Clarify the relationship between realtors and wholesalers?

Question

As I’m studying wholesaling, a lot of advice is saying to connect with realtors. I’m still not quite sure how wholesalers and realtors collaborate to their mutual benefit. It makes sense that realtors would have the MLS access and could pass along listing information to wholesalers, but I’m confused as to how realtors benefit. It seems like we would be in direct competition. Are we trading referrals instead? I'm so confused. Can someone help me understand?

Yoann Dorat · Answer

@Evan Kraljic @Ramandeep Sidhu ideally every wholesaler should get licensed as it is the easiest way to get paid on referrals + the way wholesaling is advertised, regulations are going to kick in at some point and they won't have a choice, so better be prepared than being surprised. But for the ones who are not licensed yet, there are still ways to be paid for those "retail leads", you just have to sell them outright with a flat price per lead, it becomes a marketing service and is not considered as a referral since you're not sharing/splitting a commission.

It's perfectly legal otherwise all the lead providers & marketing companies out there would need to get licensed.

Sam Compton · Answer

I believe the goal is for the agent to give you leads on properties that agents do not want to mess with. The wholesaler then cuts the agent in if deals are closed.

I'm a noob but that is how I understand the relationship to work.

Randall E Collins · Answer

My experience thus far has been that realtors are against wholesalers saying we're just a bunch of scammers operating without a license. I say it's because we are, as you said, competition. However if you're lucky enough to actually locate a realtor that's willing to work with you it would be to your advantage. The dibble dip strategy then comes into play, meaning you both earn a commission. Good luck.

Dustin P. · Answer

An agent can either bring you a deal (Pocket listing) and keep the commission for themselves or they could bring you a buyer. The value they bring is that either the property or the buyer is already vetted, the seller or buyer is already lined out by the realtor and you are able to capitalize on their relationships

Ramandeep Sidhu · Answer

What @Evan Kraljic said is correct, a realtor cannot pay commissions to a wholesaler, but as mentioned by others the relationship is sharing leads.

A wholesaler can refer sellers to realtors who want top market value and a realtor can share leads to the wholesaler for sellers that want a quick as-is sale.

Evan Kraljic · Answer

The tricky part about giving realtors leads as a wholesaler is that since wholesalers are not licensed, it is technically illegal for licensed agents to pay unlicensed parties who play a role in the deal. David Greene talked about this on a real estate Q&A podcast recently (BP Show 501). He also has an older Q&A with a couple questions about wholesaling that he answered (BP Show 473). The youtube videos I hyperlinked have timestamps in the description so you can skip to the questions about wholesaling. I think David does a pretty good job of explaining these things while being mostly unbiased, although he obviously is an agent so keep that in mind with his responses.

Brandi Vigil · Answer

Realtors have buyers that need a home and it doesn't matter where it comes from:  the MLS, FSBO, wholesaler, etc.  The commission for the agent will need to be negotiated since the realtor will often handle the bulk of the transaction.  Also, if you choose to wholesale and run into sellers that want top dollar, you can refer these leads to an agent for a referral fee and it is a win/win.

Sam Compton · Answer

I was under the impression that it was a gentlemen's agreement. You bring me leads, I split wholesale fee. win/win

Then, said agent is used as selling agent after rehab???

I am basing this off of reading and not actual experience so take that for what its worth.

Nick C. · Answer

It's pretty simple how realtors benefit- they don't. The key is you wouldn't tell the realtor that you're attempting to wholesale a property. You would tell them you're an end buyer. They wouldn't find out you're trying to wholesale until after you cancel the contract.

Randall E Collins · Answer

Good morning Dominique, I'll try to answer your question to Sam. I'm uncertain what type of contract a realtor does with the seller. I've never done a sale through a realtor, but I would imagine the realtor would draft a Purchase and Sale contract with the wholesaler listed as the buyer. The wholesaler would then assign the contract to the end buyer and/or business partner.  For all purpose and intent the wholesaler IS the buyer. Even though the wholesaler has assigned the contract, he/she will remain listed on the contract as the buyer up until closing. At closing the title company would ensure that both the realtor and wholesaler get paid. That's just my guess, but sounds right to me.

Clarify the relationship between realtors and wholesalers?

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