Legalities of Wholesaling WITH a Real Estate License

5 Replies

Hi all!

I'm new here, but not new to real estate investing by any means. I have been discussing wholesaling in depth with several local investment associates and the question I always come back to is: 
What are the legalities of wholesaling when you have a real estate license?

Specifically, I'm a licensed broker in Georgia and Alabama and I am interested in wholesaling in both states. Obviously, disclosing the fact that I am a licensed broker is required in contract but what other items should I be mindful of? I'd love to hear from someone who has been successful in wholesaling and holds a real estate license to lay down the ground rules so I feel comfortable moving forward.  

Contracts/proceeds would of course be issued through an L.L.C. and all aspects kept separate from the actual brokerage. 

Looking forward to your responses!

The legality of wholesaling comes up regularly in these forums and there have been a couple of very active threads just recently. Take what you read with a grain of salt. That includes what i say because i am not a lawyer.

Are Net Lisitngs allowed in your state?  Wholesaling could be construed as a "Net Listing"

Also in most states, agents are required to deal honestly and fairly with the public. Would that extend to telling your seller that you know it is worth more than you are offering and you intend to quickly resell it for more? 

Both of the above are hypothetical questions. The answer may depend on how liberal the judges are in those states and how they tend to rule.  

I personally believe that if you are assigning contracts as an agent you are probably putting yourself at legal risk. If you are double closing on the properties, my guess in most states your risk is minimal.

PS I see this is your first post welcome to BP

I concur with @Ned Carey that wholesaling by an agent, at least using the method of an assignable contract is a de facto net listing.  If an agent wants to wholesale, then Id suggest they double close on the property.

@Sara Thompson All you have to do is convince the seller that they need to pay you a higher than normal commission because their property is in bad shape. You don't need to put the property under contract as a principal and close or assign the contract, because you are licensed to sell real estate for others.

Originally posted by @Doug Pretorius :

@Sara Thompson All you have to do is convince the seller that they need to pay you a higher than normal commission because their property is in bad shape. You don't need to put the property under contract as a principal and close or assign the contract, because you are licensed to sell real estate for others.

 this is quite common with low value assets were realtors set a fixed fee to sell distressed assets that many times is 20 to 50% commissions or more.. I see it all the time on huds Or let me say used to .. the amount of bank owned has dwindled.. 

I started my career in the mid 70s selling VERY hard to sell rural land in Northern CA.. I charged 20 to 35% commissions to sell those.. and earned every penny..  Commissions are negotiable up and down.. 

@Doug Pretorius   I have been wholesaling/investor for decades.. but I did not double close I closed on everything and was doing 50 plus a year.. many though I took sub too and rented for a year or so .. as to put them into cap gain treatment.