Realtor Wholesaling a Contract with seller to buyer?

Question

Hello,

As a realtor, I come across deals off market and I don't always have the funds to buy them myself. These people just want 'their number' and don't want it on the market. So I'd like to 'buy' their home, market it for the 15 day inspection period, find a buyer willing to pay more and have the difference go to me in lieu of a commission since they aren't listing with me.

Anyone have experience with this? We're not talking pennies either, potentially $50k-$75k if I can get access to the home and do my big open house. I more than likely would be flipping to a Realtor represented buyer. Does that make it difficult? More than likely a cash buyer, not worried about financing. I will have checked the 'may assign and be released' box on the contract.

Thanks in advance!

Steve K. · Answer

@Marc Middleton this is a question for your managing broker of course, but it sounds like what you’re describing is basically a net listing. This arrangement is illegal in all states except Florida, Texas and California, and highly discouraged in those states as well as all 50 states by NAR (if you’re a Realtor you can’t do it). This is not allowed for the most part in order to avoid situations where an agent has a conflict of interest or could be seen as using their specialized real estate knowledge in a predatory way with the public, basically stripping equity from people who don’t know the true value of their property. A much safer and more ethical route would be to buy the property with your own funds (or hard money), close on it then resell it or double-close. Way too much liability with a net listing even if you’re in one of the few states where it’s legal (with restrictions).

Bill B. · Answer

The reason they don’t want to list it is because they don’t want people to know it’s for sale and they don’t want people coming through their house. So either you have to actually buy it, close the sale, then sell it. Or sell it without the MLS and without an open house.

Does the MLS even allow a non-owner to list on it? If I'm a realtor, can I list your house without telling you? Doesn't seem likely. I would also cross about 100 t' s and dot 100 I's. Tell the seller you plan to re-list it for more money and never buy it. I don't know if you'd only lose financially in court or your license would also be at risk. I'm pretty sure who's side the court would take if a realtor sold a "victim's" home for "thousands" more than they agreed to. And make sure the seller isn't an elder, you don't want elder abuse on the list.

Talk to your broker, see if they’re willing to let you and take the possible heat for no gain to them. This is one of the downsides people often mention when getting their license. You’re held to a higher standard.

Joe Norman · Answer

This is your answer. Putting a home under contract when without the intention to close on it is misleading and unethical, full stop. Its even more egregious as a Realtor who is supposed to be adhering to the Realtors Code of Ethics. A few examples of the many lines that would be crossed by doing this (I stopped looking for examples after around Article 10, I'm sure there are my others):

Article 1: When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Article 2: REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.

Article 4: REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker.

Article 5: REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.

Article 7: In a transaction, REALTORS® shall not accept compensation from more than one party, even if permitted by law, without disclosure to all parties and the informed consent of the REALTOR®’s client or clients.

Close on the deal yourself or broker it to someone else who can. Leave the shady "I'll buy your house even though I don't have the means or intention to" to the unlicensed and unregulated real estate "investors" out there.

Ray Danishyar · Answer

Yeah its not possible, BUT ITS DEFINITELY possible if you get a hard money loan. Then you can comfortably buy it, and resell it.

Troy Albers · Answer

@Marc Middleton either be a realtor with ethics, or a wholesaler, or acquire funds to buy the property yourself and do with it what you want.  You can’t have your cake and eat it too, unless you have no ethics.

Lydia R. · Answer

@Marc Middleton What you are describing is basically just wholesaling. Except for the putting it on MLS part. I think thats not OK if seller specifically stated they dont want property listed. What you are describing is basically trying to be half real estate agent and half wholesaler and I dont think what you are describing is allowed. You are either a wholesaler putting the property under contract and reaching out to your private buyers list or you are an agent representing the seller for a commission and putting the house on MLS. As for the funding, why not use hard money to fund these deals so you can just give the seller their number and then resell on open market? Ive done this many times and in this market Ive always gotten over asking. The profit more than pays for the hard money loan costs.

Marc Middleton · Answer

I guess that's where I struggle..I won't be able to get true market value if I can't list it and do my big open houses.

Otherwise I just need to find a buyer that will pay me a whole sale fee?

Ray Danishyar · Answer

I don't know how you can list on MLS or OPEN HOUSE if the seller agreed to not list it. I don't know how you can avoid that or a way around it. However it does make sense in part with a partner who does have the cash. Settle the buy with your partner then when its owned out right can be listed and resold. Just my thoughts. I do follow what you are saying but I believe you cannot list it. In theory you can also wholesale it, meaning you can then have a buyer list reach out to those buyers and assign the contract to them and keep the wholesale fee, whatever that may be.

James Wise · Answer

If there is really a true spread like that why aren't you closing on the sale? You'd be nuts not too take control of the home and then resell it yourself on the MLS.

Dale Degagne · Answer

@Marc Middleton this is your answer.

Realtor Wholesaling a Contract with seller to buyer?

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