Wholesaling; Licensed or not Licensed?

Question

Hello BP,

I was just wondering what everybody's thoughts were on wholesaling with a license and without a license.  I ask because I currently have a license and am considering going inactive.  I initially had it for the benefit of commissions and being able to list homes, but I'm finding it may not be as beneficial as I had thought being that the company is focusing all of its time on rehabs and wholesaling when at capacity.

What do you find the pros and cons of each to be relative to disclosures, marketing, bringing on new team members and how it effects your business?

I realize this discussion may have more parts to it than would fit in a blog post, but any information/direction would be greatly appreciated at this stage.

Thanks ahead of time BP!

Dev Horn · Answer

This is a big issue here in our company, where almost 70% of our WeBuyHouses.com investors around the country are also licensed.

In general, I think it's a good thing to have.  If you don't want to list, you can still get referral fees.  If you get 10 motivated seller leads, maybe only 1 will be interested in your cash offer, but 3-4 will ultimately list with SOMEONE.

Regarding disclosures. in Texas, it's not bad at all.  There is no reason you can't buy houses for cash and also be licensed under a broker.  We do disclose the license in all our marketing pieces, and even have a simple clause in our contracts to disclose it.

Legally, there can be a higher bar set for licensed individuals.  But if you already act with high integrity, that should not be a problem.

If you let it go inactive, that's fine too, but I really think the referral and listing opportunities could make it worth keeping.  My 2 cents.

Best wishes!

Ryland Taniguchi · Answer

• The transactions are off-market and the brokerage is not on the contract; so it doesn't get submitted to the brokerage. In other words, the contract is between my company and the seller with no agents I involved. I am with a national big name brokerage.
• It is absolutely imperative to disclose that the buyer is a licensed real estate agent and that the purchase is with the intent to make a profit.
• List backs are getting the listing when they flip or build a house.

Bill Gulley · Answer

It's odd that someone who deals nationally isn't aware that the license laws in effect are those in the state where the property is located, where you sit is irrelevant.

Dave has the right answers here.

However, buying as a principal and closing isn't "wholesaling" it's purchasing and reselling. Taking title makes all the difference!

I suggest you hold on to that license. Study other methods of taking title, seller financing, sub-2 deals, partnerships, working with the owner. Just make sure you don't get into a net listing situation as an agent. Good luck :)

Dev Horn · Answer

Licensed agents are not acting in the capacity of broker/sales agent when offering to purchase properties for cash.  They are acting as a principal in the transaction (the buyer), so they cannot represent the seller.

In general, they disclose that they are licensed but not offering to represent the seller.  That's it.   I don't know of any cash buyer - licensed or not - that provides a CMA/BPO along with their offer.

Renee Cato · Answer

Interesting perspective @Ryland Taniguchi .      Please explain list-backs.

Also, are you with a RE firm or are you your own broker?  If you're with a firm, how do you present the transaction to your broker?

Ryland Taniguchi · Answer

I am not sure how your business is structured but let me how my wholesaling business works as a licensed agent.

I pay for all the marketing and soft costs like earnest money, preliminary drawings, etc. In my wholesale business, it is set up so I pay a non-licensed closer/negotiator 15% of the wholesale fee to take seller calls, negotiate and close.

That way, I am not dealing directly with sellers as a licensed agent. I also negotiate list-backs on our wholesales.

Micah Copeland · Answer

@Ronnie McClain

I am not licensed. However, I can see the benefits to being licensed. I currently have access to MLS in my market, but if I didn't I would probably be rushing to get licensed for that alone. Besides that I don't have a strong opinion one way or the other. I feel that it would be slightly annoying to have to disclose all the time, but then again I could see some situations where I might have been able to score a listing from a seller that really liked me and wanted to get their house sold but couldn't come down to my price.

Renee Cato · Answer

Me personally, I would provide a CMA to CYA (LOL).  Although the seller would be the customer in a wholesaling transaction, I am not obligated to them in a fiduciary sense. However, since I'm licensed and am not representing them,  I'd treat them as a customer and provide the CMA as it is  deemed important information about their property. DISCLOSURE DISCLOSURE DISCLOSURE.

THEN, based in their current situation, they can choose option A (list retail) or option B (go with my offer).

With respect to providing BPO/CMA for cash/gut/off market deals, I would only do BPO/CMA to determine an ARV.

Ronnie McClain · Answer

Thanks @Micah Copeland @Dev Horn @Roy Oliphant @Renee Cato @Ryland Taniguchi

Curious, for all the licensed agents that are wholesaling or even just buying homes for cash to flip yourselves, do you provide BPO or CMA to your sellers even though you are not representing them?

In general what are your thoughts on providing BPO's for cash sold/gut rehab properties when a lot of investment type properties are sold off market? Would that not cloud the accuracy of the BPO?

Ryland Taniguchi · Answer

We don't pay a non-licensed person to do the work of a licensed agent. We pay them to negotiate our wholesale deals. The laws in Washington maybe different than Texas, but in Washington you don't need to be licensed to wholesale a deal.

Wholesaling; Licensed or not Licensed?

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