Wholesaling Real Estate With License - How commissions/fees are handled?

24 Replies

I have been building my wholesaling business for about 7-8 months now and have successfully closed 9 deals so far. I'm trying to find a real estate brokerage to hang my license with and have hit a little dilemma and trying to get some assistance.

I've spoke with a brokerage company that wanted to speak with our state association of Realtor legal hotline before signing me up and have come up with this scenario:

Any wholesaling fee or commission must be run through the brokerage company.

I can understand the commission, however, the problem I have is the fact that they need my wholesaling fee to go through the brokerage company as well??? Mind that I have been doing this without a license for months now. Is this common with Wholesalers that obtain their Real Estate license.

I feel like they are trying to collect both ends of my money.

Keep in mind, my decision is to do both!

No, deals where you are NOT acting as an agent for someone, shouldn't go through the brokerage. The broker's concern, and a good one, is that the line between when you're acting as someone's agent, and when you're acting as a principal, can easily become blurred. The broker is concerned about ending up liable for something you do, while you consider yourself Not acting as an agent, but it may be interpreted differently by regulators.

Originally posted by @Wayne Brooks :
No, deals where you are NOT acting as an agent for someone, shouldn't go through the brokerage. The broker's concern, and a good one, is that the line between when you're acting as someone's agent, and when you're acting as a principal, can easily become blurred. The broker is concerned about ending up liable for something you do, while you consider yourself Not acting as an agent, but it may be interpreted differently by regulators.

When you say "regulators", are you referring to the Brokerage Company or the legal interpreters with the Association of Realtors?

Would you suggest just contacting another brokerage company?

Was referring to state RE laws and enforcement. Yes, talk to other brokers.

@Michael Giorgianni contact a few brokers. I suggest letting whoever you contact know that all leads you cannot wholesale can then become potential listings for the brokerage. I think the majority of brokers do not like it because of what they feel is illegal but you need to explain to them what you are doing is not illegal and eventually you will be with a brokerage that will allow you to hang your license and collect splits on the listings you generate. I have not begun to wholesale yet but I spoke with RE lawyers in my state to confirm wholesaling as an agent is legal. It may be wise of you to have lunch with your potential broker and RE friendly attorney this way all questions/concerns can be answered and put to rest from the start.

Originally posted by @Shawn M. :
@Michael Giorgianni contact a few brokers. I suggest letting whoever you contact know that all leads you cannot wholesale can then become potential listings for the brokerage. I think the majority of brokers do not like it because of what they feel is illegal but you need to explain to them what you are doing is not illegal and eventually you will be with a brokerage that will allow you to hang your license and collect splits on the listings you generate. I have not begun to wholesale yet but I spoke with RE lawyers in my state to confirm wholesaling as an agent is legal. It may be wise of you to have lunch with your potential broker and RE friendly attorney this way all questions/concerns can be answered and put to rest from the start.

I will say when I approached the initial broker, right from the start assumed it was illegal and felt like I was giving a lecture on wholesaling, gave them resources of other individuals who are doing the same thing, explained the process and different situations.

It's not very easy to meet for lunch with the legal counsel with my state association of Realtors as their office is 2.5hrs away. Maybe a phone consultation. I'm going to contact a couple other brokerage companies to get some additional opinions to see if this helps.

I'm dislike the term "fee" and don't understand why wholesalers keep using it. Your profit/mark-up on an assignment of contract or resale is not a fee. You are either selling/assigning your contract or you are doing a double close, thereby reselling. It's not an assignment "fee" nor is it a "wholesaling" fee.

The supervising broker has every reason to be concerned if one of his agents is collecting "fees" and every reason to put that "fee" through the brokerage.

Agents buy and sell their own deals everyday. Most supervising brokers can handle that. Stop calling what you do wholesaling, stop calling your profit a "fee". Act, think, and speak like a principal.

Originally posted by Kristine Marie Poe:
I'm dislike the term "fee" and don't understand why wholesalers keep using it. Your profit/mark-up on an assignment of contract or resale is not a fee. You are either selling/assigning your contract or you are doing a double close, thereby reselling. It's not an assignment "fee" nor is it a "wholesaling" fee.

The supervising broker has every reason to be concerned if one of his agents is collecting "fees" and every reason to put that "fee" through the brokerage.

Agents buy and sell their own deals everyday. Most supervising brokers can handle that. Stop calling what you do wholesaling, stop calling your profit a "fee". Act, think, and speak like a principal.

Please understand it's a legal term that is placed in an "assignment agreement" that we as investors use instead of the term commission. It's "our fee" or like you said profit. However, let me know how you would write an assignment agreement without the word "fee", I'd love to hear your ideas.

I'm not doing double closings, this is another way to buy and sell, however, all of my deals have come from assignment agreements. I put a property under contract and assign my rights to that contract for a "Fee".

I did not want to get into a debate about your frustrations against wholesaling real estate, again, another "term". So if you don't have anything of value to add. Please move on.

Unless otherwise explained, this would be very similiar to me actually buying/closing and reselling the property and the brokerage wanting to take a percentage of my "profit"?

Originally posted by @Michael Giorgianni :
Originally posted by @K. Marie Poe:
I'm dislike the term "fee" and don't understand why wholesalers keep using it. Your profit/mark-up on an assignment of contract or resale is not a fee. You are either selling/assigning your contract or you are doing a double close, thereby reselling. It's not an assignment "fee" nor is it a "wholesaling" fee.
The supervising broker has every reason to be concerned if one of his agents is collecting "fees" and every reason to put that "fee" through the brokerage.

Agents buy and sell their own deals everyday. Most supervising brokers can handle that. Stop calling what you do wholesaling, stop calling your profit a "fee". Act, think, and speak like a principal.

Please understand it's a legal term that is placed in an "assignment agreement" that we as investors use instead of the term commission. It's "our fee" or like you said profit. However, let me know how you would write an assignment agreement without the word "fee", I'd love to hear your ideas.

I'm not doing double closings, this is another way to buy and sell, however, all of my deals have come from assignment agreements. I put a property under contract and assign my rights to that contract for a "Fee".

I did not want to get into a debate about your frustrations against wholesaling real estate, again, another "term". So if you don't have anything of value to add. Please move on.

You can write an assignment agreement that doesn't use the word fee. When I assign a contract, there is no fee. There is a seller (assignor), buyer (assignee) and a consideration amount or purchase amount. And of course it references the original purchase agreement.

I have no frustrations with wholesaling real estate. I've resold almost everything I've bought in the last 15 years, usually without rehabbing. Most people would call what I do wholesaling, but I don't. I don't offer what I sell for a "wholesale" price (whatever that is), rather I usually sell for what the market will bear. I prefer to close on most things now. That way I can control the re-sale and usually sell for the best price. But assignments have their place. I have a rehab buyer that wants to buy something I have coming up. Instead of closing and re-selling to them, they would rather to have me assign my contract as it makes it easier for them to re-sell by by not creating another party in the chain of title.

Is there a difference whether the word fee is used or not? I'm assuming anybody can call it what they want. I use the term wholesaling when structuring a deal with an assignment or double closing (transactional funding) as neither would be using your own funds. Reselling to me would be buying/closing on the property myself then selling it. To each their own, I guess.

I'm getting off subject here though. I'd like to know if anyone else is "reselling" or "wholesaling" real estate with an active real estate license and have to have these profits go through their brokerage company?

I don't usually share my contract or legal doc info. But maybe this little bit will be helpful to others reading this thread. I'll stand by statement that it's important to speak and act as a principal. IMO, the word fee doesn't have a place in what is typically considered wholesaling. One of my assignment agreements refers to consideration in the sum of ...... . Another refers to good and valuable consideration and doesn't reference the specific amount on the face of the assignment. There is separate form that indicates the amount I sign when I receive the funds. Yet another, when purchasing interests in estates via assignment refers to "consideration".

This is one of the disclosures:

Assignee understands and agrees that Assignor is not acting as a real estate broker or agent in this transaction and is not representing the Seller, but acting as a principal in selling her interest in the above-referenced Purchase Agreement to Assignee.

Not legal advice. So go get some. :)

Originally posted by Kristine Marie Poe:
I don't usually share my contract or legal doc info. But maybe this little bit will be helpful to others reading this thread. I'll stand by statement that it's important to speak and act as a principal. IMO, the word fee doesn't have a place in what is typically considered wholesaling. One of my assignment agreements refers to consideration in the sum of ...... . Another refers to good and valuable consideration and doesn't reference the specific amount on the face of the assignment. There is separate form that indicates the amount I sign when I receive the funds. Yet another, when purchasing interests in estates via assignment refers to "consideration".

This is one of the disclosures:

Assignee understands and agrees that Assignor is not acting as a real estate broker or agent in this transaction and is not representing the Seller, but acting as a principal in selling her interest in the above-referenced Purchase Agreement to Assignee.

Not legal advice. So go get some. :)

I understand your point of view. Are you a licensed agent?

I'm a few months away from getting my license. I work with an agent team that specializes in working with investors and buys properties at trustees sales. They understand assignments and wholesaling perfectly well as I've sold them deals for their investors. I love them, they love me. The supervising broker told me he couldn't take me on as an agent if I was actively marketing to sellers to buy houses. I have print ads and direct marketing, the I Buy Houses type. He said an unhappy seller that finds out a property was immediately resold for profit could come back to harm the agency. I don't disagree with that. It's hard to wear both the agent hat and the investor hat when serving the general public.

@Michael Giorgianni I am not saying approach your board of realtors. Contact the attorney you use for your RE transactions and have he/she explain to your broker what you intend to do is not illegal. Better yet tell the broker your interviewing for how many leads you receive each month that want to list, they will find out how legal or illegal wholesaling is once they hear that number.

Marie: Your previous post is the issue I was trying to clear up. The initial broker stated that they would take me but want my fee/profit going through the brokerage as well as normal real estate activities. I don't understand how they can ask of that if I'm acting as principal.

Shawn: I agree, however, was not clear to let them know the exact number that I'm missing the boat on, it is very large. I will however contact the attorney I use to handle my transactions.

Originally posted by @Michael Giorgianni :
Marie: Your previous post is the issue I was trying to clear up. The initial broker stated that they would take me but want my fee/profit going through the brokerage as well as normal real estate activities. I don't understand how they can ask of that if I'm acting as principal.

Shawn: I agree, however, was not clear to let them know the exact number that I'm missing the boat on, it is very large. I will however contact the attorney I use to handle my transactions.

My point is that by calling your assignment profits a fee, you headed down a slippery slope with the broker. Now the issue of being a principal is somewhere in the background and him thinking he's entitled to collect on your fee is front and center. When it shouldn't be. IMO, he wouldn't be asking for any share of your personal RE profits if you hadn't called it a fee. Just sayin.

That was my "ah ha" moment for the year. I'll know how to handle my next broker appointment lol

Originally posted by @Michael Giorgianni :
That was my "ah ha" moment for the year. I'll know how to handle my next broker appointment lol

Hope it helps!

Originally posted by Kristine Marie Poe:
Originally posted by @Michael Giorgianni:
That was my "ah ha" moment for the year. I'll know how to handle my next broker appointment lol

Hope it helps!

That perspective made absolute sense to me. This will help me prepare more for my next brokerage I contact.

I'm not far from you in Richmond and I let my broker know that I was wholesaling when I joined. It was great because HE was wholesaling in 2011 and understood everything that I was doing. Good stuff.

@ K. Marie Poe, did you have your attorney draw up the assignment contracts or did you draw them up on your own?

Is there a website online where you can download them in specific to your state?

Originally posted by @Clinton Smith :

@ K. Marie Poe, did you have your attorney draw up the assignment contracts or did you draw them up on your own?

Is there a website online where you can download them in specific to your state?

I use the realtor board purchase agreements when I have to, and my own attorney supervised purchase agreements when I don't. I write my own assignment agreements.