanks for asking that great question!  We need to talk more about that as professionals!! 

I've never understood why there is such a stigma behind being an investor while also being licensed. Full disclosure and good record keeping is all it takes. If you are a buyer then act as one and never provide consultation as an agent would. If the conversation steers that way then a choice needs to be made. You either respond by recommending they seek counsel on what you're offering as an investor; Or you stop acting as an investor and become their agent with zero personal interest and seek a separate buyer for them. 

If they ask about what you intend to do with the property after they have been put on notice that you are an agent it is their choice if they want to move forward. They also have a choice to do their own due-diligence and uncover what strategies and options they have with their property, including rehabbing and reselling for a profit. They then also have the choice to figure out how to implement that strategy just as we do (raising money, using their own, taking out a loan, etc.) Wanting to sue you sounds more like an emotional reaction to what they felt they should have done but didn't have the commitment to completing. Disclosure stops that emotional reaction in it's tracks. 

If you feel safer investing by utilizing a required disclosure statement and release I'd say go for it. Having something in writing is always better than the dealing with the headaches and time lost later. 

Originally posted by @Paul Z. :

I've never understood why there is such a stigma behind being an investor while also being licensed. Full disclosure and good record keeping is all it takes. If you are a buyer then act as one and never provide consultation as an agent would. If the conversation steers that way then a choice needs to be made. You either respond by recommending they seek counsel on what you're offering as an investor; Or you stop acting as an investor and become their agent with zero personal interest and seek a separate buyer for them. 

If they ask about what you intend to do with the property after they have been put on notice that you are an agent it is their choice if they want to move forward. They also have a choice to do their own due-diligence and uncover what strategies and options they have with their property, including rehabbing and reselling for a profit. They then also have the choice to figure out how to implement that strategy just as we do (raising money, using their own, taking out a loan, etc.) Wanting to sue you sounds more like an emotional reaction to what they felt they should have done but didn't have the commitment to completing. Disclosure stops that emotional reaction in it's tracks. 

If you feel safer investing by utilizing a required disclosure statement and release I'd say go for it. Having something in writing is always better than the dealing with the headaches and time lost later. 

 Absolutely, and unquestioningly agreed!!!

@Paul Z.  and @Karl Krentzel  good points.  I will have to remember to be careful how I address sellers.  The public seems to think nowadays that realtors are out to get them no matter what, so I just want to 1. protect my behind and 2. protect my license.

Thanks!