Can i still Wholesale deals with a RE License??

9 Replies

Hello! I'm a 26 yr old beginner in Real Estate, and have worked on several wholesale deals. Recently i have decided to go for my RE license. In my few deals in wholesaling in Chicago i have ran across some Brokers who also say they are Wholesalers as well. I wanted to know how does this dynamic work? Also when i complete my License will I, as a Broker, Still be able to Wholesale deals?? If so, how do i do so and remain Ethical and Professional. Obviously since i have been wholesaling, my mind tends to lean towards investing and making a Profit for Myself rather than working on behalf of a Seller...any advice on how i can use my RE License to help me flip properties, and propel me to be a Great Investor?? 

Just a couple of things.  When you complete your license, you're going to be a sales agent and you'll work for a broker.  There's a big distinction there because your broker is who sets the rules for you.  That's why it is important to pick the right brokerage. Also, here's how to get an Illinois real estate license.

With that out of the way, there's absolutely no reason why you can't wholesale deals with a real estate license. In fact, you're setting yourself up very nicely by getting your license. First of all, you're not going to save commission when you buy most of the time (since you'll likely not be buying listed property. However, you're going to turn it around and save yourself the commission (at least half of it) when you sell! Furthermore, you get to decide how it shows up on the MLS and you'll build a lot of valuable relationships with other agents that are going to help you immensely.

So why do people say that you don't want to have a real estate license when you wholesale?  The most common answer is that it's a conflict of interest in that you have too many disclosures.  This is simply incorrect.  All you have to do is introduce yourself as an agent and you've disclosed properly.  When you sell, you're going to disclose that you're an agent to the buyer.  That is literally as simple as, "Kahil Ortiz is a licensed real estate agent in the State of Illinois."  Now, I'm not a lawyer and I highly suggest you speak to one when you start wholesaling but that's the main idea.

Disclosure, disclosure, disclosure.  That's going to be the key.

The other reason I hear is people crying that you pay so much in fees that it cuts into your profits.  That's ridiculous!  The money you save in commissions on one deal will likely cover your license expenses for the entire year!

Now, as far as how you can use your license to help you make more money... you will be a member of your local board and take advantage of the board's classes!  Every board I've ever seen offers a wide range of classes.  In fact, I'm going to one next Friday called, "How to jumpstart your real estate career."  Why would I go?  Because it's a short investment of my time and if I get one or two pieces of advice, it could means thousands and thousands of dollars in return.

Next, you will have INSTANT access to the MLS. You'll have chances to jump on deals long before a lot of your competition has woken up in the morning. That's a big deal and one you will learn to love. It's great walking into a new listing and not seeing a single card on the kitchen counter. You've beat others there!

Best of luck, Kahil.  Go get that license.  It's worth every penny!

An absolute YES!!!  When you are getting into real estate as a wholesaling Realtor® then you absolutely need to concern yourself with the following....

  • Article 4 and Article 7 of the NAR Code of Ethics (with respect to who gets paid, when where and how; along with disclosure of your true position in the transaction)
  • True disclosure of the property's real value (Article 4) 
  • Disclosure of your Agency Status (working on your own behalf, NOT as a Fiduciary to the Seller) (State laws, Commissioners Rules, National Association Rules, etc)
  • A State Contract (Considered a "Standard of Practice" for use by Realtors® when purchasing property, so I'd be hesitant to use 2 page internet contracts)

There are a TON of blogspodcasts, and other resources available to the agent who is looking to learn how to wholesale or add wholesaling to their repetoire of services! 

Congrats, and let me know if I can help! 

@Kahil Ortiz  Glad you asked this question.  I wondered the same thing myself as this is the route I am strongly considering taking to both getting started in wholesaling but also to learn the industry better so I can be effective too.

@Chris Farrugia  and @Karl Krentzel  Thanks for the links guys.  I have so many bookmarked links in my browser bar that I suspect it's going to start crashing on me soon!  

I learned about this on bp. Some states have net listings for agents. This would function nearly the same as wholesale without the risk. Say the seller is good with 100k...and you have a buyer at 110k. You make the difference vs the regular 3%. This could be abused is perhaps why some states don't allow the practice. For an agent this listing seems superior to traditional wholesaling perhaps.

LOL... I feel your pain!  TONS of information on the web these days!  

I wrote an article in BP expressing my frustration at the same issue myself just a few days ago....

"Why Don't More Realtors® Wholesale?!"

Most of the time, it seems, is just because we don't know that we can!

Have a powerful sales day!!

k

@Chris Farrugia  Thanks for the informative answer, and the Links! Can you please elaborate when you said, "First of all, you're not going to save commission when you buy most of the time (since you'll likely not be buying listed property. However, you're going to turn it around and save yourself the commission (at least half of it) when you sell". 

i understand buying outside the MLS as a wholesaling method, but need more clarity on the selling aspect and saving myself commission. Thank you very much for taking out your time to answer my question, your words have encouraged me immensely, and im more than ready to tackle my RE License!

Awesome, glad to hear you're inspired.  When I said you won't save money on the buying of the property, it really is just because you're not likely going to be buying properties under a listing agreement that has commission.  So what you'll be doing is finding some property you think you can rehab, talking directly to the owner and offering some price well below what you think you can get out of it.  Since it isn't listed, no commission there.

So, you or your crew go into the home and do whatever you need to do to get it back on market. Well, now you're not going to list by owner. You have a real estate license and you've picked a broker that lets you keep 100% (or damn close to it) of your commission because you pay a very small desk fee ($100 or so). Now you list that unit on the MLS yourself at let's pick a completely random number--6% commission split between buyer and seller's agent.  You're the selling agent so you're not paying 3% there... so really, you only need to pay 3% to whoever brings you the buyer.  Here's the great thing though.  Many times, someone is going to drive past your beautiful house and call you directly!  Now you're the selling agent and you have the buyer (called a transaction broker) so you don't pay commission to anybody!  Well, you mail me my $500 consulting fee... but yeah, no commission.  More often than not, you'll pay 3% to someone bringing you a buyer but you've factored that into your costs and you've accounted for that cost of doing business.

@Karl Krentzel   Thank you Karl! Those were some really awesome links you posted, im combing through them now. Also, i appreciate the breakdown of the codes of ethics. I dont see a problem at all with disclosing the fact that i would be a broker. I do however have a little concern about disclosing the "value of the property", any idea on how i can do that and still make a great wholesale deal?

Also, do you consider Wholesaling as a "niche", one that would be worth Focusing on as a Broker, or are their other "niches" to consider? Thanks again

Originally posted by @Kahil Ortiz :

@Karl Krentzel  Thank you Karl! Those were some really awesome links you posted, im combing through them now. Also, i appreciate the breakdown of the codes of ethics. I dont see a problem at all with disclosing the fact that i would be a broker. I do however have a little concern about disclosing the "value of the property", any idea on how i can do that and still make a great wholesale deal?

Also, do you consider Wholesaling as a "niche", one that would be worth Focusing on as a Broker, or are their other "niches" to consider? Thanks again

 That is an AWESOME question @Kahil!

At the risk of sounding "Promotional" let me briefly summarize my beliefs as succinctly as possible!!

  • In The Red Pill Podcast and TenMinuteSkill  I teach that wholesaling (aka "Assignment of Contract") should be a part of every Realtors® "toolbox" of skills.
  • For Realtors®, the Code of Ethics is very clear.  We have a responsibility to disclose the true value of the home (as we see it) along with any other material facts that someone with our "expertise level" would ordinarily disclose. (NAR Code of Ethics Article 2
  • Since our obligation as Realtors® (again, only Realtors®, not all AGENTS) is to disclose all facts that are material and pertinent, and not to remain silent or exaggerate certain facts (again, article 2) that APPEARS to be in conflict with your ability to negotiate fairly on your own behalf.  However, that is only an appearance.
  • As the truly motivated homeowner is not always interested in the "highest netting offer" (i.e. estate sale, pending foreclosure, divorce, etc) then the values of other "like property" that you disclose are virtually irrelevant as they were listed, and took time to sell.  Not to mention the accompanying closing costs, repairs, commissions, etc.
  • Your job now becomes one of the "Educating professional investor." (YouTube Video "How To Present Comparables As a Wholesaler") Letting them know that ..."while that it may be true that the house on 123 main sold for x...  and yours MIGHT be worth X if you had the time to sell, in this case, because I am offering all cash, taking it as is, closing when you want to, waiving all my commission, and paying YOUR closing costs, I am only willing to pay Y."
  • Since the value of a home is ONLY what a READY, willing and able buyer is willing to pay a ready, WILLING, and ABLE Seller.. then it is irrelevant what Mr. Smith sold his home for down the street.  My obligation is to TELL you about it.  But what WE agree to.. well, that is something different.

To answer your question about wholesaling being a "niche" market?  No.  

What I teach on the podcast and in the blog, and books, etc. is the following....

You are the Buyer.  When you act like the Buyer first, instead of the Agent, then your rights are expanded, your options are plenty, and your profits expand.

Wholesaling is the beginning, and the end of the real estate transaction.  Buy and hold is great, rehabs are awesome... but give me a great wholesale deal that is super quick, and super easy?  I'll take a quick nickel instead of a long dime ANYDAY!!! 

Thanks for the questions, and sorry for the long winded answer!!

Have a Powerful Sales Day!!

k