Wholesaling a property that is listed with a realtor.

Kendall Morgan · 2019-02-13T09:52:41-08:00

I want to start by saying I’ve done many wholesale deals and am very aware that listed properties are not ideal for wholesaling. However, this situation is a bit different and since I’ve never dealt with a listed property I am seeking advice. The property is owned by a woman who inherited the property when her grandfather passed. Before his passing he took out a reverse mortgage, causing her to take on the remaining debt of the loan when she took ownership. She had very little time to pay it off and In order to get an extension, the reverse mortgage company required her to hire a realtor. I was connected to her through a friend of mine who knows I’m always looking for distressed properties/motivated sellers. Before I knew about the realtor, i’d Already been negotiating with the seller and got her to agree on a price that is less than half of what the realtor has listed the property at. Before signing the contract the seller informed me that she did have a realtor but has not heard from her in 3 months since the signed the contract. And that the realtor has done nothing to her knowledge to market the property or show it (seller still lives in the house). By the time the contract with the realtor expires, she will have already lost the house so waiting for it to expire isn’t an option. The agreement they have is an “Exclusive Right of Sale” agreement.So, my question is.. with the seller having a realtor, what (if any) options do I have here? I have a handful of cash buyers that I am confident would jump on this immediately following me getting it under contract, sight unseen.

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Kendall Morgan. Don’t try to wholesale this. That’s not the idea behind wholesaling. If it’s on the market what’s the value add component?

0 Reply

John Thedford

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

7y

interfering with the listing agent can get you sued. Purchase the property and then resell it

0 Reply

Kendall Morgan

OP

Specialist · Jacksonville Beach, FL · Member since 2016 · 37 posts · 18 votes

7y

So working with the agent wouldn’t be an option? In 4 weeks the reverse mortgage company takes the house and its foreclosed on. She owes 43k.. the seller only wants to make 5k profit to help get her a head start on an apartment and moving expenses. the realtor listed it at 120 which is about what the arv is. But the house needs quite a bit of work To be worth 120. They will never get 120 for it and In 4 weeks the seller loses the home and the realtor loses any chance to make money anyways.. it just seems to me there would be some way we could work together on this but again, I am not experienced in dealing with realtors in this fashion.

1 Reply

John Thedford

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

7y

Make an ALL CASH OFFER AND CLOSE ON THE DEAL. Then resell.

9 Reply

Kendall Morgan

OP

Specialist · Jacksonville Beach, FL · Member since 2016 · 37 posts · 18 votes

7y

Solid point. I’m considering it. But I just don’t know if the realtor will go as low as I’m wanting her to, but she can’t legally refuse to submit an offer to a seller correct?

3 Reply

John Thedford

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

7y

She is required to submit the offer UNLESS instructed by the seller otherwise. If the seller says "don't bring any offers less than "x" dollars" THEN she isn't required to submit it. If it does go to auction, the seller WILL get the overage so all is not necessarily lost. The agent would not get a commission in that circumstance.

3 Reply

Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

7y

Your seller can cancel the listing agreement if she feels the agent has not performed or lived up to the contract. You can also just write the offer and submit to the agent, the agent S required to present the offer and can only advise the seller on it, the agent can not force the seller to deny it, but more likely, they will suggest a counter offer. Offer whatbyou feel is worth your while and get it done. I would close on it and then resale it though unless you already have a buyer in mind, then sinply write the offer in the name of your buyer and have a separate agreement with them to pay you a consulting fee for your non real estate licensed services.

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6 Reply

Brian Pulaski

Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes

7y

I would submit the $48k offer to the realtor and line up funding. Close on the house and sell it after you own it. This seems like a straight forward deal assuming the seller will take that offer as they stated.

0 Reply

Kendall Morgan

OP

Specialist · Jacksonville Beach, FL · Member since 2016 · 37 posts · 18 votes

7y

@Will Barnard I do have a buyer lined up and ready.. I’d prefer not to have to use my own money if it’s avoidable.. but I like your idea of a separate agreement with consulting fee. That’s actually how I did my first deal now that you mention it. I didn’t even think about that. That’s why I really love and appreciate bigger pockets and the awesome (and even the not so awesome) advice.

As far as firing the realtor goes..that’s what the seller keeps asking me about because she is very unhappy with the realtor and the realtor has not performed any of the duties she is supposed to be doing and is leaving all the work to the seller. Legally I just don’t know how to advise the seller to go about it since the agreement is an exclusive right to sell... any input on how she’d go about that?

1 Reply

Brian Pulaski

Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes

7y

Why has the buyer, who will accept under $50k for the house let the agent list it for $120k? Why doesn't the agent drop it to $75k and it will most likely sell right away to a cash buyer? I understand your position is the wholesaler looking to make a deal for yourself, but this seller really should have the agent drastically reduce the price and they would probably walk away with more money than if they cancel their contract and wholesale it.

1 Reply

Pratik P.

Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes

7y

@John Thedford LOL sued? What is the agent's defense? "Hey the seller cut me out of the transaction because I'm a failure of an agent and neglected my client's needs, so I deserve my commission for doing nothing"?

Go with Will's advice. Put in an offer with your buyer's name on it and have a separate agreement with your buyer for a marketing fee. This fee can be paid through escrow at closing.

Is the agent responsive at all?

2 Reply

Kendall Morgan

OP

Specialist · Jacksonville Beach, FL · Member since 2016 · 37 posts · 18 votes

7y

@Brian Pulaski I’m assuming you meant to say the seller, not the buyer correct? They seller told me that this is the price the listing agent told her that they’d be listing it for and did not ask what she wanted out of it. It seems to me the agent is trying to make the most commission possible with no regards for what the seller actually wants and needs.. but in return this agent is 4 weeks away from losing the deal

0 Reply

Kendall Morgan

OP

Specialist · Jacksonville Beach, FL · Member since 2016 · 37 posts · 18 votes

7y

@Pratik P. Im with you on the getting sued thing buddy. I mean, I’m just going based off of common knowledge, not educated facts so I wasn’t really sure if he had a valid point or not. I’ve read over the realtor agreement and I do know it is an Exclusive Right to Sale agreement, but with her not performing her duties as stated in the agreement, it seems to me the realtor has breached contract herself, but again, I do not know the law well enough because I only typically deal with off market properties. However, this agent is not responsive.. this woman (the seller) is desperate for answers as she is going to be practically on the verge of being homeless in just a few weeks and to my knowledge she has reached out to her realtor several times to touch base and has yet to receive a response. It sounds to me like the realtor knows there is no hope at $120k and she’s just brushed it aside.

0 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Kendall Morgan:

@Brian Pulaski I’m assuming you meant to say the seller, not the buyer correct? They seller told me that this is the price the listing agent told her that they’d be listing it for and did not ask what she wanted out of it. It seems to me the agent is trying to make the most commission possible with no regards for what the seller actually wants and needs.. but in return this agent is 4 weeks away from losing the deal

I think your way off base.. agents dont do what you describe.. why do that when it wont sell. i bet the seller dictated the price.

I would check in FLA also bringing two parties together for compensation is clearly something that requires a license there is no arguing that fact..

I think we are only getting Kendalls side of the story here .

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Kendall Morgan:

@Pratik P. Im with you on the getting sued thing buddy. I mean, I’m just going based off of common knowledge, not educated facts so I wasn’t really sure if he had a valid point or not. I’ve read over the realtor agreement and I do know it is an Exclusive Right to Sale agreement, but with her not performing her duties as stated in the agreement, it seems to me the realtor has breached contract herself, but again, I do not know the law well enough because I only typically deal with off market properties. However, this agent is not responsive.. this woman (the seller) is desperate for answers as she is going to be practically on the verge of being homeless in just a few weeks and to my knowledge she has reached out to her realtor several times to touch base and has yet to receive a response. It sounds to me like the realtor knows there is no hope at $120k and she’s just brushed it aside.

so if you truly wanted to help this lady why dont you call the listing agent yourself then conference call your seller into the call and talk it through I just dont buy what your selling..

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Pratik P.

Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes

7y

@Kendall Morgan In that case, I would gather copies of any attempts to contact this agent over the past few months. Maybe try to reach out from your end a few times. If still no response, just put it under contract with the seller, assign to buyer and close.

Make sure your buyer knows what is happening and they are okay with it since they are a principal in the transaction. From what information you provided, the agent has abandoned their fiduciary duty to the client.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Pratik P.:

@Kendall Morgan In that case, I would gather copies of any attempts to contact this agent over the past few months. Maybe try to reach out from your end a few times. If still no response, just put it under contract with the seller, assign to buyer and close.

Make sure your buyer knows what is happening and they are okay with it since they are a principal in the transaction. From what information you provided, the agent has abandoned their fiduciary duty to the client.

what she should do is call the broker who is managing this agent and get the real story.. LOL.

as an agent i have done what you described.. a few times and we just left the listing agents commish in escrow for them. but i went direct to seller and closed the deal.. i remember one were my seller was in Los Altos Hills very type A software company owner.. and his agent was on a month long trip LOL.. me being the brash young agent i just went direct.. but like i said we left the listing commish. in escrow.

that broker was not happy but i did not care. And the Software company owner became a long time major client of mine.

If this deal closes out side of the listing agreement the brokerage will have the right to sue for their commission.. so I would think this poor seller who is on the verge probably does not want that.. I would if it was me walk the seller to an attorney and have the attorney advise her on next steps.. let the attorney write the broker and cancel the listing if thats what they want to do.

Keep in mind the OP sole purpose in this is to simply make money on a what is probably a big spread so of course she is painting it like the broker is inept.. without really verifying the facts.

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Pratik P.

Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes

7y

Originally posted by @Jay Hinrichs:

Originally posted by @Pratik P.:

@Kendall Morgan In that case, I would gather copies of any attempts to contact this agent over the past few months. Maybe try to reach out from your end a few times. If still no response, just put it under contract with the seller, assign to buyer and close.

Make sure your buyer knows what is happening and they are okay with it since they are a principal in the transaction. From what information you provided, the agent has abandoned their fiduciary duty to the client.

what she should do is call the broker who is managing this agent and get the real story.. LOL.

as an agent i have done what you described.. a few times and we just left the listing agents commish in escrow for them. but i went direct to seller and closed the deal.. i remember one were my seller was in Los Altos Hills very type A software company owner.. and his agent was on a month long trip LOL.. me being the brash young agent i just went direct.. but like i said we left the listing commish. in escrow.

that broker was not happy but i did not care. And the Software company owner became a long time major client of mine.

If this deal closes out side of the listing agreement the brokerage will have the right to sue for their commission.. so I would think this poor seller who is on the verge probably does not want that.. I would if it was me walk the seller to an attorney and have the attorney advise her on next steps.. let the attorney write the broker and cancel the listing if thats what they want to do.

Keep in mind the OP sole purpose in this is to simply make money on a what is probably a big spread so of course she is painting it like the broker is inept.. without really verifying the facts.

I agree, the broker should be contacted as well. But I don't think commission should be left in escrow since the agent has been completely MIA since day 1.

I'm not saying it's okay to cut an agent out of a deal, but I think this is an exception. In terms of a lawsuit, I think it's unlikely. I can't imagine someone spending $300/hr in attorney fees to go after a 5k commission. Even if they did, I don't believe they would have a case.