Can a licensed agent, partner on a JV fix/flip deal?

6 Replies

Talking with my lawyer, he tells me there are implications where a licensed agent can fall into legal trouble and possibly lose their license if they are involved within the fix/flip deal? Is this true? I have a property under contract with my LLC entity, so technically, it's my LLC purchasing, not me. I have a possible partnership on the table where the partner funds the deal 100%. If any replies, please focus on the aspect of boundaries on licensed agent involved in the deal, versus the 100% funding aspect. Any words of wisdom is appreciated, thank you.

@Ramsin Jacob - you may need to talk to the lawyer who does this for the real estate agent/ wholesalers in your community.

I JVed my LLC with another LLC on a flip where the other LLC had 100% property ownership. I paid for and managed repairs in exchange for a % of profit (calculated x way, interest on my money and the listings. After I had spent $15k cash and almost two months full time and the listing was almost ready to sell, they said we don’t need you anymore. I didn’t get the listing and commission. I didn’t get paid until after I filed a lien and the house sold. I didn’t get any profit share. I got my materials money back and everything I paid painters, etc.. I could have sued to block the sale but that would have delayed me getting some money back. I couldn’t sue as myself their LLC to get the listing commission promised and my broker wouldn’t do it.

My main takeaway is GET EVERYTHING IN WRITING before you start because that’s when people are the happiest. What happens if you lose money? What happens if it takes too long to sell? What happens if one wants to spend more for better improvements than the other? Are you the GC or who will manage the GC? I didn’t have any “what happens if this agreement ends before the sale of the property” terms because that didn’t occur to me. Person initially said I work full time. I don’t have the time to do this. Please take this house and make it ready to sell, then sell it. (Later it was like... why are you spending $$ to fix curb appeal, painting, repairing doors? This old furnace without warranty I got off the back of a truck should go into my brand new Flip. But I don’t know anyone who installs. No... we replaced the roof, why put in a crappy hvac?)

Natalie, thanks for the information and sharing your experience.  Sorry that happened to you.  I was actually just ripped off by a investor out here as same result but led up differently.  Usually investors here will agree to let you represent them to double end the property (purchasing the fixer > flipping the fixer) it makes sense and I believe it adds to the longevity of the business relation IMO.  An investor who had agreed upon this in writing, pulled some shady strings and forced me out of the listing when we closed escrow on a flip.  Lawyer fees to go after the listing commission wouldn't have been worth it.   So just had to bite the bullet and move on.  Definitely makes me sick to my stomach.  Not to mention I negotiated $105k off from the original contract price.  SMH.  Because of that experience I am doing my own flips.  Too much work goes into getting good deals and a lot of people will snake their way into the deal.  So yes, definitely agree, everything in writing.  Great points with the questions, funny you brought them up, was creating questions very similar just a few hours ago.  Transparency is definitely key. 

Originally posted by @Natalie Schanne :

Ramsin Jacob - you may need to talk to the lawyer who does this for the real estate agent/ wholesalers in your community.

I JVed my LLC with another LLC on a flip where the other LLC had 100% property ownership. I paid for and managed repairs in exchange for a % of profit (calculated x way, interest on my money and the listings. After I had spent $15k cash and almost two months full time and the listing was almost ready to sell, they said we don't need you anymore. I didn't get the listing and commission. I didn't get paid until after I filed a lien and the house sold. I didn't get any profit share. I got my materials money back and everything I paid painters, etc.. I could have sued to block the sale but that would have delayed me getting some money back. I couldn't sue as myself their LLC to get the listing commission promised and my broker wouldn't do it.

My main takeaway is GET EVERYTHING IN WRITING before you start because that’s when people are the happiest. What happens if you lose money? What happens if it takes too long to sell? What happens if one wants to spend more for better improvements than the other? Are you the GC or who will manage the GC? I didn’t have any “what happens if this agreement ends before the sale of the property” terms because that didn’t occur to me. Person initially said I work full time. I don’t have the time to do this. Please take this house and make it ready to sell, then sell it. (Later it was like... why are you spending $$ to fix curb appeal, painting, repairing doors? This old furnace without warranty I got off the back of a truck should go into my brand new Flip. But I don’t know anyone who installs. No... we replaced the roof, why put in a crappy hvac?)

In no state, not even the left coast, is an agent prohibited from buying/selling/rehabbing/developing for themselves.  You simply have to be honest in all your dealings with people and make the proper licensing disclosures so there is no chance of confusing the “I am representing you as an agent verses I am representing myself as a principal in this transaction”

Disclosure is your friend and shield, at least where the agency/seller relationship is concerned part of your question.  Be open, honest, and get it all agreed to, understood and approved in writing and signed by all parties.  I believe that's the best way, no matter whom you represent.

No harm, no foul.  Good luck.

Thanks everyone for the input.  Yes, disclosures are key.  I was kind of thrown off with the level of concern coming from the lawyer.  So that is why I took to the message boards just to re-confirm from other who are actually in this business, that there isn't anything wrong.  I just sold a house to two investors, one has a license and know of many investors with licenses here, so that is why I was thrown off.  Thanks everyone.  If any more words of wisdom, please do add.  Thanks.