Giving sellers a choice--cash offer or MLS?

Question

I've searched BP for anything related to RE agents acting as wholesalers, and there's not much. Forgive me if this is a repeat topic.

I was considering this for a market campaign, but was afraid it might cross a line somehow. Specifically, if someone received this letter and thought it was a ploy or somehow dischordant, they could report it to the Realtors board and I'd be investigated. BUT, I couldn't find anything in the Realtors Code of Ethics that would make it unethical. My brokerage would have to agree to and approve the marketing, then take a cut if any wholesaling occurred (so I understand). Here's what the letter would say:

Dear Homeowner,

My name is Heidi Rogers and I am looking to buy and sell homes in the Newport area. Your house at 123 Main St. caught my attention and I was hoping you'd be interested in selling it.

I can offer you two options:

1) A cash offer. I can offer you a cash amount and close within 5-7 days. The benefits of this option are that you wouldn't be paying for paint and other repairs, Realtor's commission fees, or closing costs, and we could close the deal as soon as you needed.

2) I can list it for sale. As a licensed Realtor with At the Sea Real Estate, I could list your house on the MLS for market price. It could take many months to sell, but I would work hard to market the property, and you would stand to gross a larger amount by selling it retail.

If interested, please call me at...

Is this a good idea? Thanks in advance.

Tom Day · Answer

It is my understanding that as long as you disclose that you are a licensed agent you have not crossed any ethical boundaries. Just because you have a license that doesn't mean you can't make offers and buy properties. If your broker requires he get a cut of of your outside business, get another broker. Is he sharing in the marketing expense? Assuming any risk? My approach is to market myself as an agent only. That way I cast the widest net. When I am with a seller who has a property I am interested in, I would ask if they would entertain an offer from me. Then explain that the reason it is less than what it would get on the open market is because A) There is no commission. B) It will close very quickly and painlessly without contingencies. Be up front about everything. Yes, you expect to make a profit. Its what you do for a living after all.

Jesse Rivera · Answer

Two Thoughts: 1. Why would your broker take a split on a wholesale deal? They need to ok the paperwork, in all RE deals, but this is a private transaction, no commissions involved. If you sold your house in a private sale, without paying a commission, would your broker get part of your net profit? 2. KISS, keep it simple. I would just offer to buy the house for cash, any condition. Don't complicate it. Then, when you get them on the phone (or better yet, in person) and build a little rapport, if they don't accept your offer, tell them the advantages of putting it on the market, and ask them for the listing.

Karen Rittenhouse · Answer

Heidi: The main thing, to begin, is always disclose that you're an agent. Every state is different as far as agent regulation. You must check with your local Real Estate Commission before you do anything like this. I would not want my agents to do this.

Anson Young · Answer

Tom Goans - curiosity got the better of me so I called my broker and he said this was 100% ok as long as you disclose you are a licensed real estate agent. I went over it twice to make sure he knew exactly what I was talking about and he said that was fine. No issues at the company level and none with the commission. I was wondering this myself when I first saw Heidi Rogers post.

Wayne Brooks · Answer

Heidi, any RE commission earned for selling someone's property must go through your broker. A profit from the buying and selling RE, not a commission, does Not have to go through your broker.

Heidi Rogers · Answer

Haha, Dev. I see what you're saying! So it might be better to go the route of being an investor who just happens to be an agent, too. Karen, thanks for weighing in. I know my Principal Broker is not keen on the idea, but hasn't said no. I want to understand all the legal issues before I approach her again. It's good to know that you wouldn't be interested. What risks do you see to the Principal?

Dev Horn · Answer

Heidi Rogers It just seems to me that if you go into to list the property first, the agent/broker has the obligation to list for a reasonable (retail) market value. Once they have set that amount, to then switch gears and offer to buy it for cash at a significant discount seems a bit awkward. Maybe Tom has figured out a way to make that flow better than I imagine. But if you first offer them cash for their house (and you have already disclosed that you ARE an agent/broker) and they say I really want to get more, I'm not in a hurry, I'll make the necessary repairs, etc. then you switch to, "I understand your goals, let's LIST your house instead...". If I listed my house at a retail price and all of sudden the agent/broker tossed me a "lowball offer", you would see "WTF?" in the thought bubble hovering above my head...

Mark Ferguson · Answer

Tom Goans Anson Young I do a very similar thing and I have had it approved by my broker and he checked with the Real Estate commission. I have to disclose I am an agent and I do in my letters. I simply say I am a Realtor, but I am not looking to list your home I am looking to buy it. Once I give them an offer most sellers don't want to sell at my price, I say I could list it if you want to try to squeeze more money out of it.

Heidi Rogers · Answer

So it's not as mysterious an endeavor as I thought, and it's legit. The strategy Dev described (to market as an investor and list if its not a deal) is the opposite of Tom Day who said he markets as an agent and buys cash if he's personally interested. Dev, what does your marketing look like that you described above? Thanks for all the great info, people!

Dev Horn · Answer

Thanks, Jenkins Ramon for the shout out. I will offer this - we work with MANY investors who are also Agents or Brokers. And I'm actually developing some marketing to offer both choices very similar to what Heidi Rogers mentioned in her OP. I think each of our investor/brokers handle it in their own way right now, but I really like what Jesse Rivera said above. You generate the lead via your own marketing effiort, and you start the conversation as an investor. Once you find out they are not motivated or don't have equity, you then offer them the option of listing the property. Our larger investors keep these activities separate - the person that offers to buy the house is not the same person who would list it. But I know people that play both sides all the time. The key is disclosure and being aware of the rules you must always follow as an Agent or Broker.