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!
Just in case it's helpful for anyone on this post, I specifically called the CAR (California Association of Realtors) legal hotline and spoke with one of their available lawyers and they said that there is no issue wholesalers, doing off-market deals, etc. as long as you're not using CAR forms. If you do use CAR forms and do things "on-market" then it's really more of a question of your brokerage's tolerance. As stated by many in this thread, many brokerages probably do not allow for this for liability concerns so find one that is OK with it, but legally speaking, at least according to the CAR legal hotline, there are no issues. Re: one person's question on "commission," if you're taking commissions for listing the property you need to be going through your brokerage, but a wholesaling fee is not the same thing as you aren't getting paid to find a buyer, you're getting paid because you got the property under contract and are assigning that contract to a new buyer which is not the same thing.
The chief legal officer for the CA Department of Real Estate pretty much answered this question in his 1977 letter to Ted H. Gordon Esq.
He said, in part, “I know of no statutory law, regulations nor decisional law which imposes any special duty upon a real estate licensee acting exclusively as a principal in a real estate transaction. …”
He goes on to talk about all the duties you have when acting as an agent.
My take is you don’t want the seller to have any reason to believe you are acting as an agent in that specific transaction. Unless of course you want to be an agent in the transaction, in which case you have a fiduciary duty to the seller. I know some folks use a statement something like ‘I am a licensed real estate agent acting strictly as a principal, not as an agent, in this transaction’ to make things crystal clear.
Re a salesperson working under a broker. There is a contract between broker and salesperson, that both must honor, including any provisions regarding salesperson acting as principal.