Net Listing vs Wholesaling?

[Steve Christensen]

Can someone please explain the difference (if there is one) in a Net Listing vs wholesaling?

My understanding of a Net Listing:

Net Listing provision states that seller will receive a net amount of money (say 150k for their house) from any sale, with the excess going to the listing broker as commission (broker sells for 175k, keeps 25k for them self). The broker is free to offer at any price greater than that net amount. Because a Net Listing can create a conflict of interest between the broker's fiduciary responsibility to the seller and the broker's profit motive, however, net listings are illegal in most states and are discouraged in others.

So is there no difference? Or is there a difference because in wholesaling the deal is typically non-commissioned?

To my knowledge, the only way I see around this is if you buy outright someone at x price, close, then sell at y. Because then you can sell for whatever you want with no fiduciary responsibility to a seller.

Does an Option to Purchase Contract, with full disclosure that you will be marketing for a profit, allow the ability to do this?

I appreciate any feedback.

[Bill Gulley]

Originally posted by @Steve Christensen:

I am hoping @Bill Gulley weighs in on this. Not only because he is from my state, but I have seen his posts, and his knowledge is incredible.

I'm thinking the end result is, you must close. I know people wholesale, but it seems that if you want to be 100% covered, you must 1) be licensed, 2) disclose your intentions 3) close on the property.

Really looking forward to hearing the feedback!

 Thank you Steve!

You are absolutely right, there is no difference. 

Yes, wholesaling the way it is being taught is the same thing as brokering a property, the end result is the same, justifications to the contrary are based on the vehicle used to get there, it doesn't change the results.

In Missouri, the law states "facilitate a sale" and wholesaling as most try to do would be illegal without a license. It is also a catch 22, as Fred mentioned, a conflict of interest, dealing in a way that is detrimental to the owner. Basically, you're taking equity owned by the property owner, the seller, as an agent you're the expert in the room so you have another issue in dealing fairly, fully disclosing the value of a property is part of an agent's duty, with or without a listing agreement.

There are threads on BP with over 100 posts arguing this matter. The only two RE brokers I've seen in the yes you can camp is one who is rather a guru for wholesaling, and another in CA. where net listings are legal with certain disclosures. No attorney I've noticed is in the yes you can camp. Those who are are attempting to or are doing wholesaling, who advocate for wholesaling do so as it's more of a psychological matter of defending your actions or desires rather than admitting the end result, there are simple justifications and often, that involves the wording of the statutes. 

That same approach to understanding the laws is like claiming you're selling the brief case, not the illegal drugs inside. It's the end result that matters, not the path taken to get there. 

We can't ignore the intent of laws, regulations or rules attempting to justify our actions by defining every word written in them, this is why we have judges in courts and regulators in administrative law. They will be looking at the end result working backwards to the path taken getting there, the type of contract used can be irrelevant. The type of car used in a get-away doesn't matter.  

Assigning a contract is legal, the issue is that when all you do is assign contracts as a business model, the intent of your actions changes. Also at issue is the fact that while you sign an agreement to purchase, be it an option or purchase contract, you have no intention to honor they contract as made, there is no meeting of the minds there. 

Assigning contracts as a business model is totally different than someone assigning a single contract for some reason, even if the reason is profit motivated. Doing one deal is different than having the intent of not closing as agreed and doing so time after time. 

Using options, IMO, is much safer as you have no obligation to purchase, but use options time after time, you're back to facilitating transactions and needing a license.  

Has anyone heard of a wholesaler getting "stiffed" by a seller or end buyer, I have on BP, a common question by wholesalers is how do I protect myself? Have you ever heard of a wholesaler enforcing a purchase contract they assigned? I haven't, that's probably because they can't enforce a contract where they didn't have the intent or ability to close as agreed.

Can you accomplish the goal of wholesaling legally? Yes, by closing in the name of the buyer on the purchase contract. I will be teaching wholesaling latter on, there are several ways to accomplish the closing, yes, even if you have no money and have no other job or poor credit, just don't have general lien type judgments against you! This would be legal in all states without any hitch. 

I'm not against "wholesaling" in the right circumstances, I'm dead set against how gurus and most "coaches" teach it, lying about imaginary partners, weasel clauses and silly disclosures. 

Last word on this rant, on my 6th anniversary on BP, :) , if you ever have to justify your action in any business transaction, you're wrong! Business should be conducted in a way that justifications never need to arise in the first place. This is from my business ethics class,  think about it, why are justifications needed to act in some manner?  :)