Pros and Cons of becoming RE agent while a wholesaler?

22 Replies

Pros and Cons of becoming RE agent a wholesaler? What are your thoughts if you want to pursue RE full time? 

I'm still confused by how learning local real estate law, contracts, customs, etc can be considered a negative before embarking in...well...real estate?

So the drawback is that you have to disclose that you are an agent working as a principal?  Well, I suggest that you dry your tears with the checks from the closed leads that you pass on to your retail agent friend/associate.

I kid, but seriously, I'm still waiting to hear the drawbacks.  If your argument is that you don't feel like subjecting yourself to overbearing licensure fees, general fees, more fees, etc from a governing body just to obtain a 'license', that's a different conversation...though I doubt you will find much sympathy in that regard either.

Just do it, what do you have to lose?

I am both licensed in the state of Mississippi and currently marketing for wholesale leads.

Pros: The MLS access obviously grants you the convenience of reliable comps that people without it do not have. You can also potentially get listings from leads that don't fit the wholesale model. Like many people say on BP, it's just another tool to have on your investor belt.

Cons: I can speak from experience on this one. You will certainly not make any realtor friends mailing to their listings. I've gotten several angry agent calls inquiring about why I'm "marketing to their property." Even though my letters clearly state both that I am licensed and intend to purchase the property and not list it, the calls still come and they are not pleasant to deal with. Just today I received two. One realtor emailed my broker and informed her that what I'm doing is immoral and misleading. The other realtor called me and asked why I sent a letter to her listing saying that I wanted to buy a 7 million dollar property in all cash and within 30 days. In the last two months of marketing for wholesale leads, I've made about half a dozen realtors not like me at the very least. So unless you are prepared to go through all of the hundreds/thousands of your addresses to make sure that they aren't on the MLS first, you're absolutely going to mail to houses that are currently listed with another realtor and odds are they aren't going to like it. I haven't figured out how to address this problem yet so if anyone has experience dealing with this please let me know!

Good luck!

Once you become an Agent (for the purpose of advertising your services so sellers use you for their listings) you will be ethically bound to act in the Sellers best interest, which means if a motivated Seller comes to you because you are an Agent and your own list of buyers might want to pounce on a deal you find, you HAVE TO directly put that Seller in contact with your buyer, and your fee is ONLY the normal Agent closing fee ie. NO wholesalers fee will be coming to you from those transactions! Get it?  Cheers...

I have worked this business without a license and with a license.  My opinion is get a license.  In my state there is language in the RE laws that not being licensed does not excuse you from following the law.  There are times when you can get a listing rather than purchase the house.  Many times a seller will not want to sell at a big enough discount to warrant a wholesale deal but will list the property.  i send a lot of letters, and I have never had an agent act as @Kirk Gore describes.   I would just nicely and calmly explain what I do.  I have received letters from investors on listings I have had and wouldnt use the time to call the person sending the letter.  They usually call and ask what I will pay.  @Brent Coombs is correct unless you just purchase yourself then resell.   Bottom line is get a license and learn how to use it to your advantage is my opinion.

@Gary Parker  

My daughter lives in Salt lake city, she is 8. I fly out from Boston to see her. For the record I am in classes to get my license. I have my business beginning to unfold. I am a little confused now by above comments because I direct mail. So what I am hearing but do not believe to be true but if a lead comes in through my own marketing I cannot collect a wholesale fee if I am agent? I thought I just had to let them know I was an agent. I would technically be assigning the contract or buying it. I thought I could still collect wholesale fee.

@Joseph Theriault  

From what I understand most states do not specifically prohibit a realtor from acting as a principal in the transaction and then collecting a wholesale fee in one of the usual methods.  Some feel that a judge will look at these transactions as net listing or a loophole allowing you to have the same outcome as a net listing.  This will vary state to state and vary based on the discretion of any legal expert who considers it.

I would recommend actually closing on the property before sale even if the laws in your state don't prohibit you from assigning as a realtor.  Double closing or simultaneous closing at a minimum... or better yet use transactional hard money loans and close with your buyer the next day.  Even better would be to build up your reserves and hard money relationships and sell via mls after closing.  Full disclosure to the original seller is also very good practice.

Joe as someone that works in the state(s) you are interested in and has a licence in one of them I can say that I have and I know lots of people that are agents and also will wholesale.

No idea what this stuff about not being able to get an assignment fee or even sillier not be able to buy and resell on like a double close.

Yes you need to disclose you are an agent.  The end...

Now to keep your nose clean if you market for LISTINGS I would not try to wholesale something that came out of that. If you get a listing out of wholesale marketing, not a big deal. Now if you do list a place and after like 2 months the seller comes and says they now are ready to just dump it, to bad you now have that fiduciary duty. However you can just bring it to your buyers list and double end the MLS sale which can be more than you might have made anyway since our houses are quite pricey so commissions on junkers can still be many thousands of dollars.

Shaun Reilly, Real Estate Agent in MA (#9517670)
1-800-774-0737

@Shaun Reilly   Thank you for the Clarity. That is what I thought. So you know I have been clawing and digging past couple weeks with some pretty heavy direct mail campaigns. One in our old home town. That should start breaking lose.

@Joseph Theriault   For the most part in Utah with a license you can do anything that is legal and moral as long as it is disclosed.  Disclose you are an agent and disclose your fee and you should be fine.   In Utah as a licensed agent we must use the state approved forms; of which, there is a specific form to assign a contract.  On that form is a place for your fees.  Disclose, Disclose, Disclose.

@Shaun Reilly , I agree with most of what you said but I am not sure about this comment:- "you can just bring it to your buyers list and double end the MLS sale which can be more than you might have made anyway since our houses are quite pricey so commissions on junkers can still be many thousands of dollars". If you are suggesting that "double end" will result in YOU getting a larger amount than just your normal closing Fee as an Agent who brought the Seller directly to the Buyer, then I DO have a problem with that (because it means that you would have UNETHICALLY decided to pocket some money that would otherwise have gone to the Seller, who came to you to find him a Buyer in the first place for an agreed listing/closing Fee - not more)!

But I certainly agree with this paraphrased comment of yours, which should be followed by all Wholesalers:- "when you market for LISTINGS - do NOT try to wholesale something that came out of that"!  Cheers...

Originally posted by @Brent Coombs:

@Shaun Reilly  But I certainly agree with this paraphrased comment of yours, which should be followed by all Wholesalers:- "when you market for LISTINGS - do NOT try to wholesale something that came out of that"!  Cheers...

(Aah, I meant to say: ...should be followed by all AGENTS:- "when you market for LISTINGS - do NOT try to wholesale something that came out of that")!...

Originally posted by @Brent Coombs :

@Shaun Reilly , I agree with most of what you said but I am not sure about this comment:- "you can just bring it to your buyers list and double end the MLS sale which can be more than you might have made anyway since our houses are quite pricey so commissions on junkers can still be many thousands of dollars". If you are suggesting that "double end" will result in YOU getting a larger amount than just your normal closing Fee as an Agent who brought the Seller directly to the Buyer, then I DO have a problem with that (because it means that you would have UNETHICALLY decided to pocket some money that would otherwise have gone to the Seller, who came to you to find him a Buyer in the first place for an agreed listing/closing Fee - not more)!

But I certainly agree with this paraphrased comment of yours, which should be followed by all Wholesalers:- "when you market for LISTINGS - do NOT try to wholesale something that came out of that"!  Cheers...

Dual agency, buyer isn't represented by another agent.

You get the buy and sell side of the commission.

No different amount paid by the seller than if another agent brought the buyer, it just all goes to one person instead of 2.  

Shaun Reilly, Real Estate Agent in MA (#9517670)
1-800-774-0737

@Shaun Reilly  , Aah, but it doesn't matter to the Seller whether there is "dual agency" or not, because as a good agent, you have negotiated one Fee with the Seller ahead of time (so that if you get lucky with finding a Buyer off the street, you do get both 'buy and sell' sides of the commission, but if your Buyer has used a different Agent, you already know that you will have to split the Fee with that Agent)! But getting back to the first point, if you feel that the best price the Seller can get is selling to someone on your (wholesaling) Buyers List, then you would just put them in touch with that Buyer directly for the Seller to negotiate with - no different than what I said in the first place.  Shouldn't matter whether months have gone passed and the Seller has decided to dump it, or what not.  Same thing, as an Agent, you CAN NOT ethically buy that property yourself to wholesale to your Buyers list! Cheers...

Updated over 2 years ago

Edit (8 months later): my last sentence might have been better worded this way:- as an Agent who might also Wholesale, you CAN NOT ethically act in any way that results in your Seller getting from your Buyer (via yourself) less dollars than if they were just paying you normal commission!

@Shaun Reilly How about when you market for lead generation? As an agent do you have to put that you are a licensed agent (and your affiliate broker) on yellow letters, craigslist, your web site…?

Welcome to BP.

You will hear both sides.

In short, benefits for having a Real Estate License are much more than not having one. Especially if you want to do this fulltime.

Hope it helps.

James Syed, Real Estate Agent in IL (#471018522)

As the original poster of this topic. There is no doubt I would get my license. I have gotten it since this original post. For me anyway I treated this as a full time business. Pros I have encountered. Much easier to make business to business connections. Much easier to deal with the town halls of the cities you work in. My office has 500 agents in 3 states and that is pretty powerful in terms of networking. Some of them are damn good at selling a home. Access to the MLS to pull my own comps. Access to marketing and other software. I could go on and on. There is no real downfall after going thru the process.

TO MANY TIMES we are stuck not doing something saying well what if this what if that. IMO just get the damn license and figure out how to work your wholesaling with it. It is all a learning curve.

I am a licensed realtor in NY who has started a real estate investing career doing wholesaling. I am having a hard time trying to figure out what is ethical or not. However, I just do what I think is right and ethical. I disclose that I am a realtor who also wears another "hat" as a real estate investor and ensure that I disclose which "hat" I am wearing in that particular time. I would be interested in learning of any other NY realtors going through a similar situation. 

What is the big deal. It is understanding your customer and not all the time does it make sense to list the home. I believe many agents are not ethical because they actually do not provide the amount of solutions as an agent with an investor background. Just saved someone from getting foreclosed on. That is not going to happen from listing their house. I will get off my soap box. I am not from NY but think this applies universally. 

Originally posted by @Stephen Zondorak :

I am a licensed realtor in NY who has started a real estate investing career doing wholesaling. I am having a hard time trying to figure out what is ethical or not. However, I just do what I think is right and ethical. I disclose that I am a realtor who also wears another "hat" as a real estate investor and ensure that I disclose which "hat" I am wearing in that particular time. I would be interested in learning of any other NY realtors going through a similar situation. 

Ethics101: in every case, pretend that the Seller has asked you:- "will I be receive more dollars by selling to you, rather than listing it"? And tell the Seller the truth!

Your post scares me.  If you need us to tell you what is ethical or not in this business (or any other), you probably shouldn't be wholesaling.  All you will do is cast a pall over the wholesale specialty and do damage.

As far as learning ethics, consult clergy.

Originally posted by @Brent Coombs :
Originally posted by @Stephen Zondorak:

I am a licensed realtor in NY who has started a real estate investing career doing wholesaling. I am having a hard time trying to figure out what is ethical or not. However, I just do what I think is right and ethical. I disclose that I am a realtor who also wears another "hat" as a real estate investor and ensure that I disclose which "hat" I am wearing in that particular time. I would be interested in learning of any other NY realtors going through a similar situation. 

Ethics101: in every case, pretend that the Seller has asked you:- "will I be receive more dollars by selling to you, rather than listing it"? And tell the Seller the truth!

I don't think it's as simple as that. "Dollars" are not the only thing a seller is "getting" by selling to a wholesaler. They also get a fast close, no contingencies, no repairs, etc. All of that has value, and it's up to the seller to determine whether they value those things more than the dollars, or not. 

Edit: Aaaaaand I just realized this post is a year old. Whoops, but point stands. 

Will Stafford, Real Estate Agent in TX (#656957)

@Will Stafford , yeah, I'd forgotten about that post, with its grammatical error that should have read ..."will I receive more dollars by selling to you, rather than listing it"? I agree that "dollars" are only part of the Seller's need, but, as a LICENSED Realtor, if the answer to that question is NO, then you'd better be prepared to explain how selling to you by an agreed date justifies the NAMED number of dollars they'd be agreeing to never receive, because of selling to you directly.

That is, if you're serious about being ethical. Cheers...