Being a RE agent, but also wholesaling deals?

Question

Hey everyone,

Forgive me if this question doesn't make sense. I'm still very new to everything real estate. I am currently finishing up my real estate license procedure so I will be a licensed agent within the next two months. Like I said, I still am new to everything real estate whether that be agency or investments.

My question is this: Can you be a real estate agent but also wholesale deals to investors as well? From what I can tell, I, as an agent will be similar to an investor's "bird dog" when it comes to finding deals. Say that during my work as an agent, I come across a few deals that I feel would be easy wholesaling properties. I find these deals, put them under contract, and then assign them to an investor for a wholesaling profit.

Is this scenario profitable? Frowned upon? Encouraged?

Like I said, I'm still feeling my way in to this wonderful world of real estate so I won't be making any deals within the next 6 months or so. Thanks in advance BP community!

Dev Horn · Answer

Looks like you've gotten some great advice here.

I'd add that the source of the lead is an important factor.  Any lead generated thru the broker's advertising is his/her opportunity that they are in essence sharing with their licensed salespeople.

For your investment deals, you will need to have a discreet advertising method that is in no way associated with your brokerage, so there will be no confusion about who produced the opportunity.

Then, yeah, disclose that you are licensed but you're acting as an individual buyer, and you are not offering to represent them.

Our licensed investors also include a disclosure clause* in the Purchase Agreement, and many provide a "HUD-like" break down of what is being offered, what they expect to invest in the property, what they expect to sell it for, and their expected profit.

Here's the good news to tell your broker: As you generate leads for your investing activities, most of those leads will not turn into purchases (maybe 1 in 15 or 20 will).  If you generate 20 leads, probably 5 to 8 of those leads will actually be LISTING opportunities that you can bring back to the brokerage.  That's free money for your broker, and I guarantee you can list more than you can buy.  This type of marketing is GREAT for agents because most people who contact us are not currently represented - and we KNOW they are interested in selling.  That is found money for you and your broker.

*FYI - This is a clause we've used in the Purchase Agreement with the seller:

DISCLOSURE: The Buyer may be a licensed real estate broker or salesperson (agent).  This agreement is not an offer of real estate brokerage services, such as an offer to represent the Seller or list the subject property for sale on the Multiple Listing Service (MLS).  The Buyer is not representing or represented by any broker in regard to this transaction.

Chris Soignier · Answer

You need to do more than just disclose your license status - act like you have a fiduciary responsibility to the seller, and you'll stay out of trouble.   Having a license has both pros and cons:

Pro:

1) Access to MLS, which includes much more than just comps.    I also get an e-doc signing system, leads, and lots more

2) Greater opportunity to monetize leads, since I offer an extra solution (listing) than most wholesalers and can position my proposal to best meet their needs, vs. my needs if I'm a 1-trick pony

3) It's another way to monetize your real estate activities, w/o involving your own capital beyond reg. operating and marketing costs.

4) I pay 0% commission on my side of my MLS transactions.    This might enable me to pay more or sell for less.

5) I can go look at any listed home I'm interested in, no waiting to align schedules w/ anyone else.

Cons

1) Being a REALTOR is expensive!   Licensing, training, MLS, board dues, desk fees,etc.   One decent transaction per year will pay for those costs, though

2) You're held to a higher standard, and can't pull the wool over little old ladies' eyes to "steal" their houses.     Not really a con, but perhaps a comp. disadvantage at times.

Kim Knox · Answer

A brokerage may have limitations on you conducting Real Estate activity without the involvement of the brokerage, while you are licensed and active.  Regardless of using your brokerage for a transaction, the moment you are actively licensed, you lose some of your ability to "take advantage" of an opportunity.  When you interview with Brokerages, tell them what you have in mind.  Their E&O insurance often does not cover self represented transactions, so you must find out their company policy on self represented transactions.

Chris Soignier · Answer

I wholesale and am a REALTOR, which is perfectly legal in TX.    First, you have to disclose you're a licensed agent, and be transparent that you want to buy it to make a profit.  I provide my CMA based on comps. on an "as repaired" based, and advise prospective sellers whether they'd be better off selling to me or listing the property, and that I'm happy to assist them whichever route they decide to take.

Will I lose some deals w/ the extra disclosures required?   Perhaps so, but I sleep well at night adhering to a higher standard, and hope that sellers will see the value of working with someone who doesn't have a vested interest in pushing their property sale through one channel or another.    BTW, my broker is very investor-friendly, and totally cool w/ wholesaling as long as I comply w/ the disclosure requirements.

Brennan Boyd · Answer

Chris Soignier Thank you so much for your reply. That answered my question. I definitely would not risk getting myself and my broker in jeopardy because I did not disclose my license status. Somewhat of a side note: do you think it gives you an edge as an investor to also be a realtor? Or vice-versa, do you feel that it gives you an edge being a realtor who also invests in RE?

Chris Soignier · Answer

If I source a deal, I'm taking equitable title.   First, speed is often of the essence, and I don't need another party in the way of locking down a property.    Secondly, if my buyer fails to close, I could be left empty-handed, whereas equitable title gives me options to salvage the deal, either purchasing myself or re-assigning.   Third, equitable title provides me with greater control of the transaction.

Sometimes the simpler path is lined w/ potholes of unforeseen circumstances.

Brennan Boyd · Answer

Thanks guys! That kind of clears it up. I don't think I worded it correctly though.

What I was trying to say and did so very poorly, was this:

While in my day-to-day duties as an agent, I come across a property which I think is a good deal. I put this deal under contract, not acting in my capacity as the seller/buyers agent, and I wholesale it. All without earning commission, just a wholesaling profit.

I guess if I was going to ask one question it would be: Can I be a licensed real estate agent, and in my free time and personal investments; wholesale properties without earning a buyer/seller's commission?

Alex Franks · Answer

Love the post especially the last sentence ...

So true

Hope all is well

Alex

Neil G. · Answer

most if not all Brokers have developed strict associate guidelines such as a total BAN of dual agency on any property in which there is an agent/broker OWNERSHIP interest for whatever the time period (ie the contingency contract u assign as a wholesaler).

Being a RE agent, but also wholesaling deals?

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