using a realtor to help with wholesale deals

using a realtor to help with wholesale deals

Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes

Hello everyone. New to this site. I have some questions. I want to wholesale deals and assign them to a buyer, using either an Assignment Agreement or an Option to Purchase agreement. I want to use a realtor to find undervalued, handyman, re-habs. ( I understand they have access to these types before they hit the MLS). I'll have realtor find properties, do comps,etc. So, here is how the deal will go. I decide on which property I want to make offer on, decide on price, run it by the realtor. Realtor calls seller, makes this offer, seller accepts, I put it under contract, seller signs contract. Meanwhile, I am finding a buyer. I find one who wants property, I collect a non-refundable deposit from buyer, and buyer signs contract ( with inspection clause in case buyer backs out). Realtor takes contract to Title co for closing and has my fee (the remainder of it after non-refundable deposit on HUD form. Buyer cuts check at Title co. to seller. My fee will be separate on the HUD form, so Title co. will cut me my check. How does realtor get paid in this wholesale deal? Does this cut in to my fee, do I need to re-figure it? Thank you, Christine

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
14y

Your response was so long I lost interest about 5 seconds!!!

Curt Davis - KAIZEN Realty538 Reviews
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  • Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    14y

    Would say realtor would be paid off the sale price on the contract which would be what your buying at. Realtor dealt with you to get it under contract not your end buyer so I dont see why realtor should be entitled to a cut of the markup.

  • Real Estate Investor · Baltimore, MD · Member since 2008 · 619 posts · 75 votes
    14y

    I know wholesalers who give their agent a percentage of the deal. I think it varies from relationship to relationship, however, create a structure that provides a win for everyone.

  • Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes
    14y

    Thanks everybody. A little clearer now. Wasn't sure if you give the realtor a commission regardless , a %, or maybe a flat fee. If they were going to get a commission, seller pays that at closing on HUD form. Correct? But, if they are getting paid a % or a flat fee,( instead of a commission) that's my responsibility, right? I would have to pay them out of my assignment fee?

  • Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes
    14y

    It might also depend on how much the realtor does for you on each transaction -right? Just send you listings OR actually do the whole transaction for you.

  • Wholesaler · Bay Shore, NY · Member since 2009 · 359 posts · 199 votes
    14y

    I dont know many wholesalers who work with realtors on the front end of a deal unless its a short sale.

    There are some other mechanics that go into that type of deal and the realtor has to be involved because the deal can't be conducted without them because the lending institutions say so.

    Not sure about REO's and wholesaling.

    Are you buying fixers? Is your buyer a rehabber? If yes, I dont think the rehabber is going to want to pay the realtor's commission.

    Also, and I think a realtor can best answer this question but if you are buying from a seller that the Realtor has a listing with, the realtor has a fiduciary responsibility to the seller (not to you) to disclose if you are not going to be the true end buyer and intend to assign the contract.

    I think the general wholesaling rule of thumb is to NOT include Realtors in the wholesaling portion of the deal.

    Its been my experience that a lot of realtors think wholesaling is illegal to begin with.

    Have you talked to any realtors about it?

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y

    I wouldn't be very happy being the agent in this scenario. First, if you can't find an end-buyer, the agent will make no money, despite finding you a good deal. Second, if the agent doesn't have a buyer's agency agreement with your end-buyer and if the end-buyer refuses to sign one, it's quite possible that the agent won't/can't get paid (many brokers require the agent to have this agreement in place). Third, if you plan to pay the agent yourself, you'll need to do so on the HUD-1; this will require a buyer's agency agreement in place that would likely look a good bit different than a standard buyer's agency agreement, and the agent will need to ensure that his/her broker finds it acceptable.

  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    14y

    If your agent is bringing you REO bank properties your scenario will not work unless you actually have cash, POF and earnest money to put down.

    Also, many wholesalers DO work with Realtors as they get the REO listings and in many cases bring them to wholesalers as they know they will get both sides of the commission and you will close with cash.

    This is how it works for us and it is working very well. Every wholesaler should have a good realtor finding them deals.

    Curt Davis - KAIZEN Realty538 Reviews
  • Real Estate Investor · Boca Raton, FL · Member since 2010 · 12 posts · 11 votes
    14y

    I am actually a licensed Realtor in Florida. I am in Southern Florida about 3 hours south of you but the laws apply state wide. I am going to try to answer all your questions step by step.
    First of all the chances of a property not hitting the mls prior to you seeing it is slim and none. Under a listing agreement with a seller we have to place all properties in the mls unless the seller specifically request it not to be listed there. I have one right now like that, but that is an abnormality not the rule. Once I have a signed listing agreement I place it into the mls the same day. The only other time a Realtor has knowledge of a property that is not in the "active" mls is because it is an expired listing. A lot of Realtors try and go after expired listings to get them re-listed. The problem with these is they were over priced listings to begin with and it is usually because of the seller wanting more money for their property then it is worth. The only other source that would not be found on the mls is for sale by owner (FSBO) properties. There are some Realtors that drive around different neighborhoods trying to get listings that way. If that is the knowledge of a property that is not on the mls that a Realtor may have then they would get a one time listing agreement from the seller. In the state of Florida it would have to be a transactional broker listing agreement for your scenario. This means that the Realtor does not represent either party in the transaction and is only there as a medium to get the deal done. The commission based on this scenario would come at closing from the listing agreement the seller signed. It is against the law in Florida for any Realtor to accept a percentage of a deal. This is called a gross listing and any licensee could lose there license.
    Most Realtors will not work with someone who wants a sales and purchase contract assignable, myself included. This would indicate that you are trying to find an end buyer and have no intentions on closing the deal yourself. This would be a perfect waste of time. As mentioned before if you do not find an end buyer then the Realtor does not get paid. Next problem you will have is if you do not have a proof of funds letter that is independently verifiable or a verifiable letter from a lending institute stating you are pre-approved for a loan of up to the amount of the purchase price or more then your offer will not be taken serious by most Realtors. What that means is you would not be able to get the property under contract. One of the many jobs of a Realtor is to make sure the property for sale gets to the closing table. If a Realtor believes that will not happen then no property will go under contract. We only get paid if the deal closes. If we do not get to the closing table then we have also failed the seller. In both cases this is not good for any Realtor as most of our business comes from referrals and if we keep getting deals that don't close this will reflect badly on us. If we do not believe it will close then we do not waste our time. We pre-qualify all buyers before we make any offers. I am not saying that there are not Realtors that will place weak offers, but they will only get away with that for so long before other Realtors will make it very difficult for them to place an offer on any property. I am a listing agent and as such I make sure my sellers are protected every way I know. When I get offers from buyers agents or buyers I make sure the offer is strong prior to submitting to a seller. If it is not strong then when presenting the offer to the seller I will advise them on why it is not a strong offer and let them know the different possible outcomes if they should still want to accept it. Under no condition however do I accept or present offers that do not have a verifiable proof of funds or pre-aproval letter and a copy of an escrow check. This is agreed upon with the seller in advance and an escrow check to be deposited is required by law before the contract can be legally binding. Once I do get a property under contract I give a very small window of time to place that escrow deposit with a title company. If after the time passes there is no escrow check the contract becomes null and void.
    On REO's curt stated it best. Banks are not going to waste there time with people who only want to flip to an end buyer. They require a 10% deposit with all cash offers and a verifiable proof of funds letter. The other thing you can expect from a purchase of an REO is a very long process. You will first have the standard Realtors sales and purchase contract that you will have to initial and sign. This is 14 pages long. Then if the bank approves the sale they will send you there own purchase and sales contract. This one is a book and has so much language in it. You cannot transfer the contract with REO's as they expect you to be the buyer. I have one right now that went pending a year and a half ago and the bank still has not made the final decision on whether they will accept the offer as it stands. Another thing to keep in mind that with the tight regulations on mortgages, people cannot get a mortgage on a house that has to be rehabbed therefore only cash buyers will qualify to even make an offer.
    The only thing I can recommend for you is either to find private money to do a double closing or go after FSBO's without the Realtor. If you do not use a Realtor make sure you know all the laws and what forms are required to be filled out and signed with a purchase and sales contract. The last thing you want to have happen is end up in a law suit.

  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    14y

    Your response was so long I lost interest about 5 seconds!!!

    Curt Davis - KAIZEN Realty538 Reviews
  • Wholesaler · Bay Shore, NY · Member since 2009 · 359 posts · 199 votes
    14y

    @ Curt - I didn't lose interest...

    Tom sums it up nicely...basically the whole using a realtor for wholesaling is probably not the best strategy for wholesaling.

    I also don't get your point saying that many wholesalers use realtors?

    Why would a realtor seek out a wholesaler knowing he's going to flip the contract to a rehabber and not buy the property?

    I would think the realtor would seek out the cash buying rehabber and skip right over the wholesaler...no?

    Did you mean to say rehabbers work with realtors?

  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    14y

    Realtors will sell homes to people they know whom are real cash buyers. In our business we get the best deals from the MLS so considering we have relationships with some of the top REO agents who get great listings, they sometimes call us up first and give us first crack at the deal. This is why is is good for anyone buying property to work with Realtors. Whether we close on it with cash or do a double close our Realtors dont care one way or the other.

    Curt Davis - KAIZEN Realty538 Reviews
  • Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes
    14y

    Thanks Tom for your reply. One of the reasons I thought of using a realtor was I assume they must have alot better access to more handyman's, vacants, rehab's, etc. Is this true?

  • Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
    14y

    Christy

    If your talking about the average agent, your not likely to do any business with them. However there are agents like myself that started as investors and added a license to the mix that understand what your trying to do.

    And there are several ways for you and them to work together. So ask other wholesalers if they deal with any, and what kind of arrangement they have, and maybe you can add a few to the mix. But remember finding real wholesale deals is the main job of a wholesaler, not depending on others like an agent to find them for you. As a broker working mainly with investors and also looking for myself, I run into many more deals then the average bear, so your right I am aware of a lot of available deals that are not common knowledge. So it depends on what you want to do and are able to do.

  • Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes
    14y

    Thanks for replying, Brian. I'm new to all of this and I heard that there are realtors out there who work with investors so they understand how a wholesale deal works. Think maybe I'll just work alone instead.

  • Commercial Real Estate Agent · Los Angeles, CA · Member since 2008 · 148 posts · 39 votes
    14y

    I'm a realtor here in California..... Finding properties for wholesale investors is a part of my business model. It accounts for a great deal of what i call QUICK CASH... I find the deals.... Investor/Wholesaler provides POF and EMD.... we take it under contract.... I immediately Blast it out to my list and so does my investors/wholesalers..... If they find the buyer ... i just get the Buyer-side Commission... If i find the buyer... I get the buyer-side commission + 70% of the wholesale fee.... 30% to the investor/wholesaler for providing docs and doing paperwork. It really works well.

    Part 2 : 40% of the time.... when i find the buyer.... that buyer will give me the back-end listing.... now i go searching for a retail buyer.... sometimes i find the buyer there too... now i get 5% commission of the rehabbed price... worse case 2.5%....

    Point : There is great advantage to having a realtor that UNDERSTANDS the wholesale process, UNDERSTANDS how investors think.... and adds value. Realtor gets what i call FREE MONEY ( Commission paid by the bank(Seller) that the investor/wholesaler does not pay..... And every now and then i can participate in a joint venture with investors that choose to keep and rehab the property for themselves

    Hope this helps

  • Residential Real Estate Agent · Delray Beach, FL · Member since 2010 · 115 posts · 83 votes
    14y

    I recently listed a "short sale" in Palm Beach County.

    Market value was an estimated 110K. I listed it on the MLS for $65,000.

    Within two weeks I received over 200 phone calls, emails, contracts, proof of funds letters, pre-quals, etc., etc. etc. Yikes!

    Easily more than half of these were cash buyer investors, I figure 10% were wholesalers (flips, assignments, transactional funding methods, etc.) and the rest (about 40%) were retail, end buyers of all sorts: some cash & some needing financing.

    My point is trying to find a good wholesale deal here in South Florida on the MLS is like winning the lottery! LOL!

    I sold the house, as the bank approved $67,000 to a cash buyer-investor looking for good rental properties. This investor will put an estimated $20,000 into this house and will have an estimated 23K in equity, plus a nice rental.

    My point is there was a 200 to 1 chance to grab this property, as I had 200 realtor inquiries and one property.

    Pretty long odds.

    I'm mostly a land liquidator, and yes I do find deals from Realtors, but I need to make a "ton of offers" to get a deal.

    As an investor, I do it the old fashioned way too!

    Send out 50-100 letters per week. I may get one, or I may get five calls, sometimes weeks after I mailed-ot my letters.

    I guess having a personal assistant is sounding better & better to me, as those months and years go by? LOL!

    At times, it is frustrating finding deals but when you do, all the hard work pays off!

    So Cristy, Realtors can be great, and like I said winning the lotto can be great too! LOL!

    Just try to find other ways in addition to my fellow real estate agents to prospect for wholesale deals.

    Hard work will turn into a "labor of love" for you, as it did for me!

    Bob
    Managing-Director, Land Rescue League LLC (FL Limited Liability Co)
    Trustee-Settler, The Renaissance Trust (My "buying" tool!)
    Licensed Associate, Capitol Homes Real Estate, Inc. (Est. in 1909)

  • Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
    14y

    1. realtor has you sign a contract with seller
    2 you look for someone to buy your contract
    3 sign an assignment of contract with them and sell them the original contract.
    4. the deal closes with the individual you sold your contract to. The realtor gets paid from closing just like normal.

    DISCLAIMER-LOTS MORE DETAILS ARE LEFT OUT!!!

    :mrgreen:

  • Commercial Real Estate Agent · Los Angeles, CA · Member since 2008 · 148 posts · 39 votes
    14y

    [1. realtor has you sign a contract with seller
    2 you look for someone to buy your contract
    3 sign an assignment of contract with them and sell them the original contract.
    4. the deal closes with the individual you sold your contract to. The realtor gets paid from closing just like normal]

    That pretty much sums it up Rob

    :D

  • Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes
    14y

    wow what a great response! okay, Rob and Juan. You stated lots more details are left out. In a typical wholesale deal, the wholesaler ( one who puts property under contract w/seller)should collect an ernest deposit from the buyer. This still holds true when using the realtor? When deciding what to offer seller,and what to sell contract for to my buyer,(if I was going to use a realtor), would I have to take into consideration now the way I price the deal? (because realtor has to be paid). On a normal deal not using a realtor,) buyer pays closing costs already, does this mean that if were to use a realtor, buyer would have to pay realtor also? When using a realtor, do we use the assignment contract a wholesaler uses, or which one? Please add anything else I may not know about. Thanks again everyone.

  • Commercial Real Estate Agent · Los Angeles, CA · Member since 2008 · 148 posts · 39 votes
    14y
    Originally posted by Christy Gilliam:
    wow what a great response! okay, Rob and Juan. You stated lots more details are left out. In a typical wholesale deal, the wholesaler ( one who puts property under contract w/seller)should collect an ernest deposit from the buyer. This still holds true when using the realtor? When deciding what to offer seller,and what to sell contract for to my buyer,(if I was going to use a realtor), would I have to take into consideration now the way I price the deal? (because realtor has to be paid). On a normal deal not using a realtor,) buyer pays closing costs already, does this mean that if were to use a realtor, buyer would have to pay realtor also? When using a realtor, do we use the assignment contract a wholesaler uses, or which one? Please add anything else I may not know about. Thanks again everyone.

    The realtor commission is usually paid by the seller... When I place an offer... the commission is set in the MLS... only when you deal with a seller directly ( For Sale By Owner ) then a realtor will cost you extra. I search the MLS or deal with pocket deals.... So there is a way for me to get paid. If the commission is low or limited then I negotiate an added fee with my buyer.... on a deal by deal basis.

  • Real Estate Investor · Canton, NC · Member since 2011 · 18 posts · 11 votes
    14y

    I meant commission would be paid by the seller. So, the question about having to price differently when using a realtor: would I need to combine the commission with the offer to seller or does seller normally pay out of pocket at closing? (separate). Adding commission into offer to seller changes the what I offer the deal to my buyer. (have to make sure buyer still gets a good deal). What's the best way to find out how much seller owes yet on his property? Realtor have access to this info?

  • Commercial Real Estate Agent · Los Angeles, CA · Member since 2008 · 148 posts · 39 votes
    14y

    Realtors commission don't need to be calculated in the offer price unless you are dealing with the seller directly and you are just using the realtor as a resource. Even then that would be paid outside of escrow... so it would need to be considered in your bottom line expense numbers. What the seller owes can usually found on title report.... keep in mind that any hard money 2nd's or 3rd's unrecorded will not show.... They should appear on the Prelim.

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y
    Originally posted by Christy Gilliam:
    Thanks Tom for your reply. One of the reasons I thought of using a realtor was I assume they must have alot better access to more handyman's, vacants, rehab's, etc. Is this true?
    Not usually true. Agents will not come close to having the same contacts that other rehab flip investors have. If you are looking to build your contractor/handyman team, go to RE clubs and talk with those who do it everyday, they will have much better leads for you on those they are willing to share.
  • Investor · Dayton, OH · Member since 2015 · 14 posts · 0 votes
    9y

    So what if your interested in wholesaling a property that's listed by an realtor what do you do in that situation do you owe the realtor fee than. If you just thought it was a great deal.

  • Real Estate Agent · Jacksonville, FL · Member since 2016 · 406 posts · 163 votes
    9y
    Hi Christy, I'm a realtor in Jacksonville, FL and while I work together with wholesalers to get inventory and have closed deals with them I have found that in helping a wholesaler get his own inventory it is very difficult to work it out in a way that works out for a buyers agent. There are several issues we encountered: 1. If I find a good rehab deal, I am going to send it to my real buyers before a wholesaler. This means the wholesaler generally isn't getting a deal from me, he has to present me the properties. 2. My time is money. I don't work for Free and when a wholesaler wants me to make hundreds of offers and pull CMAs on all these properties it just doesn't pay. That being said there are some ways that could work out where it would be a win-win. For example if you JV the deal with the agent it will be more enticing because then he is your partner. Another suggestion would be to find a new agent who doesn't have a lot of business. When an agent first starts in the business he needs commissions to grow. An established agent will already have a buyer list and will not be able to spend the time doing all the work for you in grabbing the deal because it's not highest and best use. I hope this helps.
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