Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
I just spoke with my real estate attorney, she said the contract is fine that I currently have, however she said that it would probably be necessary to change this that I have in the contract. How do you go about advertising a property under contract, through craigslist, or through flat fee if the property doesn't actually belong to anyone just yet?
She said if I advertise a property I have under contract, I am acting as a broker, and Associate of Brokers might come after me, that you have to be licenced in order to do so, so she said there might be risk involved in advertising? What are your thoughts on this? How do you go about advertising a property if you aren't licenced to do so? I already have a few on my buyers list btw.
Btw she is making some tweaks for some clauses and stuff which is good, glad I could talk to an attorney first.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Matt James:
Ok J.Scott so I have thought over this, and let me explain why you are wrong, and how a wholesaler is not acting as a broker.
Matt -
I'm not sure why you are arguing with me about this...I've agreed with you this entire thread about having the right to market a property you have under contract.
I disagreed with the fact that there is a major difference (from a legal standpoint) between selling a property with legal title and selling a property with equitable title -- something you asserted without support in a post above.
If you disagree with that statement, can you support it? (I'd provide support, but it's impossible to prove a negative :)
Btw, you seem to like to form your legal opinion based on what people in these forums have written. I would certainly recommend not listening to any legal opinions that you get from non-attorneys (and especially don't listen to me) without verifying with your own counsel...
Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes
15y
I do it all the time. I am not licensed.
You should have advertising out for buyers weather you have a contract on a house or not.
I am not an attorney but I think she is mistaken.
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
I got told this via e-mail
"As we discussed, I have revised your agreements to provide that the sale is contingent on clear title and that you are satisfied with the condition of the property. Due to the fact that you are not a licensed real estate broker, I removed the right to advertise and show property to others because these actions are reserved for real estate brokers under state law. However, once the property is owned by you, you are free to advertise and show your property in New Mexico without a real estate license. "
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
I tried to explain to my attorney, that I am not selling houses, I am selling my interest, she seemed to not understand the difference.
I told her this: ( i took a quote from what somebody said on here on BP for clarification purposes )
"I think there is some confusion, my question is as far as marketing it to an end buyer When you have a contract to purchase you have an equitable interest. That is what keeps it legal when you are marketing the property for an end buyer. Here's what I read on it "Simply put, your purchase contract with the owner of record gives you equitable interest in the property, which allows you to market the property as if you were the owner of record. This issue has been flown up the court ladders and they all agree that wholesaling property is not illegal. Alot of real estate agents just don't understand the wholesaling process...trust me, I used to be one." I am not going to be representing anybody, just my interest in the property.
Check out this article, it sums it up well.
"Real Estate Agents have a license to sell real estate because according to the law you need a license to sell real estate. Wholesalers do not need a license because they are not selling real estate they are selling their rights to a certain real estate property. Because contract rights are considered property, they can be transferred to others just like a piece of property such as a home or car."
I did not say the contract was not assignable. I believe that any advertising or marketing of the property by you prior to closing may be construed as activities restricted to licensed real estate brokers. If you proceed with the advertising language in your purchase agreement, you proceed at your own risk. I suppose you may consult with another attorney and perhaps you will obtain a different opinion. I am not going to say that it is o.k. if I believe there are risks. "
Wholesaler · Dallas, TX · Member since 2011 · 294 posts · 152 votes
15y
It seems that your title office does not typically work with RE Investors. Im sure I could find several local title offices around me that would give the same explanation that you got.
I would suggest networking with other investors in your area to find a REI friendly title office. If there are investors in your area (which I'm sure there are); there has to be a friendly/competent title office to use.
You may be able to find a good referral here on BP.com. Or check with your local REI club.
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
Stinson,
That was an attorney that told me that, I already have a title company that works with investors. What I am saying is she seemed to think that when you wholesale a deal, and have it under contract, that you are not aloud to advertise it (like on craigslist, or through MLS) all because you are not "licensed" to be a broker, I explained to her that :
""Real Estate Agents have a license to sell real estate because according to the law you need a license to sell real estate. Wholesalers do not need a license because they are not selling real estate they are selling their rights to a certain real estate property."
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
I'm going to assume that this attorney doesn't specialize in real estate. Find a good real estate attorney. I'm not an attorney, but I'd be amazed if any qualified real estate attorney were to tell you that you didn't have the right to market a property in which you have equitable interest -- and you do have that once you have the property under contract.
I certainly could be wrong, but I'd be willing to bet that I'm not...
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
She said I can assign, and my contract was fine, she did a few tweaks here and there, but other than that she says I couldn't advertise a property under contract? How does it make sense to be ok to assign, but not find somebody to "assign" to? That's the whole point of assigning! IS to find someone through marketing to buy.
Even though I explained to her that I am not acting as a broker and selling houses I am selling my interest.
She is official though, check out her crudentials : http://www.505-888-8888.com/DynamicAttorneys.shtml?wldpid=3725579_1&mailpagename=ObfuscatedForm&p=yes
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
I would ask the attorney two questions:
1. Do you have equitable title once the contract is signed?
2. Does having equitable title necessarily give you the right to market the property, even if you're not licensed?
I'm certain that the answer to #1 is yes, and again, I'd be willing to bet that the answer to #2 is yes.
Clearly, she thinks the answer to one or both questions is "no." I'm curious which one (or both) she thinks the answer is "no" and if she has case law to support it...
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
I see people all the time wholesaling properties on craigslist advertised as "Handyman special". She did have an open mind, she just said she would be careful, because I don't have a licence, even though I have no interest selling a property, I just have interest marketing my contract to a person who does want to buy the property.
I told her this earlier
"Wholesaling is merely selling your interest to buy a property you've secured under contract. That is completely different that acting as a broker to market the property, so it is misunderstood. I've done extensive research on this for a long time, selling houses is different from selling your interest to somebody trust me."
She told me this.
"I believe that any advertising or marketing of the property by you prior to closing may be construed as activities restricted to licensed real estate brokers. If you proceed with the advertising language in your purchase agreement, you proceed at your own risk. I suppose you may consult with another attorney and perhaps you will obtain a different opinion. I am not going to say that it is o.k. if I believe there are risks. "
I didnt want to spend the time arguing with her back and fourth lol
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Matt -
I disagree with you about there being a big difference between selling a property and selling an interest in a property; they are essentially the same thing, and in fact, from a legal standpoint, there may be no differentiation (though I'm not a judge, so that's just a guess on my part).
As I understand it, having an equitable interest in a property gives you as much right to market and sell it as the person who has legal title. Clearly, this attorney disagrees with that sentiment, and without talking to her, there's no way to know why she disagrees with that statement.
Regardless, I would consult another real estate attorney and get another opinion...
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
She gave me the clear for everything else, I already have about 5 buyers on my buyers list, also in craigslist there is a place under "services" where they have a real estate section and you can post what you are looking for I posted an ad earlier for 'looking for cash buyers, if interested e-mail me" so either way there is more than one way to skin a cat, I think this guy sums it up good.
As well as people here and all around the nation already doing it, I don't see a problem, I read on threads "why don't brokers like wholesalers" and they all say the same thing, and they've been doing this for years just fine.
BTW i would go to another attorney but I got what I needed accomplished just to verify if I can use my short contract, so I can get the ball rolling, as i said I already have a buyers list and I plan on finding more so it should be an issue, remember "there is always more than one way to skin a cat"
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
Ok J.Scott so I have thought over this, and let me explain why you are wrong, and how a wholesaler is not acting as a broker.
A broker, is getting paid off of commission to MARKET a property that is ALREADY under contract.
A wholesaler, is getting paid by putting IT in contract by themself, thus allowing the wholesaler to step into the buyers shoes out of equitable interest.
The BIGGEST difference is that brokers do not deal exclusivly with putting houses under CONTRACTS themselves from motivated seller, wholesalers DO. If you were to sign a contract I give you for a car, you are allowing me to take over and be in place of your shoes, as if I am the seller, thus allowing me to MARKET a property under MY name, out of my own equitable interest because once I have somebody under contract, it is a LEGAL binding contract, for me to STEP in to the sellers shoes, and act in their position.
Flipper/Rehabber · Seminole, FL · Member since 2010 · 859 posts · 316 votes
15y
I think what this attorney is saying is that you should not add language in the contract thays indicates you will be marketing the house for sale. So just keep it out of the contract and do it anyway. Since we can all agree you don't need permissions to do so. Adding it to your contract could make it seem like you approached the seller like a broker would.
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
Jimmy I am thinking that too, she removed it from my contract, but if it's not in the contract I am concerned though if I find a house , and the seller see's I am marketing it, and they didn't agree for me to market it, couldn't I get in trouble for not following contract terms?
Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
15y
I think the issue is crystal clear.
Out here in California we have distinguished between selling real property and selling personal property which represents a contract for purchase.
In short the right to buy affords you the right to sell. Thus allowing you to resell. I always add a paragraph in my agreement to purchase however not required. Its like the assignment clause, unless stated otherwise you can assign an agreement. I think advising the seller of a possible concurrent close is always smarter than not.
The issue is recording the grant or warranty deed and creating constructive notice versus selling the contract. In California the latter is only allowed a certain amount of times per year before a real estate license is required. I believe it is 8 times.
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
Originally posted by Michael Quarles:
The issue is recording the grant or warranty deed and creating constructive notice versus selling the contract. In California the latter is only allowed a certain amount of times per year before a real estate license is required. I believe it is 8 times.
Michael,
You do not need a "licence" to wholesale, I know people that have done a ton of houses that don't have a licence. I don't know where you are getting your information from but I'd disagree.
It's been posted before:
" Since when do you need a license to Wholesale property in California, or any state?
A wholesaler is kind of like a RE Broker, but not really. A wholesaler is buying and then reselling the property. I can buy 500 homes a year, and not need a license. "
" I concur with Tom. I live and work in CA and have wholesaled more than 8 times and I have no RE sales license, nor do I need one. What I do have are entities and trusts which I funnel deals through and I pay my taxes according to the net profits for each entity. For my S Corp, I receive a salary plus I get dividends which are taxed at only 15% as opposed to the marginal tax rate."
Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
15y
First I didnt say wholesaling... I said selling a contract. It, the California Code, is very clear... The law puts a limit on the amount of contracts you can sell annually. Very simple to comprehend if you read the code.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Matt James:
Ok J.Scott so I have thought over this, and let me explain why you are wrong, and how a wholesaler is not acting as a broker.
Matt -
I'm not sure why you are arguing with me about this...I've agreed with you this entire thread about having the right to market a property you have under contract.
I disagreed with the fact that there is a major difference (from a legal standpoint) between selling a property with legal title and selling a property with equitable title -- something you asserted without support in a post above.
If you disagree with that statement, can you support it? (I'd provide support, but it's impossible to prove a negative :)
Btw, you seem to like to form your legal opinion based on what people in these forums have written. I would certainly recommend not listening to any legal opinions that you get from non-attorneys (and especially don't listen to me) without verifying with your own counsel...
Flipper/Rehabber · Seminole, FL · Member since 2010 · 859 posts · 316 votes
15y
I could see how Agreeing in writing to market someone else's property in writing could be considered unlicensed brokering.
However if you simply get a p&s signed between you and the seller you shouldn't get in trouble for marketing. They can get ticked off but shouldn't get you in legal trouble.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
15y
Lots of subtle details here. Regarding J Scott's "verifying with your own counsel..." Matt has done just that. Keep in mind that attorneys are trained to keep their clients out of trouble, sometimes to a 'fault'. Without knowing details of New Mexico state law, I would believe Matt's council provided the best guidance for Matt in the context of this post. My opinion is that Matt should ask his council for the state statute reference showing the basis for his council's opinion so he can educate himself. IMO, it would be worth the 30 or 60 minutes of council charges to get a full and detailed understanding. Just my opinion. Then Matt can 'carry on' and know whatever risk is involved. In my state, I would say a principle seller does not fit a broker's definition, but this post is not about a property sale. It's about a contract sale. And so a layperson would have to have damn good understanding of his/her state's case law about advertising property without legal ownership via deed to get the full picture. I think Michael Quarles has a good answer for California... and I have an answer for North Carolina. Wrong states, unfortunately.
I'd like to add that "marketing" a property where you do not have the deed is frowned upon by many (e.g. realtors, MLS, other licensed folks... like attorneys) because you can't sell the property, or in other (technical terms) you can't perform in the context of the property sale. Period. You can't sell something you don't yet own... but you can sell the contract. So Matt's attorney says assignemnt is fine. Keep in mind that 99.9% of the "business" of real estate is selling property, hence it makes sense that most people (including many judges) can't initially distinguish the difference.
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
Thought I would revive this thread, again. When you have a house under contract, since you are the principal of the transaction, can you go to a realtor , and pay them to list it and market the property for you? I don't see anything wrong with that, but I thought I would see how other people would view this? Since you are in fact hiring somebody to "market" for you, technically, since you have principal interest, they should be able to do that for you? Or do you have to have the house in your name in order to have a realtor list it on the mls and show the property to propsective buyers?
Private Financing Consultant · Honolulu, HI · Member since 2010 · 132 posts · 27 votes
15y
Interesting discussions. I don't know of the specific real estate laws in your area but consult with a real estate attorney to see if this is a way to handle it.
On the offer to purchase, state to the seller that you will show the property to potential renter or third party end buyer prior to your closing. And try to be accommodating the seller's schedule if they are still living in the property. (This will let the seller know that their property would be marketed by you and or your agent and if they let the clause stay on the contract then they are ok with it.) You don't want to surprise the seller by hiding your intentions to wholesale or assign, there could be liabilities for you if someone else is at closing instead of you.
Contract the property only for a reasonable time, like 45-60 days. Or allow the seller to continue market their property on pending sell. This might make the seller feel a little comfortable that their property is not being held up too much in the event that you can not close the sell by yourself or with the third party end buyer.
Have some other contingencies in relation to financing, inspection, or approval of third party end buyer so that you can still back out of the contract when closing don't seem to be happening.
Regarding your question about using a Realtor to market for you - If the seller did not hire a Realtor, then you can. If the property was already on the MLS, then no, the same property can not be listed 2 times where one is a pending sale, and the other one is active.
If you already have a buyer's list, the best way is just to contact them privately about the property. You probably won't get many good results through MLS listings especially if you only have a week or two of advertising time - allow another 3 - 6 weeks for your potential end buyer to do the inspection, appraisal, title work, and financing so that the deal can be closed within the contracted time frame.
Also, depending on the price and type of the property, you could have challenge assigning to buyers that uses FHA or conventional financing. The lenders generally won't honor your "assignment fee" on the HUD. Cash buyers would be more ideal, but your selling price must be very attractive. Look for a seller who wants to sell their property quick at a deep discount.
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
Good answer Celine. I plan on using an Option contract, on the property, it has not been listed, and is a higher end house, so let me say, I do plan on closing with the seller, via transactional funding/double closing the same day I flip to a retail buyer. There is a lot to be made on this deal, and I just want to make sure I have everything down before I start marketing it. I am willing to pay the realtor fees myself, that way I don't constantly have to be showing the property, I'd rather pay somebody else to market it for me, that once a buyer is found, I go to closing with flash funding, than I plan on flipping it to my end retail buyer the same day. I will let the seller know I am personally closing with them, and my intentions are to flip the property, since they know I am an investor, I don't think they care, since they are going through a tough time.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Matthew T.:
When you have a house under contract, since you are the principal of the transaction, can you go to a realtor , and pay them to list it and market the property for you?
You should probably check the rules of your local MLS, but in my area, you're not allowed to list a property on the MLS unless you own it -- not just control it, but actually have title in your name.
Since most real estate agents will market mostly by just throwing the property on the MLS, you wouldn't gain much by asking an agent to market for you if you weren't able to actually list on the MLS.