What are the pros and cons of being an agent and a wholesaler?

Question

I just go into wholesaling earlier this year. Closed my first two deals within the past 5 weeks. I just got my RE license yesterday. I figured it would be good to have the license for many reasons including the MLS access whenever I need it, additional source of income and the contacts I will meet. My broker knows I am a wholesaler and is fine with it. The only drawback I hear is about disclosure. I dont think its an issue at all. I have no problem with disclosing. 
I would like to hear from experienced investors (licensed or unlicensed) what their opinions are on the matter. Any feedback or input would be greatly appreciated. Thanks.

Karl Krentzel · Answer

Awesome Question!

When it comes to the pro's vs. cons, it is difficult to find any cons.. Like @FrankMcGovern, I too am a Broker who wholesales.

If anything, disclosure, use of state contracts, etc. all distinguish you from the average unlicensed wholesalers.

Pro's certainly include access to the Expired and Cancelled listings as potential purchases (you have NO competition), as well as the other obvious sources.

Additional Questions by BP Member

Here were some additional questions... along with answers!

1.The spread you take must be paid through the broker first, then to you. fsbo, mls transaction, it doesn't matter, even if you are disclosing everything, which everyone does. Payment comes from the broker.

This would be correct.. if you were in an agency situation with a Seller.. Which in an Assignment of Contract or Double Close, you are not.  Assignments are considered "Real Property" and therefore are not subject to commission splits.  Double closes would be dependent upon your individual contract.

2. You cannot put out bandit signs unless you have the brokers info on it as well.

Well, that's probably true.. But given the ability of you to use powerful lead generating websites and blogs like Investor Carrot, Youtube, as well as prospecting... why would you need to worry about putting out bandit signs?

3. You cannot pay unlicensed birddogs.

While this is true, my question would be... why would you?  You don't expect your dentist to send you a referral fee whenever you send him a client.. yet I would bet you that you've sent him/her more referrals than they've sent you.

4. you cannot advertise a home that is unlisted.

Well, I assume that you are referring to the inability to "List" a wholesale deal.  Because otherwise, that would be simply incorrect.  There is absolutely no reason why your occupation as a Realtor® would stop you from your right to sell your property.

5. Im not certain if you can list a property just because you have it under contract. I know you can disclose, but still not sure.

I am going to again reflect on question 4.  However it is of no concern.  A true wholesale deal will sell within the 7-10 days you have for your inspection period.

Have a Powerful Sales Day!

Jimmy C. · Answer

Hi everyone... Here are some cons I am wrestling with.

1.  The spread you take must be paid through the broker first, then to you.  fsbo, mls transaction, it doesn't matter, even if you are disclosing everything, which everyone does.  Payment comes from the broker.

2.  You cannot put out bandit signs unless you have the brokers info on it as well.

3.  You cannot pay unlicensed birddogs.

4.  you cannot advertise a home that is unlisted.

5.  Im not certain if you can list a property just because you have it under contract.  I know you can disclose, but still not sure.

If I am incorrect about these statements which I hope I am, please let us know.  I got these answers from my local board, and it seems lawyers and the boards answers are always "no."  I am a realtor, and considering otherwise.  Disclosing and being careful and helpful without a license and with all the resources out there seems safer.

Bill Gulley · Answer

Hi, nice boat! What kind is it, a Cal?

Congrats on your license and deals. The thread mentioned will likely point out the aspects of doing your deals. DIsclosure is no big deal. Simple; "Mr. Jones, I'm a real estate broker, but I'm going to talk to you about your home as a buyer, not a broker!" Then hand them the disclosure pamlet you normally use. And move on....

The only real draw back is approaching one of your listings if you decide to try to buy it. You have a duty to find the best deal for your client and that could be an issue. Before you list a property, you should ask yourself, "would I be interested in this property?"  Good luck, Bill

Zachary Clough · Answer

Thank you for your response @Shane Woods!

I'm anticipating that the response will be that I need to disclose in writing, as well as verbally, in any marketing and/or written contracts that even though I may hold a license, I'm acting on my own behalf. Hopefully this won't present a problem ... I love the brokerage I'm currently with and I'm hoping some type of an arrangement can be met.

@Shaun Reilly, have you run into any issues holding a license in MA and marketing to motivated sellers in your REI business? I know it can be done, I'm just looking to limit liability for myself as well as my brokerage by doing things correctly.

Shane Woods · Answer

Quick Add-on thought...for low price houses...the listing might make more sense for the seller and you as the agent...if you have investors in mind, or know other agents who have investor buyers with cash, you don't even have to put it on the MLS.  Just do a non-MLS listing, and use your network.  On low price homes, you'll probably make just as much commission as you would trying to hustle investors to make a $2500 wholesale fee with a direct sale.

And if you can talk them in to a MLS sale, you can still keep the showing restricted, etc.  And have a shot at a higher sales price = higher commission for you, and better for the seller.

Shane Woods · Answer

Hey @Zachary Clough,  When I talked to my broker, she was fine with it.  She was a little concerned about my two-sided card offering "we Buy houses".  Asking me "who's we"?  Meaning I need to be extremely careful to make it clear that it's MY BUSINESS, not the brokerage that is offering to buy properties at a discount.

The two senior agents in our office have tons of rentals & they also do rehabs.  One of them is experienced with wholesaling by "flipping contracts" as she calls it.  (Assignment of contracts).  She's also very successful with double closes.

Just make sure you find an investor-minded broker who understands the game.  And make sure you disclose disclose disclose with every potential seller or client.

Now that I'm licensed, In my personal practice, I have now made it a habit to ALWAYS offer the listing first.  And offer my "we buy houses" option if they decline the listing because of whatever reason.  There are other options.

Zachary Clough · Answer

Great answers @Karl Krentzel.

Have you (or anyone else on this thread) experienced any pushback from your broker when you explain your intention of operating a REI business and marketing to motivated sellers? The benefit to the brokerage would be converting those leads into listings where the #s don't work for wholesale, fix and flip, or buy and hold. I'm a licensed realtor looking to expand into the investment arena.

Do any of you have recommendations for approaching the topic of conversation with your broker? Would the solution be to simply find a more "investor friendly" brokerage if they aren't on board?

Frank McGovern · Answer

Yes Manny....this post was from 4 years ago....I have certainly come a long way

Manny Rodriguez · Answer

Much props to you @Frank McGovern!

I saw where you mentioned on Facebook that you closed $93K in revenue from assigning wholesale deals last month! Wow!!!!

#Rockstar

Impressive,

Manny

Tommy R · Answer

What's at stake, just your license I'm assuming right?
(or are there legal stipulations?)

What are the pros and cons of being an agent and a wholesaler?

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