Is my licence needed!?! All opinions welcome!!!

24 Replies

Hi all! 

Hope you're all having a brilliant holiday season with your friends and family! 

Quick question for you all, as discussed in a previous post, I'm looking at wholesaling as a potential strategy for acquiring property that fit my criteria while wholesaling the rest. 

My question is, shall I also pursue my real estate licence? My background is sales/sales ops. I'm certainly no expert in RE, will having my licence give me an advantage from a legal perspective (I understand there are some grey areas in wholesaling) and will it give a competitive advantage when talking with motivated sellers? 

All opinions welcome!!

Well, am licensed in OR and if I did some of the BS wholesalers do I'd lose my license.

I also take every opp to rat-out wholesalers to the REA here.

Then again if wholesalers practiced some disclosure and didn't do such a dis-service to sellers I might be more open-minded.

That help?

Helps greatly guys, I'm sensing some animosity between Agents/Wholesalers here, I want to ensure that I'm doing the right thing by all parties involved therefore, I'll be seeking my licence to learn the trade the right way. 

Any more opinions welcome!

Check around locally.  Wholesaling is a bit shady by itself.  And many local-to-me wholesalers are very shady. 

Technically, in my state, you need a license to market and sell someone else's property.  People claim to get around it by claiming they are selling the contract, but they aren't marketing a contract, or assigning it.

I've seen "wholesalers" clear $50k on a sale to a "flipper" that barely made $15k after they (the flipper) believed the "ARV" that was given, then spent too much on bad design decisions.

It sounds like your plan is fine.  If you are just selling your own properties at a discount, you don't need a license.  It will probably be easier to hire someone with a license to sell them at close to retail, unless you have a network of real buyers.  And even then, I market my sales nationwide.

The whether or not to get your license, at the end of the day, is an ROI question. How much will you pay to sell how many properties vs how much will you pay to get and maintain a license (including broker splits). Generally, for a new investor, your personal volume isn't going to justify getting a license. Especially if you are already a high earner in a different field. Getting your own off-market deals will take enough of your spare time.

Just my 2 cents without knowing your whole situation!

@Tom Port   As others have said, you need a RE license to market a property that you don't already own.

Here's the rub if you get licensed though.  A Realtor wholesaling is indistinguishable from a net listing.  Those are illegal in most states and strongly discouraged in the rest.  If your broker isn't comatose, I bet they'll put a fast stop to it.

The other potential landmine is that if you cause the seller to enter into a contract when you don't have the money and intent to perform, that's a tort called "fraud in the inducement".  When a family member finds that you screwed Grandma out of $25,000, that's just one more thing they can sue you for.

Having a real estate license means more disclosure to the seller.  You have to tell them that you're a licensed agent, so at least they know that they're dealing with somebody who has a lot more industry knowledge (and probably an unfair advantage).

I can promise you that your real estate commission will not look kindly on licensed agents taking advantage of people the way wholesalers do.  My bet is that you would see a stiff fine and license suspension on the 1st offense and revocation thereafter.

Wholesaling in general is an evil, unethical business.  Wholesalers make their profits by stealing equity from sellers who are either uninformed about the fair market value of a property or are in such a financial bind that they'll take a bad deal to get some relief.

After screwing somebody like that, no amount of soap will get the stink off of you.

@Tom Port

This has been brought up a few times before on BP, but I don't have them handy.

In short, the main issue with having your real estate license and assuming you work in residential real estate and join the National Association of Realtors you will have to abide by the Code of Ethics.  That basically means you should be honest, disclose, etc.  The general viewpoint is you should be doing that ANYWAY, especially when wholesaling.

Meanwhile, it makes you more "legitamate" since your card is less likely to be faked.  You and your smiling mug should come up easily in a Google search...  They could call your office to confirm, even call your State's Real Estate Commission to check your license if they are so inclined.

Also, lets you provide additional options, such as listing their home, bringing a buyer, etc.  If you are an investor like myself, now I can bring pretty much bring everything to the table (well, if I wholesaled...).

It was brought up that some brokers don't let their agents wholesale.  I have no experience on this topic.

Regarding actually having your license, you do realize there is some $2k to $3k of annual fees and dues just to have your license, right?  Then, there is the other argument of whether you'll be any good at it if you don't have the time to learn the profession.  As with most licensure situations, the pre-licensing course only tells you enough about the laws and regulations so they can charge you if you legally mess up.  Otherwise, it teaches you very little about actually performing the function of a real estate agent.  Here are a bunch of prior threads you might find useful.  Good luck.

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

@Tom Port

You can see from the above post how some feel its a "bad" thing.  I try to stay out it.  Let me just add since I can't find the other threads quickly, some see it as just another kind of "business" since you are assigning contract and helping people sell their homes by functioning as middleman, without being broker or real estate (since you are only selling your right to purchase).

However, one question comes up is the wholesale fee "equivalent" to an accepted Realtor commission??  For better or worse, the commissions for a licensed real estate agent is legal, an accepted practice, and regulated.  On the other hand, I've read here how some wholesalers will take $15k or more on a small deal (say less than $150k).  That's a huge cut.  If the investor, or potential family buyer, could find the deal themselves, then the seller would have gained more...

And yes, everybody seems to have an opinion as to whether wholesaling is legal.  I'm sure it varies by State.

Good luck.

Thanks everyone, great feedback. A lot to think about. 

I suppose my thinking is/was that in order to be successful in this game, you have to find good deals, in order to find good deals (Especially in my market) you need to go off market, which from a sales perspective I am absolutely comfortable doing, however what do you with those motivated sellers that do not fit your criteria? If the general consensus is wholesaling is unethical do you then Whole tale them? Legally speaking it sounds as if that's better, however, ethically speaking it sounds very similar? 

Also, in order to move quickly on off market deals, I am assuming hard money lender is usually necessary? 

Thanks all, hugely appreciated!!!

@Tom Port

Correct, off market deals are where you make your money.  Having a license doesn't necessarily help with that, unless you network well/correctly.

Like I said.  I don't wholesale...  As a licensed agent, I would just offer to list the property and bring the buyer.  If I represent both, I don't need a super high commission to get the deal done.  Now everything is "up and up" assuming you believe that real estate agents are "up."  Sure, you have to split the commission with your broker, but that's how the system is setup...

Otherwise, I don't understand your question about "...Whole tale them."

Cheers for the reply @David M. I owe you a virtual pint! 

I'm referring to what I've read called "Whole tailing" which as I understand it, refers to buying a off-market property that does not meet your criteria as a long term hold and fixing it up just enough to flip. For those not wanting to wholesale, this is perhaps a more preferable strategy.

@Tom Port

So a "fix 'n flip..."  Who is doing the buying?  You?  Then, I already brought it up above.  Instead of saying you are buyer who will be selling your purchase rights, you well --- are the buyer...  If you can get them to sell it to you as if you were a wholesaler, then you can have them sell it to you as the investor.  As a wholesaler you would have resold your rights to an investor anyway.  

I don't get it.  Are you thinking that wholesaling is only to buy and hold investors?  Wholesaling is to any sort of investor...  Thats my understanding of it.  You are the middleman and are skipping the "brokering" aspect because you are selling your right to purchase, not the actual purchase...

This is a double edge sword, if you get your license your done and your in only at 3%. The comments above are pretty black and white. I’m an agent but for myself and I use the tools that RCO gives me. But the comments that the agent is going after wholesalers that’s just WRONG @Steve Morris if only Steve knew how much work is involved to find a wholesale deal maybe he would think twice about contacting the RE police. 
1. most wholesalers sell properties that RE agents like Steve will never lost because the banks will not approve the loan!

2. Steve has no clue of the sellers situation and what their problems are!

3. Why won’t you go after the sheriff or county when they auction off property? Why don’t you contact RE police and tell them like a baby “why isn’t the county giving these properties to RE agents to sell” BECAUSE OF THE SITUATION!

I respect every aspect of a wholesaler and I buy from wholesalers keep in mind I’m a RE agent. I recently purchased a home below 70% market! The owners could of listed it oooooo but the foundation was a $10,000 mess and your local Chase bank will not lend you the money. The older lady had 4 kids all in their 50’s and couldn’t fork up $2500 each to help with their mothers home???? How’s problem is that? Only hers, so she found a cash buyer in 3 weeks! She wanted to give me a $500 gift card and I told her no. So if your living in China call the police and regulate. You live in the USA and people the hustle made this country what it is. Go out there Steve and try yourself to wholesale a deal let me know how easy it was.

@Steve Morris oh sorry I just read your Bio, your from Portland that’s not the USA anymore what’s it called now? CHAZ? Hopefully your RE over there doesn’t become a second Detroit cause the city sure looks like going down that path.... 

@Tom Port I was in a similar position as you, and I am getting my license because I would find off market deals that were too nice for me or another investor to buy, so now instead of recommending them to a realtor to sell I can list those myself

Hey @Tom Port , I would look at the requirements and the annual costs to see if it is worth it to you.  For me, it was 250 studying hours and costs about $1,500/year to maintain.   The things they teach you don't help you in investing whatsoever.  In my opinion, if you partner with a good agent, they should be able to do everything you need.  

Originally posted by @Arsen Atanasovski :

@Steve Morris oh sorry I just read your Bio, your from Portland that’s not the USA anymore what’s it called now? CHAZ? Hopefully your RE over there doesn’t become a second Detroit cause the city sure looks like going down that path.... 

We're getting close.  I think we're further since we don't have a lot working -wage jobs like GM/Ford to lose.  Intel is not looking good right now and Nike is shrinking here.  However, still have a huge PERS debt they keep stealing money for.

I grew up here and it drives you nuts.  20 years ago Austin was nothing and Portland was going to be THE high-tech hub.

Don't look now.

 

Originally posted by @David M. :

@Tom Port

This has been brought up a few times before on BP, but I don't have them handy.

In short, the main issue with having your real estate license and assuming you work in residential real estate and join the National Association of Realtors you will have to abide by the Code of Ethics.  That basically means you should be honest, disclose, etc.  The general viewpoint is you should be doing that ANYWAY, especially when wholesaling.

Meanwhile, it makes you more "legitamate" since your card is less likely to be faked.  You and your smiling mug should come up easily in a Google search...  They could call your office to confirm, even call your State's Real Estate Commission to check your license if they are so inclined.

Also, lets you provide additional options, such as listing their home, bringing a buyer, etc.  If you are an investor like myself, now I can bring pretty much bring everything to the table (well, if I wholesaled...).

It was brought up that some brokers don't let their agents wholesale.  I have no experience on this topic.

Regarding actually having your license, you do realize there is some $2k to $3k of annual fees and dues just to have your license, right?  Then, there is the other argument of whether you'll be any good at it if you don't have the time to learn the profession.  As with most licensure situations, the pre-licensing course only tells you enough about the laws and regulations so they can charge you if you legally mess up.  Otherwise, it teaches you very little about actually performing the function of a real estate agent.  Here are a bunch of prior threads you might find useful.  Good luck.

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

if your good at wholesaling then you will be dynamite as an agent.. wholesaling is far tougher..  and 2 to 3k a year is a pittance for a career that can make you 100k to 1 million a year in fee's  and to be successful at wholesaling you need to be spending 5 to 30k a month on advertising.. if one thinks they can wholesale without spending significant money then they are just drinking the cool aid.. 

the idea for both agent and wholesaler is to bring a buyer and seller together for compensation..  by being an agent you always have far more avenues to make money than just ONE  which is trying desperately to rip equity from  sellers..

Look long term.. but if you have no sales skills or money up front or other things that you need to bring buyer and seller together your going to fail at both pursuits.. 

 

Originally posted by @Jay Hinrichs :

and 2 to 3k a year is a pittance for a career that can make you 100k to 1 million a year in fee's  and to be successful at wholesaling you need to be spending 5 to 30k a month on advertising.. 

You hiring?  I'M AVAILABLE :)



 

 

Originally posted by @Steve Morris :
Originally posted by @Jay Hinrichs:

and 2 to 3k a year is a pittance for a career that can make you 100k to 1 million a year in fee's  and to be successful at wholesaling you need to be spending 5 to 30k a month on advertising.. 

You hiring?  I'M AVAILABLE :)



 

I am talking about my wife  LOL.. not me..  

 

 

To be Frank about things in real estate, you can make money in all types of deals, deal making, deal finding. The wholesaler that sold a $32,000 house to me sold it for $48,000, to make that kind of money you need to sell a million dollar house, how many agents in Michigan sell million dollar houses? That’s right the agents that been agents for 20-30 years. Like said you can make money either way but to go after wholesalers and call RE police is just not right. Wholesaling is a skill and the 20-30 year agent selling million dollar homes is a skill too. All I’m saying is this is a free market let’s keep it like that. All I see is more and more rules, look at professional sports there are so many rules the players can’t even play the game anymore. So when I see someone successful in something I’m the 1st to tell Them your the man or woman you got the skills. 

Wholesaling is basically pawning houses. So, when are all the pawnshops being ruled illegal and closed?

A small percentage of people will always prefer to take less via quick cash then trying other methods to sell that take longer, but net more.

I think you are making it too hard, and are confusing it by combining 2 different ideas.

#1) If I accept a service fee in a real estate transaction, then I need a license. That's what the rules say. And this means that my business practices are regulated.

#2) For my services in helping people buy or sell their homes, for "being the connector", I can charge whatever fee I want. I just need to be transparent about it to the people I am in business with.

You meet Jane who wants to sell their house, to just "be done with it". You tell them your fee is $30,000 and then it will come out the proceeds at closing. They are of sound mind and say yes and sign a contract. Then sell it. Even put it into the MLS. Just because it is in the MLS doesn't mean it has to be pristine. I have seen some real dumps in it.

Or you meet an investor that wants you to find them a home. You tell them your fee is $30,000 due at closing, and they agree. Then find them a home. 

In essence, the whole thing is asking buyers and sellers, "Do you want my help?"  And, "Here is how I get paid, and here is what I make." If you can't or won't talk about it, or have to hide how you get paid, then that is a problem.