Agent wholesaling strategy help

14 Replies

I'm an agent in Baton Rouge, Louisiana and have an opportunity to put together a wholesale deal but am confused as to the process due to me being a licensed agent. 

So far, I've called the homeowner after seeing a rent sign in the front yard advertising that both units of a 2/2 duplex were available. I let the owner know who I was and who I work for( licensed agent) and that If she was interested in selling I might have an available buyer for a one time listing. She said she would love to sell the place and would like to show it to me. After arriving she quickly let me know that she didn't want to work with an agent therefore I let her know I wouldn't be bringing my buyer to the table but best of luck. After talking to her I know her bottom line and that she's eager to sell(divorce).

Now, I have a friend(also an agent) who I can send to her inquiring about the property and pose as the buyer putting the house under contract. Once we find the final buyer and do a double close won't we have to share the profits we make with our designated real estate brokerages once we close? So confused and nothing I've read on the forums thus far lays out the process, rules, restrictions that an agent may face. Any help would be greatly appreciated and sorry if I over looked a similar previously answered post.

I may not be the most experienced investor here, and I am sure that there are other agents that can chime in, but....no you don't.  You are working as in investor in this case, not as an agent. 

You have equitable interest in the property with a contract.  You can resell it in a double closing immediately after you buy it without any problem.

Let me ask you this...if you sold you own personal home would you give your broker part of your profit.

@Ian Richardson  being a licensed Realtor, it is against LREC for you to receive any type of commission / fee without it going through your broker first. I am licensed and an investor as well. I have not attempted to whole sale but have wondered what the best method would be. The only way I can see that you can wholesale and meet all LREC requirements is to do a one day listing along with a commission agreement and have your friend come in as the buyer. As long as the contract is assignable then this should work. Thoughts??

Hey Ian,

I think you've done everything expected of you as an agent and the seller clearly stated they don't want to work with an agent.  Presumably to avoid the added expense of commissions.  You've done as much as could possibly be considered reasonable to allow your broker a share of the transaction by offering the 1 time listing.

Now, you disclosed your agent status and you found the lead based on your own initiative, that's an important factor.  They didn't find you as a result of your broker's advertising or other marketing efforts.  You have no agency (agent/client) relationship with the seller and you are free to interact with the seller as an investor with no compensation owed to your broker.  I think it's pretty clear.

I would not do the agent posing as buyer scenario.  I would just go back to her and put the property under contract, disclose the wholesale plan and do the double close.  Do the deal!

@Priscilla Z.   I list my own properties and don't pay out any commissions to my self. Since I am not profiting from the deal as the agent, no monies need to go through my brokerage, there is only commission paid to selling broker. In this scenario however, there is a commission/ fee being paid to you. That must go through the broker. Even if you purchase a home for your self, that commission will need to go through the broker as well. Some brokers will give freebies depending on how often you purchase/ sell your own properties. 

Thanks guys,

I appreciate all the feedback.

Not sure on my brokerage regs on listing my own home with them and the commision owed or not. I also know that if you buy your own residence as an agent through them you keep 100% of the commission but it does first pass through them. 

Aside from all that, what Mr. Leonard has stated makes sense. I've approached her as an agent and she refuted my services. The second time, I would approach her as an investor whom she already knows is also a licensed agent. If she accepts the offer and it does go under contract should I assign the contract for a fee or do the double closing. It seems the double closing is where my liability of being an agent may arise.

@Robert Leonard  @Ian Richardson  simply disclosing you are an agent does not negate the fact that you have an agreement with your brokerage or the LREC or NOMAR for that matter. Being a fairly new agent, it was clear to me during preparing for the state exam that ANY transaction that you broker that has a commission or fee attached MUST be paid to your broker first and then paid to the agent. I may be incorrect on this, but that is how it was explained to me. There are some "grey" areas but I would try and keep it black and white if possible. 

Also, regarding this scenario, what is the difference between a wholesale fee or listing commission? If she won't work with an agent because she doesn't want to pay a commission, why would she pay a wholesale fee? I think she may not fully understand what you are trying to accomplish. 

If there is a double closing, technically, there is no "fee" and there would be no "commission" as I'm not acting as an agent. The only profit would be in the difference between what I buy and sell it for. I guess I need to see if I do pay any commission on profits made while selling my own property. I would ask my broker but I can only assume they would frown upon "wholesaling" as there not very keen on anything outside of traditional buying and selling. : (

@Michael Baradell  you are right about brokering a transaction for a commission and the obligations to a broker for doing so, but that is not what we are talking about.  I am talking about buying a property and then selling it.  That's investing, not brokering and not making a fee or commission, but making a profit from an investment.

Will the broker not like it? Maybe, maybe not.  It all depends on how much they have faith in the agent/investor that he made a good faith effort to list the property? That's a matter of their judgment.

I'm not a lawyer, but I am an investor/agent and that's what I think is legal and ethical.

@Robert Leonard  I think what I have explained is what Ian is talking about. He wants to "broker " the deal between the seller and buyer, in other words wholesale the property. He wants to receive a commission or fee for setting up the transaction. If this is the case, then it must go through his broker. This matter is not subjective to where the broker can decide whether or not the agent " made a good faith effort to list the property". If this were the case, then there would be deals being done between agents "under the table " everyday! The only way, in my opinion,  to properly orchestrate a wholesale as an agent is to list, agree to commission or fee, and then have the contract assignable. I don't know of any other way it would be possible. I would love to learn about it if it does exist!! 

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@Damon Armstrong

 'll keep you and your buyer in mind once I sort out how best to handle this deal, thanks!!

I am wondering if you ever got a definitive answer on this?  Maybe I read it too fast, but it looked like you were having a second agent come in to be the buyer.  As long as all this is disclosed to the seller in advance.  By disclosed, I mean have her sign something to the effect.  As far as the deal itself.  If the contract is assignable, I don't see why any money has to flow through the broker.  If you have a contract for say 50k and find a new buyer willing to pay 60k.  Isn't the difference just profit and not a fee?  I'm just thinking out loud.  

I think the important thing is to cya with signed disclosures.  As long as the seller understands what you are aiming to do, you should be good.  I would hate for her to feel taken advantage of and file a complaint with the LREC.  Let me know how it works out.  Best of luck. 

@Ian Richardson  ...wondering as well if you ever received a satisfactory answer, and what happened with this deal, what your brokers viewpoint was, if you ran it past him.

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