Wholesaling as a Realtor. Is it recommended or practiced?

Question

I do not know anyone in my area who wholesales as a realtor so I'm asking the BP professionals. Please share any details you have. I am broker in Texas and have many deals I pick up to wholesale but feel its conflict of interest. So I pass or I list them. Currently I have seller who wants out, current on payments so I contracted to at least get possession to figure out. But now have buyers from the lil marketing testing the waters. Curious!

Russell Brazil · Answer

In Maryland and DC where an agents first duty is to the public, I believe it is a bad idea for agents to participate in wholesaling.

In your state I would seek out the guidance of your local realtor board association or the real estate commission for their guidance on the subject.

Account Closed · Answer

@Russell Brazil  is completely right.  As @Barry Ratliff said in the original post you have to be very careful or you will have a serious problem with conflicts of interest.

Most of the brokers I know (in Texas) do not allow their agents to buy residential properties to wholesale them.  If the property is listed with an agent from ANOTHER BROKER it would probably be ok.

Account Closed · Answer

You can wholesale properties even if you are an agent. I do it all the time. I don't list any properties but market properties I have under contract or for other investors that have properties under contract.

Andrew Michael · Answer

@Russell Brazil I tend to agree.  I much prefer to wholesale as an unlicensed agent.  That being said I really do try to be very upfront with my clients so they know exactly what my intentions are.  I am not sure why so many wholesalers feel the need to hide what they are doing.  My pitch is always "If I could keep every property for myself I would but depending on how the numbers work out sometimes it makes more sense to rehab it and sell it or assign it to another investor".  When put like this I rarely have much push back from sellers.

Russell Brazil · Answer

Taking title to the property is certainly preferable than assigning the contract...but I do still see potential issues. If the agent were to make no improvements to the property and try to resell it there are 2 major problems I see. 1) They likely would have mislead the initial seller as to the value of their property. 2) This would likely violate HUDs anti flipping rule. (Before everyone gets in a huff about the antiflipping rule, read HUDs guidance memo on it and do a little research)

In MD and DC an agents first duty is to the public (Not their client as is the case in many states), which in part means they can not mislead someone as to the value of their property. So how can an agent wholesale when they tell the seller I'm going to pay you $X, but they have a legal obligation to tell them the true value of their property is $Y. I'm just not sure how it's done legally. I know people do it, but I think they put their license at risk when they are wholesaling.

The important thing for agents to be aware of as well is that when they are reported to the real estate commission, you are guilty til you prove yourself innocent. The burden is on you as the licensee.

Andrew Michael · Answer

The age old debate and I see/ agree with both sides of the argument.  One thing you could consider is actually purchasing the property and then listing it yourself.  As a lender, we have clients who use this strategy and we act as a bridge loan of sorts.  Since you have a license, you will save yourself a little money on the closing.  Sure its cost more to do two closings, possible hold the property for a period of time,  and pay a few points to the lender but the profits you stand to gain should far outweigh these extra precautionary costs.

@Russell Brazil I am not sure if the above satisfies you and is a valid solution for agents.  I suppose no since the heart of the matter is that the agent is not getting top dollar for the seller correct?

Even still, for non agents, if you are looking to wholesale but are afraid getting into that grey area of the law it may be worth teaming up with a capital source and actual closing on a property before you sell it ("assign it").

Barry Ratliff · Answer

Stephen, the ones you have under contract, do u simultaneous close on them when you get buyers for them? How much disclosure to parties do you have?

Account Closed · Answer

When I talk to an owner I always tell them I'm an agent but only here to buy their house. I do simultaneous closes when I am making more than $10,000 on the deal and do an assignment if it is less.

Barry Ratliff · Answer

Exactly. That's what I was thinking. Thx.

Wholesaling as a Realtor. Is it recommended or practiced?

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