All Forum Posts by: Jason K.

I'm just starting out and recently posted a thread in regards to a licensee investor marketing another investor's (wholesaler) properties to your own buyer's list in attempt to collect an assignment fee/advertising/referral fee (however you see fit) from original wholesaler.

I got mixed responses on if this strategy is legal, ethical, etc...Mostly said that the licensee would just need to disclose his/her license at all times, or yes -- that it was indeed illegal, and one added that I was making this too difficult, and there was nothing wrong here.

I phoned my broker, and he didn't have a clue as to an answer, so I then called the state RE legal hotline, and tried to explain to the attorney this idea of marketing other wholesaler's properties to my own buyer's list to collect a pre-arranged fee from the original wholesaler. I immediately was discouraged by the attorney who was very short with me, probably because I used buzz words like referral "fees", marketing un-owned property...If I had a chance to re-explain the approach, maybe I could have found middle ground with him, where I don't collect a "fee", but instead am paid at closing.

To make a long story short, I took his advice and immediately eliminated that strategy from my business system (before it even took place)...

Oddly enough, I begin reading a book on wholesaling and the author highly recommends this strategy, which the author refers to as "PROFIT STACKING." I did my due diligence to make sure there wasn't a post on this topic in BP, and strangely I found nothing. Maybe some of you refer to this as something different. Do any of you practice this, and is this indeed legal even for a licensee?? It is to my further understanding that legally you can only send someone a gift of no more than $50 as a referral or marketing "fee". I'm trying to get to the bottom of this. Is this example legal because no fees are actually handed out, but merely disbursed by the title company at closing? And are title companies even willing to do this?

1. Investor #1 puts a home under contract with a seller for $40,000 ====>
2. Investor #1 calls and offers to sell you the contract for $43,000 ====>
3. Since you don't have any direct buyers you call Investor #2 and see if he has any
buyers that would like to buy a $65,000 home for $48,000=====>
4. Investor #2 calls his buyers list and has an interested buyer who is willing to pay
$51,000.=====>
5. After coming to an agreement with investor #1 about him paying you the
difference between the end sales price and his $43,000, you put him in touch with
investor #2 and his buyer.====>
6. Now investor #2 will take over the contract for $51,000 with investor #1====>
7. This leaves investor #1 a gross profit of $3,000, leaves you with a gross profit of
$5,000, and leaves investor #2 a gross profit of $3,000.

Thanks in advance,

JDK

Bill,

This is completely arguing your comment?

Thoughts?

Curt,

I'm speaking of an investor who does not OWN the property but is simply looking to flip the contract...

Please advise?

Bill,

As always, great insight.

I've spoken with my broker and even he isn't sure exactly what the specifics indicate. (I'm assuming he's not opposed to collecting as much money from me as he can. :) ) Then again, most brokers aren't experts in the REI area...

Having said that, hopefully your kids aren't coming to you asking how to spell "comming". (I kid of course)

I will make sure that I am in compliance with local and state regulations as they are..

Thanks as always Bill

Bill,

Regarding your birddogging comment:

As long as my broker receives his portion of the earnings, what's the issue here?

Bill,

I can act as a principal in a transaction, disclosing my license.

But, how certain are you that a licensee cannot accept commission for any home not listed? And in this circumstance, it does not have to be considered a commission but a fee. Can you reference me perhaps? Here's a common example where an agent accepts commision from a home not listed:

A licensee approaches a FSBO, knowing he has a buyer interested in the FSBO house. The licensee strikes a deal that the seller only pay him 3% (the buyer's agent normal commission) of the transaction. This is completely common and alot of FSBOs are willing to pay 3% to a buyers agent if they bring them a buyer.

As long as your broker gets their percentage of your checks due to representation, then I don't see why this (investment strategy) can't be done. Please explain further.

ps.

I don't see how my license could hinder me from doing deals on my own, without representation. (as long as there is full disclosure)

I know that because I have a license, things can get a little dicey...

I always want to make certain that I am doing everything in good faith. I have no problems disclosing the information, regardless.

I'm just wondering why I haven't heard about marketing others properties along with your own. (Maybe I haven't read enough?) It's a win-win-win for everyone involved, with less time invested (on your part).

I'm obviously not reinventing the wheel by any means, but does anyone teach this or talk about this? If not, why not?

Thanks in advance for anyone else who would like to chime in.

So then you wouldn't mind someone referring you to another wholesaler's deal, correct? (Of course not)

I'm curious to hear from others as well.

I've seen it happen a few times, but never really took the time to market deals that aren't mine to my buyers.

For instance: I come across a deal from another investor and it seems like a perfect fit for one of my buyer's -- I should then contact Investor (wholesaler) to see if we can arrange for a pre-determined fee amount if in fact, I'm able to bring him a buyer at his price.

If it turns out buyer is interested, and purchases property, then wholesaler pays me my pre-determined fee.

It seems too simple. In this scenario, I have no vested interest in the property, no time spent locating or contracting the property, but simply connecting buyer to wholesaler.

Move to next deal, and repeat. Is this common? If so, I'm just a little slow and just now figuring out! If not, please shoot holes through this strategy if this is not legit, especially if one is licensed!

Thanks! :)

Anyone?

How common (or uncommon) is it to refer one of your investors to another wholesale deal that is not your own, and collect a pre-arranged amount from the wholesaler, before or after closing?

Does the business frown upon on this sort of practice if one began to develop a reputation that "he just refers his own buyers to other deals", or does neither party (wholesaler/end buyer) care because ultimately, they are both making money. Are there legal issues here?

Please advise…

Ps. If a licensee engaged in this transaction, would he or she need to disclose to each party that they are licensed, or are they not considered part of the transaction?