How to wholesale as an Agent?
I have a question for agents that wholesale properties. I got into real estate as a wholesaler a few years back and just recently got my license in Texas this past summer. My question is how does wholesaling work when your licensed? And does my assignment fee count as a commission and go through my brokerage or do I just get paid from title as usual?
It's hard to do wholesaling when you have a license. I do know people that do it, you just have to be careful and know your rules. What you can say, and can't. Technically you have to tell them their home worth, and it's hard to do that and then tell them you are only offering X amount. Assignment fee doesn't count as your commission you wouldn't go through your broker, and make sure your broker is "investor friendly" and be careful. I am in TX as well and I am with an extremely investor friendly brokerage, if you want to talk about it let me know I can help you out! Just message me.
Krystal Wakefield do you have some sort of written agreement with you agents that you can share?
@Joe HomsI don't have a written agreement with my agents -- What do you mean exactly?
@Krystal Wakefield something that will protect your broker from your wholesaling practice.
@Joe Homs So I carry the license now and my husband owns the separate entity. It just works better that way so there is no legal stuff. I was with KW but they are not very investor friendly....I still work in wholesaling but my broker is super investment friendly. So I don't really have anything protecting because everything we are doing is legal. I was just having a hard time finding a broker that is OK and familiar with what I do.
Beginning with the disclosure that I am not an attorney, my $.02 to this discussion would be as follows: a wholesale transaction will usually be conducted with an off market property. You, as both the buyer and agent should disclose to the seller your license status even before an offer is made. The seller should be fully aware of your status and sign off on it somewhere in the purchase and sales agreement. After all, failing to disclose things like this get people in hot water all time.
So long as there is ample disclosure and clear, concise and written agreements in place, I don't see how you will have a problem. Some multiple listing services have assignment contracts already in place, albeit usually used for unlicensed buyers/clients. You may want to double check with your local MLS about the appropriate and approved use of those legal documents for off market transactions. And you may want to consider discussing your activities with your managing broker. I can tell you that up here in the Pacific Northwest, they are taking a very close look at the whole wholesaling scheme and many firms are telling their realtors not to make a habit of those sorts of dealings.
I know that some realtors have been asked to take their licenses elsewhere after their pattern of behavior was discovered.
The old adage "it is easier to ask for forgiveness than permission" doesn't really apply very well to real estate services and real estate law, in my humble opinion. Check with your managing broker and just to be on the safe side, I would over-disclose as much as you can.
Why not just get an exclusive listing agreement rather than getting it under contract and assigning? Is it because the commission would be less than the assignement fee you would hope for? Or is it that getting it under contract gives you more control? What am I missing.
Originally posted by @Michael Hallahan:
"Why not just get an exclusive listing agreement rather than getting it under contract and assigning?"
Not every seller wants to work with an agent. Also, when you approach them as an agent they may see it as a transaction that will cost them money (agent commission). If you approach them as an investor who is ready to buy their property, they see it as a way for them to make money.
"Is it because the commission would be less than the assignment fee you would hope for?"
You can get a higher payment with the assignment fee, it depends on the property, the deal and what brokerage your with (commission split etc.)
"Or is it that getting it under contract gives you more control? What am I missing." I feel you would have more control because you are doing everything on your own."
You are not acting as an agent for your broker, you're an investor structuring the deal on your terms.
As long as their is disclosure there isn't a problem. You can wholesale on market properties because you're dealing with another agent so you'd just write it up as normal. If you're wholesaling an off market property, you need an additional disclosure to show them that you're licensed and they aren't. It is so that you aren't treating them unfairly.