Is It Dangerous For a Wholesaler to Have a Realtor's License if Working Directly With Sellers?

[Burt L.]

I've seen a few different views on this and it remains unclear for me, so I offer my apologies in advance if its repetitive.

The brokerage I spoke with about wholesaling said its alright as a realtor if doing REO's and HUDs, but not if working directly with sellers instead of banks and government agencies. It would probably be difficult to find a brokerage that allows this, as there isn't an economic benefit in it for them.

A local real estate attorney I spoke with said that the worst likely thing that could happen is having the board take your license, and since you could still wholesale as an investor and aren't making a living from sales commissions, then its a non-issue. Not so sure I'm comfortable with this recommendation although I would like to be able to leave it at that. I would be concerned about having a judgement, if a realtor can have a judgement against them beyond what E&O insurance is - I didn't get to that question during the meeting with the local real estate attorney. I don't plan to do anything differently than any other ethical wholesaler; I hope that isn't an oxymoron.

I would like to do wholesales directly with sellers and then build back up to the ability to do rehabs and resales. I also realize I would need to disclose having a license to sellers, and having a written disclosure that I am not representing their interests and not trying to get them "highest and best". My understanding is that sellers don't care as much if one has a license if they have a distressed property that has to be sold and you put a contract before them.

A recent thread talked about listing your own wholesales on the MLS as a Realtor - if you have closed them - which gives a much larger buyers list audience, and at higher profit levels for the wholesaler. Other benefits of course are MLS access, easy access to properties, and saving commissions if you can resell on the MLS.

The issue of having a realtors license and working with sellers directly, while working under a brokerage still isn't clear. I want to appeal to the BP nation on this gray area.

[Andrew Isaacs]

Good discussion here. It's something that I have looked into heavily--I'm an attorney and licensed real estate salesperson... and occasional wholesaler. So there is a whole bevy of potential liability arrows that may be flung upon me and my various licenses. I can tell you how Ohio law regards the situation, but that's only helpful if you are dealing in Ohio property with an Ohio license.

The NAR's Code of Ethics actually draws a more strict line than my state's laws. Article 4 of the NAR Code states that "Realtors(r) shall not acquire an interest in . . . any real property without making their true position known to the owner or the owner's agent." It also requires that this disclosure be in writing and provided prior to the signing of any contract.

As Mark H. said, you're still open to suit, no matter what you disclose. Compliance with state law and other professional standards is going to be a pretty good defense, but you could still amass some hefty legal bills, as he also pointed. But, that's the case whether you have a license or not.

What the license really adds to the equation IMO is unequal footing. As an agent you have special expertise and knowledge that the average homeowner does not have and you are in a general position of trust and esteem as a professional. If you're compliant with all of the laws and other standards, this unequal footing will be the only legitimate basis for suit by Angry Seller down the road. With that in mind, having turned your license in 7 hours before the deal and then re-activating 2 hours after the deal would seem to be more of a detriment than.

That's alot. Hopefully, that added at least a little to the discussion. My basic position though is this: pick a side and stick to it. If you want a license, keep it. If you don't then leave it inactive. In either case, here's the key - disclose your position clearly, do a good job, don't seek any dishonest gain. The golden rule seems to have universal application.