All Forum Posts by: Account Closed

I've asked this question in a similar, but different, way in the Realtors forum. But I really want different perspectives on it so I'm bringing the question here as well.

Scenario: I'm a wholesaler. In my farm area there is a Realtor. The Realtor is driving around this area all the time showing traditional buyers properties (or selling homes on the MLS, in the traditional sense). This Realtor from time to time comes across ugly, run down properties that he/she knows they can't themselves sell. They do know of wholesalers that could be interested. So this Realtor contacts a wholesaler (or list of wholesalers) with only a tip about the property, as in "Hey, I saw a property at 123 Main St. that appears to be vacant. From the outside it needs some work...". A wholesaler takes up the tip, contacts the owner, negotiates, gets the property under contract and assigns to a rehabber, yada yada. Again, the Realtor never acted as a sellers or buyers agent.

A) Is this legal for the agent to do and for them to receive compensation (i.e. bird dog fee/finders fee) from the wholesaler upon closing? Is accepting this fee within the rules governing real estate licensing*?

B) If "A" is all good, what's a reasonable fee, or compensation, for the wholesaler to pay the Realtor?

*I understand that these rules vary from location to location so this question may not be able to be answered.

I have a question for Realtors:

short version: What fee would you find acceptable (i.e. finders fee) for informing a wholesaler about a good deal out there that you saw in one of your neighborhoods?

long version: While out and about doing your job you come across an "ugly" residential property from time to time. Let's say that it's vacant and beat up. You notice it because you are in the neighborhood frequently as you are selling nearby homes and/or showing traditional buyers other properties. You know that none of your buyers would be interested in it but you know that a investor might be. What fee/compensation do you think you should receive for contacting an investor and feeding this tip? Note: you will not be the listing agent or buyers agent in this scenario. The investor will contact the owner and negotiate directly and, later, will be selling directly to a cash buyer.

I know that different states/counties/municipalities have different laws regarding receiving compensation for acting as an agent. I'm unsure if the scenario falls within the acceptable area of the rules.

Thanks for the opportunity to discuss this scenario.

So it's been about 5 weeks now. Can you share some results? How about response rate and lessons learned?

Originally posted by J Scott:

On the bright side, typical real estate investment activities for most of us are outside the reach of this new law, so you may not be directly affected.

Jason - do you have any more info or links to info specific to which activities are exempt? Thanks ahead of time.

Originally posted by stealthreinvest:

Do you file taxes for your LLC as an S-Corp for your wholesaling business?

After months of research late last year and into the beginning of this year I applied to the IRS to have my LLC be taxed as an S-Corp. I can't explain all of my reason for doing so but I felt it was the best route to go for me. Some time spent searching Google will turn up lots of good articles about the pros and cons of being taxed simply as an LLC vs an LLC categorized as an S-Corp for tax purposes. For me it came down to how the tax rates would be figured.

I will note that there seems to be a lot more paperwork involved when going the S-Corp route. I mean this both in terms of the IRS application and regular filings.

So what happened??? What was the outcome???

I know this is topic is a few months old but reading it lead me to do some research today. What you quoted from the laws of Virginia is not correct.

Originally posted by Financexaminer:

I see you are in Virginia. Go to Commonwealth of Virginia Code 54.1-2100, real estate law.
Anyone who, for compensation, sells, offers to sell, buys or offer to buy, or negotiates the purchase or sale or exchange of real estate...leases or offers to lease or rents or offers to rent any real estate or improvements thereon is required to hold a real estate license.

The code reads:
"Real estate broker" means any person or business entity, including, but not limited to, a partnership, association, corporation or limited liability company, who, for compensation or valuable consideration (i) sells or offers for sale, buys or offers to buy, or negotiates the purchase or sale or exchange of real estate, including units or interest in condominiums, cooperative interest as defined in § 55-426, or time-shares in a time-share program even though they may be deemed to be securities, or (ii) leases or offers to lease, or rents or offers for rent, any real estate or the improvements thereon for others.

This mentions nothing about needing a license. Here is the link to the text: http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+54.1-2100

Originally posted by Financexaminer:

54.2105-2 penalties, costs of criminal investigation by the department or board, and $1,000.00 fine or all profits from such transaction, which ever is greater

This code just quoted mentions nothing of any fine, let alone a dollar amount. See the code here:
http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+54.1-2105

Furthermore, 54.1-2103 A.1 states: The provisions of this chapter shall not apply to... Any person, partnership, association or corporation, or their regular employees, who as owner or lessor perform any of the acts enumerated in §§ 54.1-2100 and 54.1-2101 with reference to property owned or leased by them, where the acts are performed in the regular course of or incident to the management of the property and the investment therein;

I'm not arguing whether a referral/finders fee is legal or otherwise. I'm only clarifying something that I believe is incorrect as stated.

To my understanding, you should not have to record any sort of minutes for a single member LLC. If you were a corporation it would be a different story.

Back to a comment Steve made - in my 9 to 5 I am paying for expenses out of my pocket (cash and personal credit card) daily. I go to a lot of meetings so that means lots of parking garages, parking meters, lunches, gas, etc. I expense it all and get monthly reimbursement checks from my company. But, as Jon mentioned, keep ALL of your receipts. That way, if for some reason you were ever questioned about the purchase, you will have proof about what the expense was (assuming it was a qualified business expense).

At this point you aren't commingling funds. You're either funding the LLC upfront (as Jon suggested) or being reimbursed for qualified business expenses. Now, if you go out there and take your family on a vacation and try to write it off..... then you're commingling and that's going to come back and bite you in the ***.

Great question Will. My REI website is brand new (we're talking new car smell new) so I don't have and stats to share w/ you but I, as a mobile phone user, browse web pages via my iPhone constantly.

My day job has me tracking this on our website on a weekly basis and we've see a regular uptick in the number of mobile browsers; especially over the past 6-9 months.

I don't think I can post URLs but if you Google ipadpeek you can see what your site looks like on the new iPad. I was told today that this isn't a "mobile" device in terms of web browsing (no explanation was given to me to further explain that) but it's probably worth a minute of your time to make sure your website checks out.

Wow, I'm embarrassed that I didn't see that option! Thanks Steve.