Wholesaling/Bird dogging. Legal vs Illegal?

Wholesaling
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Wholesaling/Bird dogging. Legal vs Illegal?

Jessica Martin
Real Estate Investor · Houston, TX · Member since 2014 · 111 posts · 17 votes

As I'm studying for me RE license, I'm paying close attention to the definitions/reasons for needing a RE license (Or not needing one). Wholesaling does seem to check out so far because, technically, you are not selling real estate. You are selling your rights to purchase that home. (Your contract/A piece of paper) You have a separate contract (Assignment contract) stating that. Bird dogging however, (If I am understanding the process correctly) may be illegal because you do not have a contract to purchase this house yourself and are bringing it to another purchaser and asking for a fee for connecting the two of you? 

I bring this up because I considered bird dogging as an entry point. It was mentioned at a weekend RE traiing I went to. However, I felt it was too close to wholesaling, just much smaller profit. The only additional work needed between the two was the paperwork from what I understand. The paperwork does seem intimidating to learn, but at the same time, this is the difference between making hundreds of dollars(Bird dogging) or making thousands(Wholesaling) 

The answer has my curiosity... 

Other input?

I'm new so maybe I'm just missing something here...

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Troy Price
Investor · Spring, TX · Member since 2014 · 3 posts · 2 votes
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Originally posted by @Brandon Sturgill:

" If you are going to do it, take title to the property and double close...assigning contracts is really unprofessional."

 Would you mind expanding on this thought a bit?  I'm also researching getting into wholesaling and it seems that there really is no standard for how it gets done.  Thanks

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
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    Assigning a contract is not unethical or illegal, most often it is the tactics employed to accomplish the assignment that is unethical or illegal.

    Saying, "making $20K" on an assignment certainly depends on the price, if it's a 200+K property at 10% you may justify that, getting above that can bring predatory practice issues if you didn't add value to the property. Not going to argue the added value angle, what you do has been done before, everyday, bringing a buyer and seller together, there is a long standing rate of customary compensation for that function.

    That issue also depends on the knowledge of the parties, how sophisticated they might be. Skinning some newbie landlord or home buyer would be much different than skinning me in a deal, LOL, like that would happen. :)

    Assigning contracts is not a good business model, it's an exit to be used once in awhile depending on circumstances. Doing this as a business, means, well, you're in the business of real estate, that usually means a license. That becomes an ethical and legal issue.  It's better to error on the side of caution when you're bumping into legal aspects.

    As an agent, you'll have other thin lines to walk, trying to "wholesale" a deal by assigning a contract will be sticky.

    The best way for birddogs to operate is inside an LLC as a member with the LLC buying, then you are a principal functioning your corporate duties.

     State laws vary, local custom rules, if the REC determines you're operating without a license, get ready to take a hit for your team, here, they can be and are zapped! Best to run your plans past a local RE attorney.  :)

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  • Eric Bowlin
    Investor · Plano, TX · Member since 2014 · 145 posts · 102 votes
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    @Guy Gimenez There is no law that I'm aware of for earnest money. It is more of what is the 'norm' and what makes you look serious vs how much you want to throw away if you walk away.

    It's also done twice here..first at offer then at p&s. Often $1000 is standard for deposit at offer. Your realtor may hold that check hostage until you get to p&s while the sellers agent will do everything they can to get hold of it. It's kind of a weird game being played. 

    At P&S it really depends who you are dealing with. An REO will have a bank imposed minimum (often 5%) while a homeowner may not care as much unless they are comparing multiple offers.

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  • Terry Royce
    Real Estate Investor · Baltimore, MD · Member since 2008 · 619 posts · 75 votes
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    @Chris Martin  - Interesting post to the NY case law.

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