San Francisco, CA · Member since 2012 · 3 posts · 2 votes
Hi Everyone,
I need some advice. I have been looking around at different websites and forums trying to figure out if a licensed agent can legally/ethically wholesale property in California. I have read conflicting opinions in my search.
Are there any agents on this site conducting wholesales? Or, does anyone know of agents wholesaling property?
I am licensed and you can absolutely wholesale with your license! I was a wholesaler before I was licensed, which allows for a bit more creativity, but you can still indeed wholesale. You must disclose that you are licensed and make sure you are using the proper contracts.
People over complicate this. Your fee does not have to shared with your broker as this is outside of retail real estate. I am actually hanging my license with an investor who is a broker and before I hung my license with him, I wholesaled him a deal! Hence me moving my license as he is familiar with what I do. Many Agents dislike wholesalers as they feel they are taking deals away from them. The reality is that there is enough for everyone. People need to change their mindset from a lack to an abundance mentality and they will see a shift in their lives.
Generally, many agents just want to say it's illegal for whatever reason, maybe they we told that, or they just don't know. Structure the deal properly, full disclosure, proper contracts and you are good to go!
I dnt no about Cali, but im in Missouri, and I just became a Realtor, and there's no rules on not being able to flip houses. There are disclosures that we always have to let others know. But again in missouri it is fine.
There is an experienced investor on here, his name is J Scott but he is also a licensed agent and he buys and flips also, hes in Georgia I believe. You can ask him for more details.
So i think it is legal anywhere,but again no idea about specifics of California.
In Oregon there is an outfit where a broker is partners with a rehabber in another company and he works the wholesale side along with his brokerage activities in another LLC where he is involved with the same partner. They have 3 companies, one that wholesales, one that rehabs and one that sells their rehabs via their brokerage company. They are marketing geniuses, hitting every angle.
You just have to be careful, and honest. I am a Realtor and I flip, wholesale, rehab. There is also a difference betweeen what you can do legally as a real estate agent as opposed to what you're supposed to do as a Realtor, which is stricter. Example, if you knock on a door as an investor, while revealing you're an agent also, you can make whatever deal you like, as long as it's legal. However, if that same owner had called you/your company about selling his house, in your role as a real estate agent, then you are obligated to advise him properly, and not then sweet talk him into selling to you at wholesale. It's more complicated than that, but you get the idea.
Do you have any ethical regulation that require you to maximize the return for the seller? If so, I would think wholesaling would violate that regulation. If you can make a profit in excess of your normal commission, then you're taking some money that should go to the seller.
@Jon
If you were contacted by seller, as an agent or working for seller as an agent-yes your obligation is to the owner.
If you are not representing the seller, and are negotiating as an investor-no, your obligation is not obtain highest return for seller-just treat him fairly.
It IS a tightrope sometimes!
There are no specific limitations currently existing in CA that limits realtors to what they can legally do. As far as realtors are concerned, say in California - they can wholesale properties as long as it undergoes legal procedures and proper documentation during the process.
I need some advice. I have been looking around at different websites and forums trying to figure out if a licensed agent can legally/ethically wholesale property in California. I have read conflicting opinions in my search.
Are there any agents on this site conducting wholesales? Or, does anyone know of agents wholesaling property?
Thanks!
I really don't know why people have such a mystical view of wholesaling a property, as if it's something unique to sell a property to someone who intends to sell it again. That's all you're doing really, I guess the gurus have made it a specialized niche.
Realtors have been selling properties to investors, probably from the beginning of agency relationships. If, as an agent, you keep your client informed, price it fairly for its condition, deduct for repairs and allow a reasonable profit for the work to be completed, you will be fine. The trick selling a property in poor condition is nailing down costs to repair and understaning what a fair contractos profit would be involved.
Yes, you are seeking the highest price in the market for the property under the circumstances, the highest price any investor would pay. And it's not the place of an agent to accept a price, the seller should be reasonably advised but that decission is entirely up to the seller, not an agent. Also keep in mind that if an agent advises a seller not to take an offer and the property remains on the market, you'll begin taking on the liability of a financial loss of your client arising from not taking that offer, so it's best to leave the acceptance up to the seller.
Now, that said, check with your broker as many states require a commercial designation to sell a property in a commercial transaction and they may see such deals leaning on the commercial side.
And naturally, if a property is in good condition and meets the conditions for the retail market, it is not a canidate for a wholesale transaction unless there are other requirements for a quick sale, thereby not meeting the definition of market value. :)
I know that it has been over two years as of this posting; however, I am also a new California Licensed Agent. Thus, these postings were very helpful to me. It sure clears up a few questions. Anyone in California that can answer additional questions on this topic regarding wholesaling and referral fees. I think many mistake wholesaling as doing something wrong, unfair or illegal; however, it is not. Every thing we consume or purchase starts with a wholesaler. A wholesale means that the distressed property is sold for what it is worth and then when it is brought up to standards then it is valued at the retail price. Therefore, everyone is getting paid for what the property is worth and the investor for the work performed. As an inactive CPA I can tell you that this is commerce, and homes is a product. I know that the subject is touchier, but the rules of commerce still apply, with other specific rules for Real Estate. I hope this helps.
I would also like to know if referral fees are illegal to an agent from an investor.
I am a licensed managing broker/investor in Chicago and I would like more information. I was told my former real estate teacher to stay away from wholesale deals. However I have met an agent who has done wholesale deals. I really want to wholesale because there is a lot of opportunity to make money. I would put in writing that I am a licensed broker however I am not representing the seller. I believe honesty is the best policy. Writing helps to protect yourself. Someone also mentioned that we could not receive commision and an assignment fee however...I know an agent in Chicago who uses the 6.0 contract and a buyer fee rider for the investor in which she assigns the contract to...If anyone has more information please share it...Thank you
Do you have to pay your broker a split? IF so, how would you split that assignment fee? As you know only broker can legally take payment for the sale or purchase of any property. Then do they feel comfortable with assignments as you are under their umbrella you need to operate within their rules. Worst thing is you lose your RE license and all your listings for what $2000-5000?
An Agent needs to be associated with a Broker and the agreement calls for splitting the commissions. If an agent were to attempt a wholesale outside his brokerage, that would be an ethical Conflict of Interest - - likely leading to a loss of the license.
I am licensed and you can absolutely wholesale with your license! I was a wholesaler before I was licensed, which allows for a bit more creativity, but you can still indeed wholesale. You must disclose that you are licensed and make sure you are using the proper contracts.
People over complicate this. Your fee does not have to shared with your broker as this is outside of retail real estate. I am actually hanging my license with an investor who is a broker and before I hung my license with him, I wholesaled him a deal! Hence me moving my license as he is familiar with what I do. Many Agents dislike wholesalers as they feel they are taking deals away from them. The reality is that there is enough for everyone. People need to change their mindset from a lack to an abundance mentality and they will see a shift in their lives.
Generally, many agents just want to say it's illegal for whatever reason, maybe they we told that, or they just don't know. Structure the deal properly, full disclosure, proper contracts and you are good to go!
In Illinois, you can't wholesale properties that you have signed a listing agreement for. If you want to wholesale a property whose seller you are not representing, as long as you disclose the fact that you are licensed and that you are buying the property to make a profit, it is possible. I will advise you to seek advice from a Real Estate attorney, as such issue is ground to loose your license if it's not done right. Good luck to you!
@Anita Gee, I know several agents that wholesale. As you and @Lumi Ispas noted, the key is disclosure and making it clear what capacity you are acting (Broker/contract purchaser).
As I would recommend that you avoid double dipping with an addendum like the other agent you are referring to. Just my $.02
Hi Federico.. I am a managing broker..I am incorporated for myself. I am independent and I am the managing broker/president as that was reason I became my own boss because I don't have to split commisioms. I don't want to wholesale under My brokerage however. I was wondering if I should open a LLC or just do business in my name..
@Anita Gee , no matter under what name you want to wholesale, you are bound to the same disclosures. Owning an LLC does not separate you from full disclosure. An LLC helps you with separating your interest in different properties and liability issues.
While you might want to be independent and not wanting to split commissions, you will also have to pay for all legal advice, accountants, bookkeeping, Error and Omission Insurance, office space, the cost of running an office, etc. Depending on the number of sales you plan to do, and if you want to hire brokers to work for yourself, you might discover that it is more cost efficient to split profits, not to add the fact that working in an office you get a lot of training and mentoring, which matter most in becoming successful.
@Anita Gee, use the approved purchase agreement for your state and just make sure you amend that the contract is assignable. I mention this as some contracts indicate that they can't be assigned, just take that part out and you are good to go!
You can also just structure your fee as a paid consultant fee...don't over think...people like to complicate things...A Realtor mentality is completely different from an investors, so talk to other investors who are licensed, not just realtors as most think its illegal and just don't get it. This will make you life much easier, trust me!
NYS real estate agent and selling a wholesale contact
Is this conflict with my real estate license ?
Depends, have your ran the deal possibility by your broker? I would start there. If you get a problem, you can then check NY laws regarding the transaction and see if you are or are not in compliance but if your agency agreement with your broker specifically spells out you can not, then you can not.
In Oregon there is an outfit where a broker is partners with a rehabber in another company and he works the wholesale side along with his brokerage activities in another LLC where he is involved with the same partner. They have 3 companies, one that wholesales, one that rehabs and one that sells their rehabs via their brokerage company. They are marketing geniuses, hitting every angle.
@Anna DOlivo, Uh that was 3 years ago. Not sure how that applies to today. If you care about your real estate license you need to be current and stay current.
@Anna DOlivo, Uh that was 3 years ago. Not sure how that applies to today. If you care about your real estate license you need to be current and stay current.