Is a wholesale different than a net listing for a licensed agent?

Question

Like any real estate broker, I run into investing opportunities during the course of my daily business.  I'll probably need to call an RE attorney and our State real estate commission for this issue but I thought I may get some good info here on BP before I do.

Considering I am a licensed agent/broker, I am not allowed to take a net listing.

Net listing meaning I list a house where the seller tells me they want $100,000.  but sell it for $150,000.  Give the seller their $100,000 and I pocket the surplus.

That seems to be very similar to what a wholesaler is doing except most do not have a license.

Of course I would disclose that I am licensed and planning to purchase and resell/assign for profit.

If I know I can sell for $150,000.00 and the owner only wants $100,000.00 I see no conflict to purchase the home, I've done that before.

But the thought of putting it under contract and assigning the contract seems more murky as it is so similar to a net listing.

As a licensed agent/broker, is it possible for me to legally and ethically wholesale a property?

David Dachtera · Answer

@Brett Tousley,

As you describe a "net listing" sounds to me more like a consignment sale.

In such event, you are not putting the property under purchase contract.

A wholesaler does. They then sell their position in the contract to another buyer and get paid a fee to assign the contract to the new buyer. They're selling their position in the contract, not the property itself.

Kind of a fine distinction, I grant you - it seems to escape a lot of folks.

Even here in Illinois, most REIA folks think of an "A -> B -> C" flip without the "B" party adding any value when they think "wholesale".

"A -> B -> C" short-sale flips were common before the industry (and the legislatures) imposed the concept of title seasoning.

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."- DJ Benedict

Brett Tousley · Answer

I was at a home inspection so I didn't get a chance to read it all but this looks to have some good info as well that I'll read through tonight.

https://www.biggerpockets.com/forums/93/topics/243...

Brett Tousley · Answer

Thank you for the helpfull responses.

The distinction between listing (establishing a fiduciary duty as an agent) and entering under contract as a principle just seemed very thin as I was pondering it.

It's helpful to know that others are successfully doing it.

Chris Soignier · Answer

The difference is that wholesalers take an equitable interest in the property, while agents/brokers do not.   The key is that you need to abide by the REALTOR code of conduct if you are one, and you're state's laws.   Bottom line, abide by your fiduciary duties, be transparent, and be honest.

It's not uncommon or illegal here in Texas for agents to do both.