Are We Brokers?...Illegally?

Disclaimer: I know, I know, talk to my local real estate attorney. I hereby release any person or entity from damages caused directly or indirectly from the suggestion or advice given on this topic. The benefits out weigh the so called liabilites. :deal

Here is the spill…

I don’t have a Real Estate license and therefore am not a Realtor. I specifically don’t want to be by my own accord. Mostly due to the disclosures I must comply with and continuing education costs. I’m already a licensed p&c insurance agent, a loan officer, and a real estate investor. So that is enough for me personally. I understand the benefits of getting a license however I do not think I ever will.

With that being said I must tell you that from time to time in the real estate community there is this thought that because we as real estate investors are very similar to agents, we are somehow breaking the law. Furthermore, that we shall just give in and get a licensed. I want to address the first issue here.

A good example is that just the other morning I was having a telephone conversation with my good friend and commercial real estate agent “Jebidiah”(name has been changed to protect the innocent). He stated a well known residential agent believes that what we do as investors is illegal. Key word “is” not “should be”.

Now I asked Jebidiah how so and he went on to explain that we cannot attempt to sell a property using direct mail, internet or the newspaper without having the property under contract. And most certianly shall not post a picture of the property along with a sales price and our contact info on our investment websites.

I do not believe this one bit and protest that if this were true then there are some individuals and companies that would be in violation of this such as:

1 Lead based websites that profit from selling pre-foreclosure leads to investors.

and

2 A person who may post a bulletin at work, flyer online, or newspaper ad to help their family member sell there property and pervent a foreclosure.

Lastly, we in the real estate field should welcome any addition to our network of associates. Loan officers, contracters, private lenders, conventional lenders, attorneys, cpa’s, appraisers, title escrow officers, and especially realtors. I just hope we are welcomed in the same way. We help keep the transactions going just as anyone else.

I’m am curious if my fellow investors have experience any of this prejuduce and what steps they took to justify who we are and what we do.

I ignore them and do what needs to be done. Legally I can sell my option or assign my contract or sell my own property, so I do.

well, couple of notes…

Most ads in the Real Estate classifieds section of papers violates Regulation Z. They get away with it because unless someone complains, no one can do anything about it.

I am not entirely sure what is involved with the companies that sells leads and how they get away with it. I think there is lack of interest in going after them more so than them not violating some state law.

While some may think wholesaling and flipping options is “legal” since you are selling an interest in the property, in the end it is up to the court to decide and interpret it. I am not aware of case law regarding this, but I never looked for anything.

Does this mean you shouldn’t do it? no not what I am saying… I am just saying, do not interpret the law on your own and always be careful :slight_smile:

I am sure if you look around long enough you could find some B.S case that has come up regarding the issue, but in the mean time thousands of other deals are going on across the U.S, out numbering the few bad egg deals 1000 to 1.

As a wholesaler you typically are using 3 options, which are all legal.

  1. Lease option
  2. Assigning, meaning selling contracts, not homes.
  3. Back to back closings, same as normal closing just a shorter time line.

People will always scauff at what they don’t understand in an effort to feel mentally superior on some level, but in most cases the exact opposite is true.

Good luck

I guess the difference is that companies that sell leads are not selling real estate. They are selling leads - they get paid for what they sell.

2 A person who may post a bulletin at work, flyer online, or newspaper ad to help their family member sell there property and pervent a foreclosure.

This is an interesting one - I believe you can do that as long as you are not getting paid. I believe that the problem arises when you get paid from a real estate transaction. But this is based only on my belief - not on solid facts… so take it for what it is worth.

Here’s my professional opinion (Opinion being the key word).

Item #1: Companies selling leads. A) they are selling leads, not houses and B) practically everything that they sell is already public knowledge, just packaged into a neat little box. You’re buying a service.

Item #2: A person that posts a flyer on a bulletin board at work/etc usually is NOT the person that is involved in the transaction. IE, it ain’t their number on the flyer.

As to an investor selling real estate “being” illegal, first thing is state law can and does vary, so you have to know your state law (or consult an attorney).

That said, in most cases in order to NOT be acting as an RE agent without a license (the accusation), you have to be a principle in the transaction (a buyer or a seller). If you are the seller (ie, the owner), then no problem.

However, if you are doing an option, an assignment or even a double closing, you would be treading a tight rope on advertising/marketing the property BECAUSE you are NOT selling the property (you don’t own it), you are selling the option/contract/right to buy, UNLESS you specifically mention that what you are selling in the ad (the option, assignment, etc.)

As a REALTOR(R), I cannot knowingly market a property for a client that is NOT the legal owner (on the deed) of that property.

All that said, you have to decide what is worth it or not (does the risk outweigh the reward)? In other words, if it’s working and nobody’s complaining (except the agent that can’t sell), is it really a problem?

Raj

As far as buying leads goes, I can see it both ways:

a) you are hiring a company to act on your behalf. HOWEVER, at least in texas, you have to work for that company exclusively to not require a license to buy and sell houses on their behalf (someone in Texas correct me here).

b) they could be considered violating certain state laws since they are marketing to find sellers, and then putting sellers and buyers together for a fee.

I just don’t think anyone makes a case of it because it is no one is complaining and because it crosses state lines and is online.

I disagree Fadi.

Most lead generating websites are selling “leads” that are either foreclosures or prefore’s. In most states, that information is already public knowledge, just not laid out in an easy to gather way. They are packaging that info and charging you to do it. It’s a service.

Even lead websites that would somehow focus on putting buyers and sellers together would not violate any laws that I am familar with as long as they did not do anything more than give out contact information. You only act as broker when you become the middle man or transaction specialist in between AND/OR your fee is based on the outcome of that transaction. If the buyer and seller are speaking directly to each other concerning the deal, no violation. If you (or lead generating site) charged one or both for the information only (ie the contact numbers), then I see no violation.

However, state laws do vary and you’d have to know your particular state laws to be sure.

Raj

oh you are talking about different type of leads. You are talking about lists. I am talking about websites that adveertise “we Buy Houses” on the web and sell each lead that comes in.

My view is that if you advertise to find buyers, then sell the lead to someone, then you are acting as agent. This is just an opinion guys, I am not against it at all. just my thoughts.

Again, the only way to be acting as an agent is if you actually negotiate the deal between the two parties. Finding someone that wants to sell a property and finding someone that wants to buy and charging one or both to put them in contact with each other to work out the deal on their own would not be acting as an agent (IMO).

Raj