Rookie Question: Wholsaling as an agent??

Question

I live in Washington, DC and I’m planning to purchase and study for a real estate license in Maryland and I will apply for reciprocity in DC, thereafter.

I’ve always had in my mind that I would get into real estate, especially since I’m still young (mid 20s), I love real estate, and because I have a great deal of financial knowledge (but no real capital..haha).

I’m just learning about wholesaling and I’m curious to know is it possible to ethically wholesale and be an agent? Even if you’re not operating in both capacities at the same time.

Moreover, I don’t want to just “do” this, I would like to start a business in this and wholesale outside of the DMV as well as offer services that would compliment real estate investing.

So far I’ve listened to a ton of podcasts from Steve Trang, Max Maxwell, Alex Saenz, The Norton guy, I’ve read things from some of you on forums, watched YouTube videos on both being an agent or being a wholesaler. I’m super motivated and want to start this journey. I just don’t want to run into legal issues.

I’m sure this question has been asked before but I found Google overwhelming with “uncertainty”.

James Wise · Answer

"Business partner" as described above doesn't sound very honest to me at all. That is clearly a misleading statement.

What I do whenever I buy a property from an unlicensed and unrepresented individual is make them sign a document that states they understand I don't represent them and that I intend to buy the property for X which is less than what I believe it'd sell for on the open market and that my intention is to sell it myself on the open market for my own profit.

If you aren't planning on closing the sale I've got no idea why you'd be attempting to wholesale it though. Just sign up a listing agreement then sell it. It's much cleaner and less likely to cause you problems. Note that commissions are not set in stone. You can charge whatever a seller is willing to pay. In a nutshell the more transparent you are the better. Remember when in doubt disclose, disclose, disclose.

Russell Brazil · Answer

@Paris Morris

As an agent your broker needs to approve all of your real estate activities. You will be hard pressed to find a broker in the area that gives you an ok on wholesaling, since it is in essence a net listing, which is illegal for an agent to do.

James Wise · Answer

In the brokerage community this is commonly referred to as NET listings. Illegal in some locations discouraged in others. The Division of Real Estate doesn't like the idea of agents being secretive about the true value of the properties when they are representing the sellers.

Russell Brazil · Answer

@Ozzy Sirimsi

What people do and should do are two seperate things.

James Wise · Answer

Some good nuggets in there David.

Paris a simple sales pitch for you to use if you've got the funds to close on the deal yourself is simply offering sellers two options.

Mr seller I will buy your property As-Is for X. No inspections,  no contingencies, no questions asked. I can close in 10 days.

OR

I will sell it to investors for approx X and I will charge you Y. It's going to take a little longer and we'll need to let them do inspections and appraisals but you'll get a higher purchase price.

No assignments needed. Clean and simple with you disclosing everything. The price you are willing to pay in the 1st option should be a price that will make you enough money that you're happy to invest your funds in the deals. The commission you charge in option two should be enough that you're happy to sell it and earn the fee. Me I charge 7% with a minimum fee of $4,995. So if the property is only worth $20,000 it's a 25% commission.

Yannik Cudjoe-Virgil · Answer

@Paris Morris I have wholesaled properties off the MLS before. If your dealing with a seller and you have the listing then I think you have a fiduciary responsibility....so this becomes uncomfortable ethically. But if you are buying the property then its nothing wrong in my opinion. You get the commission on the offer price and the wholesale fee!

David Nacco · Answer

@Barry Pekin I totally agree about expanding opportunities that’s why I chose to get my license. I would recommend it!

Barry Pekin · Answer

@Paris Morris,

This is totally ok.  You have to choose up front in what capacity you are entering into the deal with.  If the seller is looking for top dollar and has no motivation, you can list their property.  If they are highly motivated, you can choose to act as an investor, at which point, you must be very clear with them.  They should know that you are an agent, but you are entering into this as an investor.  Investors look to purchase properties at a discount, and you will be doing that.  I don't know the specifics, but I've heard this several times from local realtor/investors.  I also know a broker who has several agent/investors working for them.

I may decide down the road to get a license, too.  It seems like, if done right, it can just expand your opportunities.

Ozzy Sirimsi · Answer

I think there is this group called "CR of Maryland" it seems like all they do is wholesaling. I wonder how they do it??

David Nacco · Answer

I always let them know their house is worth X but I can only pay Y because I am interested in this property as an investment and need to build profit margins into the deal. I then go on to explain to them that some of the benefits I can offer them are things such as a quick and easy close with minimum paperwork and not having to deal with banks and all kinds of other people, not having to go through the trouble of doing regular showings, the ability to walk away from the problems the home is causing for them in less than 30 days. Just as James Wise said, disclosures are key!! Also James I say business partner not to mislead people, but because I only work with 4 other people that I wholesale deals to and in my case I do consider them business partners. However, I definitely see how others could do things differently and using that phrase could be misleading for sure.

Rookie Question: Wholsaling as an agent??

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