Wholesaling as a Real Estate Agent

16 Replies

I just got my license recently and would rather get involved in the investment side of things. Is there any legal problems with being a RE Agent and finding motivated sellers, assigning contracts and things that go along with wholesaling??

Thanks!!

You need to check with your broker but in Ohio doing that while liscenced can have repurcusions. Your broker may also require you to run any transaction that you are involved in through the brokerage. Good Luck!

Originally posted by "halln27":
I just got my license recently and would rather get involved in the investment side of things. Is there any legal problems with being a RE Agent and finding motivated sellers, assigning contracts and things that go along with wholesaling??

Thanks!!

Don't make it too hard on yourself. The easiest thing to do is to get the home owner to give you their bottom line price. Once you have that, add on your commission and that is your price to other investors.

All I do is have the home owner sign a FSBO commission agreement and find a buyer. I have made some great money doing it.

Forget trying to wholesale the contract. Your a Realtor and there is no need for do that. Wholesaling will be outlawed in most states in the next few years.

I know that there is a push nationwide by NAR and other Lobby groups to make wholesaling without a License Illegal.

If you are serious about making a full time living off of wholesaling properties you should just become a Realtor and do it legit. I don't understand why more wholesalers aren't Realtors.

FYI, Being a Realtor rocks. I make my own schedule, live on my terms, and make great money. Plus I am on the inside of all the good deals. :beer:

:protest: :protest: :protest: Most of us Wholesaler's do it to just generate some quick cash. Other's to gain the experience and knowledge of how thing's work to become full time investor's. And my plan is just to wholesale until my market start's picking up. Our market is slow right now and most of my rehabber's stop buying. So the only buyer's i have at this moment are my landlord's. And yes it will hurt giving them a lot of equity on these deal's but hey it's temporary and im sure a lot of Wholesaler's won't stay Wholesaler's, I know i won't!

:superman: "Natural Born Go Getter" :superman:

Is it ethical for a Licensed Agent to have a seller sign a listing contract offering their property at their lowest price????

Our real estate agency in Oregon is tough on licensed brokers. We are suppose to function in the best interest of the party we represent. Is offering to sell a property at the seller's lowest price doing that?

How can a licensed agent wholesale properties while remaining legal and ethical through the process?

Originally posted by "agentpeter":
Is it ethical for a Licensed Agent to have a seller sign a listing contract offering their property at their lowest price????

Our real estate agency in Oregon is tough on licensed brokers. We are suppose to function in the best interest of the party we represent. Is offering to sell a property at the seller's lowest price doing that?

How can a licensed agent wholesale properties while remaining legal and ethical through the process?

You have to check your state laws for what is called a "Net Listing". In Illinois "Net Listings" are allowed.

Is a "Net Listing" ethical? Yes. Unless you are holding a gun to someones head to force them to sign the agreement or if you misrepresent what the agreement is.

Most sellers are not interested in doing a "Net Listing" and I would never push that on them. There are situations where somebody needs to sell quick to avoid foreclosure where a net listing is in the seller's best interest.

For most people they have time to sell and get the best price. For others, they need to sell now or they will be in some serious trouble.

I have not heard the term "net listing", I'll definitely check into that.

I like your idea of having the seller sign a FSBO commission agreement and then finding a buyer. This method would seem to guarantee you commission and keep the transaction legit.

Have you lost deals using this method? It would seem that the seller would not be locked into selling the property to you or your investor.

Do you run the transaction through your RE brokerage and work it like a standard deal with standard paperwork?

HI,
This really works well if I put any ads or signage that says "I Buy Houses".

The people who respond are in need of selling quickly and don't have the time to be listed on the MLS.

If their bottom line is low enough I will quickly send the opportunity to my investor clients. If the home owners asking price is close to retail for their home I tell them that it will be impossible for my investors to purchase the home.

If they are asking too much or close to retail I will push a full service listing. If their price is low enough I won't need a standard listing because I have tons of ivestors that will buy the property.

Real Example:
A gentleman called me and said he had inherited a significant amount of money and he wanted me to find a buyer for his townhouse. He said if he got 115K he would be thrilled. I took his info and ran the comps for his property. To my surprise, the other townhouses where selling between 160-170K. His unit did need about 10K of upgrades/repairs, but after repaired value was 160-170K. The home was worth 145K as is!

Here's what I did next. I had an investor looking in that area and I sent him the details. I told him the price was 120K, and there would be ZERO negotiating.(Remeber, the seller need 115K). I sent the seller a commission agreement of 5K to sell the home. Once he signed it I brought my client and his partner to view the property. Then we wrote up the sales contract at 120K.

Everybody won! The seller got his 115K(he still paid his other closing cost), the buyer got a great investment(25K instant equity) and I made 5K.

Oh, and yes you have to put it through your broker to keep things legit.

The bottom line you need investors and you need sellers to make this happen. If you don't have investors that are ready to pull the trigger if the numbers make sense, you will need to find them.

I hope this helps.

That is extremely helpful. This seems to be a very smart legitimate way to work these deals. Many of the "wholesalers" I've talked to in the past seem to be a bit on the "shady" side. Thank you for sharing!!!!

Originally posted by "halln27":
I just got my license recently and would rather get involved in the investment side of things. Is there any legal problems with being a RE Agent and finding motivated sellers, assigning contracts and things that go along with wholesaling??

Thanks!!

There are very big legal issues. Notice all the agents above who actually have experience doing similar deals do so with full disclosure. They are setting the commission pretty much at the normal level so there really is little room to do a wholesale deal like an investor where your profits are the spread.

As an agent you have legal responsibilies to clearly identify who you are representing and then follow through. As a wholesaler without a license (and assuming the wholesaler is doing legal deals) you are working for yourself, representing no one as an agent and make what ever profit you can effectively earn.

A license ties your hands in one way while opening up other options (listing properties that turn out to be priced at full retail).

Assuming you work under a broker the broker can have house rules that are strictier than the state requirements. Ask.

John Corey

I could not agree more with John. You have to be very careful about state laws and company rules. I happen to work for a small brokerage with very little rules and have complete autonomy in my work. But I still have to becareful that I keep everything on the up and up. One mistake can cost me thousands of dollars in fines and possible even loose my license.

Question for wholesalers... Has anyone had problems with the mortgage company funding a transaction that has a contract that has be assigned to somebody else? I am confused to how it all goes down and how the wholesaler is paid. As I stated before, I take my fee as a commission, but how does it show at closing for a wholesaler?

Thanks

Originally posted by "REI":
As an agent you have legal responsibilies to clearly identify who you are representing and then follow through.

Very True. Agents need to realize that their legal obligation is to work in the best interest of the party they represent.

That's exactly why an agent who takes a listing from a desperate seller and sells it significantly below market opens the door to legal issues. The agent could lose his/her license if the home owner went to the board of realtors and said he was taken advantage of.

That's what I love about Matthew's system. You have the home owner agree to pay commission using FSBO contract. Then the owner is representing him/her self. Your obligation lies with the investor you find to buy the property.

Originally posted by "agentpeter":
Originally posted by "REI":
You have the home owner agree to pay commission using FSBO contract. Then the owner is representing him/her self. Your obligation lies with the investor you find to buy the property.

That's right. The client is your buyer/investor. The seller is a FSBO and in no way is your client.

Plus, I have never had the seller think that they where taken advantage of. I actually had a seller give me a closing gift because he was so happy I sold his home for him at his price with in a week of him meeting me.

Originally posted by "Foreclosure Specialist":
I actually had a seller give me a closing gift because he was so happy I sold his home for him at his price with in a week of him meeting me.

That's great! There's nothing better than helping a bunch of people and earning money in the process.

I know I'm digging up an extremely old post here, but I wanted to chime in to the solution given here.

Why get a FSBO contract instead of just being the buyer of the home yourself? Then look to find an end buyer that can do a back-to-back closing? You're not representing anyone then, right? As long as you disclose that you are a licensee in the original contract, and that you are buying the property as a principal & for your own personal interest, I don't see why any other methods are needed.

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