Creative way to mix wholesaling with being an agent??
Hey guys! I am an agent here in Northwest Arkansas as well as a rookie investor with one duplex I bought a couple years ago at 18. Currently I've been working on trying to get my active income up, because I have no other source of income than the duplex cashflow ($1100/mo). Im 21 now and still live with my parents so expenses are low, but my goal is to make 50k in active income by Dec 31st, 2024 and I have been brainstorming about somehow wholesaling but also using my license as an agent to get clients and potentially find off market leads and instead of putting them under contract myself like a wholesaler and then assigning them, is there a way y'all can think of to just bring those leads as an agent to cash buyers and get a commission without them taking the deal from under me? I'm also open to any other feedback/ advice on how to grow my active income, its my one thing now that i'm putting my head down and focusing on!
I wrote a great article on this somewhere in the forums, but I cant find it at the moment. An agent can use an "exclusive listing agreement" with an option to sell it off market as a "pocket listing." This is where you would be representing the seller and more than likely the buyer as well. Or you can do a "permission to show" to represent you investors, and still collect a commission. It is the most legal way to be a "wholesaler."
I don't allow wholesaling at my brokerage. It's contradictory if you're an agent. As an agent you have a fiduciary duty to your client. Ripping equity from people without them knowing the options is the complete opposite of that.
Yes, sign a listing agreement with a seller, then bring that lead to cash buyers on the MLS, and get paid a commission.
#1 Starting Out Contributor
- Specialist
- Mendham, NJ
Wholesaling and a real estate license do not go hand in hand as @Peter Tverdov said. Not only because wholesaling is inherently sketchy the way most do it, but because you can't get paid when you have a license if it does not go through the brokerage. If you have a license, don't think about wholesaling at all, think about listings.
@Peter Tverdov and @Jonathan Greene. Although I agree that most wholesaling out there is sketchy. It is an option for some people, and it is what they prefer. I think if we define wholesaling as "getting a property under contract and selling it to someone else before it goes 'on the market,'" then that would include any 'permission to show' or 'pocket listing' that an agent would do. Yes, it isn't a contract to purchase, but it is essentially the same. My team and I want to always be above reproach, and we will only do what is the best interest of our clients and the public.We have also done several of these "off market" deals in the state of Arkansas.
Let me give an example of serving the public well, and they wanted "selling off market" as being the best option. A single mother of a adult kid with a disability, and a full time nurse, wanted to buy another house. However, she needed to sell her house first. She had so much shame of the condition of her house that she did not want to list it. I had communicated that she could get way more if she let me list it, and I gave her all the options including me paying to get it fixed up for her and selling it. She choose to take a cash offer from me with a delayed occupancy for 2 months to give her time to move out. I didn't rip equity from her, more than she chose that option out of convenience. Now, I did close on that, but if I found an end buyer to do the same deal, it would still be the best option for her and what she wanted.
Where a broker or investor fails is in two things: 1. Disclosure, 2. intent.
Disclosure: In all of our deals we want to give all the data with all of the options. Sure we will then give them our recommendation, but often times that is not the option they want. For example, they will choose convenience over equity. With my team, we give them the ARV, Market Value, and our cash offer. We always strive to get them to list it, and yet that isn't always the choice the seller chooses.
Intent: If you can't buy the property and really don't know its a good deal, then yes, you shouldn't be wrapping it up under contract. However, I have a good buddy you wrapped up a storage unit facility, and they would have closed on it, but the bank turned them down (March 2020: covid). However, they knew a big player in the area that would buy it in cash. So, they wholesaled the deal to them. It was a win-win-win deal.
It all depends on the seller and their needs and I truly feel like offering more options than just going on the market gives a seller more options.
#1 Starting Out Contributor
- Specialist
- Mendham, NJ
@Ryan Blackstone a cash offer from you direct is not wholesaling. The issue with wholesaling with a license is taking a wholesale fee outside of the brokerage, which you can not do and would cause you to lose your license.
Marketing to get in doors with a license and the ability to buy is fine, but the second you assign a deal to someone and take the spread and the brokerage does not get a cut, you are in jeopardy.
You are convoluting marketing as an investor and wholesaling while backpatting yourself multiple times in both posts.
@Jonathan Greene ah I see your issue is with it "not going through the brokerage." When I mention a permission to show and a pocket listing, those are going through the brokerage, and are agent activities. That essentially is like "wholesaling," but isn't wholesaling.
However, I will say that wholesaling is not an agent activity; just like flipping a home isn't a agent activity. Although, there are plenty of bad characters out there who act like they are investors and have no intent to buy, and don't disclose if they are even capable. I do believe there is a place for wholesaling and it seems like your thoughts are that there are no ways for wholesaling at all. That is simply not true. I think I am trying to make a case that
1. There are alternative way to essentially do the same thing as a wholesaler, but you are licensed. Yes it would go through the brokerage.
2. There is a time and place for wholesaling and it does help out the public. (Even if it is small).
#1 Starting Out Contributor
- Specialist
- Mendham, NJ
Quote from @Ryan Blackstone:
@Jonathan Greene ah I see your issue is with it "not going through the brokerage." When I mention a permission to show and a pocket listing, those are going through the brokerage, and are agent activities. That essentially is like "wholesaling," but isn't wholesaling.
However, I will say that wholesaling is not an agent activity; just like flipping a home isn't a agent activity. Although, there are plenty of bad characters out there who act like they are investors and have no intent to buy, and don't disclose if they are even capable. I do believe there is a place for wholesaling and it seems like your thoughts are that there are no ways for wholesaling at all. That is simply not true. I think I am trying to make a case that
1. There are alternative way to essentially do the same thing as a wholesaler, but you are licensed. Yes it would go through the brokerage.
2. There is a time and place for wholesaling and it does help out the public. (Even if it is small).
Actually, I completely agree with you. There is an ethical way to wholesale, even with a license. It comes down to transparency and 98 percent of wholesalers aren't trained to work like that which causes the problem. Sounds like you are all above board, I like it.
Hi Aden, nice to see you in the BP forum. Just to clarify some of the other comments, as an agent, you are not a wholesaler. Period. Wholesaling refers to putting a house into contract and assigning the contract for a fee. An agent/broker cannot do that and should not attempt it. But you can effectively achieve the same goal by finding off market properties and charging a commission fee for bringing a buyer. Similar kind of work, different deal structure.
Learning how to negotiate off market deals as an agent is an extremely valuable skill. So, in other words, do the same kind of hustle as a wholesaler, find those off market deals, build up a buyers list, and sling some houses for commission fees. But make sure with your broker that you have all the right paperwork in place (like Ryan described above). And if you do find a great deal but don't have a buyer, reach out to @Ryan Blackstone or me! ;)