Real Estate Agent Wholesaling??

Question

Hello, all you awesome guys and gals! I am excited because I just got my Real Estate License for the state of South Carolina! However, I feel like I proverbially shot myself in the foot because I don't believe I am able to wholesale homes now. I suspect the area I am in is going to blow up and I want to create funds for investing in the market before that happens. Being an agent there is more of a process from start to finish before I get to see any commissions. Right now I have more time than money so I figure as I work at my broker's pace, I can wholesale on the side and begin creating an investing income. Please let me know what makes sense! Thank you!

Jose Robles · Answer

@Brenden Mitchum  Honestly I never even considered speaking with my broker about it. I guess I didn't want them to say no, "better to ask for forgiveness than permission" But as a licensed Agent I guess I can't operate like that. I will ask around at other brokerages because I really want to position myself in the best I can. Thanks for the reply!

Jose Robles · Answer

@Don Konipol I can understand that and appreciate your expertise. Was it wrong of me for thinking that the market I am in has such a low supply of homes that it would be MORE advantageous for a Flipper investor or Buy and Hold Investor to enter this market and add more housing to it? I don't have the capital or a huge network to lean on so I was trying to get creative to put some money in my pocket to then reinvest but I definitely get that walking a fine line deal. I guess my eyes are bigger than my stomach right now. I will reach out to my broker and have an honest conversation with him about my goals and how I plan on achieving them. Being a newly licensed agent I do not want to shoot myself in the foot when there is so much potential for great income as an agent.

@Jonathan Greene Thank you for your insight as well. I like your point in regards to the E&O insurance, I definitely didn't factor in that kind of liability being taken on my Brokerages behalf. Gotta think of all angles haha

Don Konipol · Answer

@Jose Robles

First let’s clear some misconceptions

1.  It’s much more likely we can see a drop in home prices from these highs rather than a drastic increase.  Reasons are affordability, increasing interest rates, supply chain normalization, and general economic slowdown.  If you would like to go in depth there is plenty of information available on line.  Of course, this is merely my projection.

2.  Wholesale deals are extraordinarily hard to find right now with demand for even problem properties at a high and supply low.  When someone could get top dollar for their home quickly, why sell at a low price?

3.  Agents can’t often walk the tight rope and both wholesale and act as an agent.  A few have done it successfully in the past, however in todays litigious society, I just don’t see how to avoid being sued by someone who claims you “stole” his property while as a licensed agent you are required to honestly give him your best estimate of market value.  I suppose it can be done with getting all kinds of disclosures signed, but I see it hurting your broker business more than you can earn wholesaling.

My advise after 40 years as a syndicator, hard money lender, real estate fund general partner, residential investor, commercial investor and the holder of real estate broker licenses in three states is CHOOSE EITHER BROKERAGE OR WHOLESALING.  Trying to do both will in all likelihood not turn out well, with lots of unforeseen consequences.

Jonathan Greene · Answer

Wholesaling with a license is very dangerous and ethically unsound in a lot of cases. If you look at it from the brokerage perspective, you are hiding under their E&O, but you are trying to do deals where they will not get compensated so why would they be ok. If it's not listed and you put a wholesale deal under contract and sell it, there is no brokerage compensation and since you are a licensed agent, you can not do that. Can not and do not are two different things and plenty of agents wholesale, but it's much more likely there will be ramifications when licensed than when not.

Brenden Mitchum · Answer

Hey @Jose Robles, welcome to the BP community!

Congrats on getting your license!

As long as your broker allows it, you should have no issues wholesaling deals. However, as a real estate agent you are held to a higher standard than other wholesalers so you need to be sure you're still working in an ethical manner that is approved by your broker. If they aren't down, speak with other brokers until you find one that is. Worse case scenario, you can choose to not hang your license and let it lapse. I'm not sure what the requirements are in SC to be reactivated but typically this is only a fraction of the work involved to get it in the first place (granted you don't let it lapse for too long).

I know many wholesalers here in Atlanta that have their license. Even large wholesale brokerages that require all their agents to have a license. Maybe find something like that in your area?

Hope this helps a bit! Please, feel free to reach out anytime if you have other questions or just want to chat!

Real Estate Agent Wholesaling??

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