How to explain "wholesaling" to Real Estate Agents

Question

I just left the office of a broker, I know well and who has been an agent over 20 years.  She says she had never heard of "wholesaling" and didn't understand how I could market a property "I didn't own".  This came up b/c one of the properties I have under contract I was approached by one of her agents on behalf of a buyer to purchase the property.  I explained 'wholesaling' to the agent and said there was no provision to pay a standard commission but I would pay her a flat fee.  She said it had to go through her broker, which is fine but now just seems to be making things even more complicated.  Are real estate agents really that unaware of what wholesalers do?  Are they not aware of an Assignment of Contract form?

Phillip Dwyer · Answer

An alternative would have the buyer pay his agent's commission.

Aaron Mazzrillo · Answer

Tell them it is a lot like what they do, get paid to sell a property without ever owning it, but it is a lot less work, definitely less paperwork, and no obligation to get so involved. Oh, and we make a whole lot more money.

Bill Gulley · Answer

Good point Phillip! Same dollars.

Wayne, yes a Realtor can earn a fee from any bum on the street, it's a consultation fee, a document processing fee, they are not limited to commissions on sales unless thier broker has made some restriction to services and a broker usually won't restrict an agent's earning capacity due to the nature of thier independant contractor status as an agent, unless there are legal or liability matters.

It's pretty tough for an agent to accomplish thier duties to obtain the highest price (or lowest price for a buyer's agent with a non-listed property) at a price that leaves room for a wholesaler who doesn't touch the property. If a listing agent were involved, they really aren't doing thier job if they allow a sale at a price where the contract can be flipped at a higher price! If a property is listed, a Buyer's agent still has a responsibility to the owner as they are the selling agent for that owner, they need to reach a fair price having somewhat of two masters, at the lowest price that is acceptable given the circumstances, but not, say digging into false claims to justify a lower price because they may be able to manipulate a lising agent and owner. But an agent representing a buyer on a property that is not listed is in a slightly different boat, but they still need an authorization to sell, but that may be structured without any duty to advise, much like a transactional broker/agent.

There is the delima for agents in wholesaling deals. :)

Belinda Lopez · Answer

Correct everyone, I was selling my interest in the property via the Assignment process.  The original contract was a standard sales contract which said "Belinda Lopez and/or assigns" but my attorney says any contract is assignable even without that phrase unless the contract explicitly states it's not assignable.  Many REO properties are only sold under non-assignable contracts which is why you have to close on the property before you can sell it and usually can't wholesale those type deals.

Wayne  Woodson, this was not an MLS property but an abandoned property I had found over a year ago.  I contacted the family and discovered the owner had passed away without a will and there kids from two marriages and his widow and it took over a year to get the Title cleared so it could be sold.  I negotiated with the family to purchase the property and once under contract then marketed to my investor list to sell/assign the contract to a new end buyer.  I could have done a double closing but the Title company said I would then have to bring in funds for the purchase and then sell to my end buyer; even if it took place on the same day.  With an Assignment of Contract, the end buyer pays the assignment fee, then takes my place on the contract.  Since the original contract did not factor in a buyer's agent and this buyer was using an agent ( he's a new investor and there were language barriers as well), the agent then contacted me on the buyer's behalf.

It really did complicate things and I could have just told her that , sorry I don't work with buyer's agents but the guy really wanted the property and since he was new, I felt it only right to pay something to the buyer's agent as she was helping him out.  Now I just have to figure out how to add that fee into the Assignment contract so the Title company will pay her brokerage.

Sharon Vornholt · Answer

Belinda -Wayne is right when he says, "You have the right to market a property as long as you have it under contract. You have what is known as "equitable interest" in the property which is how you can market it without a license".

You are marketing that equitable interest and if you are doing an assignment, you are simply "assigning" that interest in the property.

Sharon Vornholt · Answer

My closing attorney says, once you have the property under contract you are simply just selling your interest in the property.

Wayne Brooks · Answer

Belinda wanted to pay a reduced commission, but yes it has to go through the broker.

Wayne Woodson · Answer

My answer this thread would be don't. Some Realtors simply just don't get it or will just tell you it's illegal. Don't get me wrong, wholesaling can be illegal if done wrong. But usually isn't if you disclose and follow your states guidelines. Yes, you have the right to market a property as long as you have it under contract. You have what is known as "equitable interest" in the property which is how you can market it without a license. I even put have the wording "buyer has right to market property" in my contract so the seller knows that I will market the property.

Correct me if I'm wrong but I don't think a licensed agent can collect any form of payment from an unlicensed professional i.e wholesaler. Also doesn't any form of payment have to go through the broker first then the agent?  Belinda are you trying to buy properties off of the MLS or work out an referral agreement with this agent? I am just kinda confused in your post here as to what you meant by"there was no provision to pay a standard commission but I would pay her a flat fee".

Jennifer Lee · Answer

No one in my brokerage knows what wholesaling is
And when I try to explain, I get the exact response.
PLUS "dont u get involved, or you'll lose you license."

How to explain "wholesaling" to Real Estate Agents

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