I have been a realtor for some time, but I am very interested in Wholesaling. How does wholesaling work if you are a realtor?
Swirlaze, I haven’t seen the switch yet that comes with the RE license, but I’ll keep looking. :biggrin
realestateconnex, first, you’d have to clarify to us what YOU mean by “wholesaling.” The reason I say that is from the recent posts on here, most don’t truly understand the concept.
Generally speaking, you may have some more hoops to jump through than someone who isn’t licensed, plus you also have your BIC to content with, but agents that have foreclosure listings are basically wholesaling, just to the public.
Raj, see, I told you that I was confused.
Here’s the deal. For the past few years I have been looking at what it would take to become a real estate investor - at first a rehabber. I like the creative side of that. But given the current market conditions, specifically in Ohio, “foreclosure heaven”, I’ve decided the rethink that a little.
My last transaction was between me as the listing agent and HomeVestors as the buyer who in turn sold my listing to another buyer for a cool $22K profit (of which the new buyer’s agent took $10K in commissions). I was outdone since I did a favor to the seller (who is a relative of a friend of mine) and only charged them $2640 of which I had to split with my broker. It was then that I realized that I am truly in the wrong business.
So I think I asked questions that combined to situations, but I just wanna know if I as a realtor can buy a house from someone at a “deep discount” and then resell it to an investor and make $5-$10K - without any of my money, like HomeVestors did???
You can wholesale, but need to do a lot more disclosing. Most agents will write something into special provisions such as , “seller understands that buyer is a licensed real estate agent and intends to sell/assign the property for profit.” I’m not sure if your contracts have special provisions section (like ours in TX), but there’s usually a section that allows additional stipulations.
In Texas, it’s mandatory to disclose forms of representation (buyer rep, seller rep, intermediary) and tell the seller that they have a right to have an agent or lawyer represent them. If they ask for comps, it’s best to provide some market data (not an analysis) that shows all homes active pending and sold in their area. It may seem like a lot, but getting sued and having your license up for review is no fun. It’s better to be safe than sorry.
I’m in TX & I recently wholesaled a property to a Realtor & they included the very language in the contract that Deeinaustin is talking about.
:smileThanks DeeinAustin and others for all of your help. I’m clear now!
As stated, as an agent, you’re going to have to disclose more and have more contracts in order to buy for a discount than a non-licensed individual.
Before you jump into it, though, I’d check with your state’s RE commission on the codes/laws concerning RE agents and buying property. Different states do have different laws/guidelines. NC, for example, the agent represents the seller by default, even if the agent is the buyer, if they are the only agent in the deal. Even if the seller agrees that agent does NOT represent them, the agent still has to disclose to the seller their professional opinion of the value of the home and time on the market. Makes it pretty difficult (but not impossible) to buy.
Also, your RE Commission may have limits on what you, as an agent, should make on a property that you bought to resell. It’s one of the reasons for all the disclosures but you could be hit with an “excessive commissions” fine if the commission feels that you did not act in complete good faith, at least in NC.
Finally, though a much easier problem to deal with, is finding out what your BIC thinks about you doing this. There is the business aspect of it (do they mind their company being associated with a “discount buyer”). But also, the BIC is legally responsible for your actions (or inactions). Again, state codes may vary, but they may not be comfortable with the risk factor to them or the company.
I have done a good number of wholesale and flips and I am a licensed agent as well. I have had no problems, I just completed my 7th flip this year today and all seems well. One problem I do run into as an agent who buys listed properties is that many banks wont pay a commission to a realtor acting as a buyer. In this case I will give my mom the contract, then deed myself on and her off later on, this way I can get a full commission.
I always dislose in purchase agreements “buyer is a licensed realtor and is purchasing/selling this property for profit/loss”
One other problem that I run into being both realtor and investor is that people often think that because I am a real estate agent that I must have some wild card up my sleeve and will try to rip them off.
Lets face it, you can get sued anytime anywhere for anything nowdays, but dont make the mistake of never getting going for fear of being sued.