Can I wholesale while having a real estate license?

Question

I'm about to get my real estate license. However, I am aware that every transaction has to be under a broker. So that means that I can't wholesale unless the broker knows. I was wondering if there is a way that I can wholesale separately. I was thinking about creating an llc and use that llc for my wholesale transactions. Would that work or no? Or please help if there is a way to do it without breaking the law or anything.

Karen Margrave · Answer

Once you have a real estate license you have to disclose to all the parties that you are licensed. Also, in CA you aren't allowed to make secret profits. If you know a property is worth more than what you can buy it for, you have to tell the seller that they could get more money for it, however; if they are ok with it after that and sell to you at a discounted price, you can buy it.

Shawn Mcenteer · Answer

@Bryan Rodas what is your end game with real estate or maybe a better question is where do you see yourself in 5 year?  Does wholesaling need to be on the cards for you?  If you are rehabbing properties are planning  to sell them or hold onto them?

Charlie MacPherson · Answer

@Bryan Rodas  Assuming that you don't double-close, the main problem you have is that wholesaling is indistinguishable from taking a net listing, which is illegal in NJ and most other states.

For NJ law, see: https://www.caplanschool.com/t... and look at Par. 6 (f), which states "(f) "No licensed individual, partnership, firm or corporation  shall  enter  into  a  “net  listing”  contract  for  the  sale  of  real  property, or any interest therein. A “net listing” is defined as an  agency agreement in which a prospective seller lists real estate  for sale with an authorization to a broker to sell at a specified   net  dollar  return  to  the  seller,  and  which  provides  that  the  broker  may  retain  as  commission  the  difference  between  the  specified dollar return to the seller and the actual sales price."

Net listings are illegal because they are most likely to be used to strip equity from a seller.  Things like this are exactly why states put real estate laws into effect to protect the public.

Your MLS will most likely prohibit you from listing a property when you don't have a contract to do so with the seller.  If you do have a contract and sign for one selling price and list for another higher price, that seems to be prima facie fraud.

Finally, if a ticked off family member finds out that you stripped $25,000 of grandma's equity and files a complaint or lawsuit, it's unlikely that your E&O will cover you.

Take the listing and get the seller the full retail value to which they're entitled.  You'll make a decent living and sleep better at night.

Ray Evans · Answer

@Bryan Rodas I know someone in my state that does and they are a Keller Williams agent.When you look at his website,you see listing then assignments.I am in Tn so I don’t know if it’s state by state,but I know it’s ok here.

Edward B. · Answer

@Bryan Rodas, yes that is exactly what I said. That is not the point I was trying to make. The point is that it must be

abundantly clear to the seller, not just to you, and your broker needs to be OK with it.

Bryan Rodas · Answer

@Edward B.

If i was contacted by seller, as an agent or working for seller as an agent-yes my obligation is to the owner.

If im are not representing the seller, and am negotiating as an investor-no, my obligation is not obtain highest return for seller-just treat him fairly.

Joe S. · Answer

I want to point out that if you’re going to get quality leads you have to be willing to spend more than most people make a month. The people that keep preaching that you can start wholesaling, because you’re broke and have no money are doing a disservice by painting a false picture that very seldom works in the real world.

Charlie MacPherson · Answer

@Bryan Rodas @Luis Rivera There's some really bad advice here.  "Not exercising your license" is not a thing.

If you are licensed, you are subject to licensing laws. Period.  You don't get to call a "time out for wholesaling".

I'll say it one more time.  Licensing laws are put in place to protect the public - especially from those who practice unlicensed brokering or others who would cheerfully screw them.

Almost without exception, that's what wholesalers do - and they make their money by stripping equity from sellers who are either desperate to get out of a bad situation or uninformed as to the fair market value of their property.

The posts here on BP where wholesalers dream up anything they can claim as a "laws don't apply to me" loophole are at once repugnant and comical.  If you want to sell real estate, get your license.  If you want to re-sell properties legally, buy them.

Better yet, buy dilapidated properties, rehab them and sell at a profit.  Everybody wins.  The town gets more in real estate taxes, the seller gets out of a dump, the neighbors see the neighborhood improved and the buyer gets a nice renovated home.  Rehabbers actually add value.  Wholesalers strip it.

Steve K. · Answer

@Bryan Rodas Asking your broker is the only way to really answer this. I think you would actually need to close on the deal, and then resell it or do a double closing, not assign the contract like true wholesaling. It’s tricky as an agent because there’s an inherent conflict of interest, and net listings are illegal just about everywhere I believe. As far as using an LLC to go around your broker, that’s not gonna go over well at all.

Steve K. · Answer

@Bryan Rodas why not just work as an agent above board? People say it’s hard and the failure rate is high, and that’s true. But that’s also true starting any new business: it’s hard work and the failure rate is high. Starting out wholesaling is probably even harder than building a business as an agent, and the failure rate is higher no doubt. As an agent operating a legit business, at least you don’t have to worry as much about breaking the law or being sued by a grumpy seller or their heirs when they realize a middleman stripped them of their equity, and at least you’re protected by E&O insurance if a deal does happen to go sideways. I’m not against wholesaling entirely, but it’s a less desirable and less profitable niche IMO. As an agent, the last thing I want to do is waste time with oddball deals, low-quality properties with liens, confused sellers, dead-end leads, a daisychain of assignable contracts and undisclosed fees, dishonesty, etc. which is pretty much what wholesaling consists of. Seems like a headache compared to building a business based on providing a valuable service and snowballing referrals IMO. I’ve been licensed less than a year and I’m approaching $10M in sales. I doubt many new wholesalers are making that kind of money, and I spent $0 on marketing other than my cell phone bill which I’d be paying anyway. Just some food for thought. I think the gurus misrepresent wholesaling as the best way to get started, but I guarantee most wholesalers don’t make nearly as much money or have as much job satisfaction as real estate agents do (with some exceptions of course, I’m sure there are a handful of wholesalers that crush, however most never do a single deal). So if you’re getting licensed anyway, I’d recommend just working to become a successful agent! You can still do lead gen prospecting for sellers, but instead of wholesaling for a fee just connect them with a buyer or list their property and make the normal sales commission. By keeping those clients happy and not ripping them off, you’ll get referrals and build a successful business quickly. All you have to do is be slightly above average to do well as an agent.

Can I wholesale while having a real estate license?

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