Agent2Agent in Pennsylvania>Question Details

Justin F., Both Buyer and Seller in Lancaster County, PA

Can real estate agents wholesale properties to other potential investors FOR A FEE?

Asked by Justin F., Lancaster County, PA Sun Feb 22, 2009

I am curious to know if that particular strategy can be followed through by an agent or not? I hear an agent cannot do this as well as the opposite.

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Answers

10
Thanks for clarifying the question for me.

Here is what you added to the question:

What I am asking is can an agent find a propertty for his or her own investment negotiate a below market deal, and then Sell the the deal to an investor for a charge. This would br for personal investing purposes. Thanks...

MY ANSWER:

Well yes, they can, but there are some rules about it.

A realtor must tell the parties involved that they hold a real estate license. They must also disclose what role they play in the transaction.

I am not sure what you mean when you by selling the deal for a charge.

An agent can buy or sell the property at whatever price the parties negotiate. The first buyer can sell the property to a second buyer as soon as he has closed on it. There is no minimum time that has to pass between the deals in some cases. A purchased financed with an FHA loan does have time limits imposed. (agreement of sale cannot be dated less than 90 days from the last purchase)

The agent could, with the permission of the seller, substitute another buyer’s name in the contract that he had negotiated. Maybe somebody else can explain more of the rules and procedures that must be followed when a contract is assigned to another buyer.

You sometimes see listings that say the buyer cannot be written as "John Doe and assigns". That means that the person who writes the original contract cannot pass the agreement along to another party.

Another way that realtors often profit from buying and selling is to buy a home that they can get for a good price, then spruce it up and resell for a higher price. That is also perfectly legal and done quite often.

Still other agents will take over a home where the owner owes more to the bank than the property is currently worth. They then negotiate a sale with the bank and turn the house around to sell for a profit. This is one way that some profit from a “short sale.” You may have seen the ads that say “we buy any home for cash” These cash buyers often use rent-to-own or lease purchase contracts when they resell.

These transactions are legal, but the Realtor/investor must be very careful that they offer “full disclosure” at every step.

NOW PLEASE, understand that I am not lawyer, and that this post is in my own words, with some of my own opinions. I will be curious to see what other answers will be offered here.

I am also curious to know what is behind your question. Are you thinking of becoming a realtor/investor, or have you had experience with one.

To me the important thing to know is that if someone offers to bail you out of a home that has not been selling on the open market, then you should expect that they will give you a wholesale price, often something on the order of 70 to 75% of true market value. Use the same caution when dealing with a builder who offers to take your home in trade so that you can buy his product.

Comments from others???
1 vote Thank Flag Link Sun Feb 22, 2009
Read the Code of Ethics and your state's licensing laws and regulations. Ask your Broker and check office policy.
0 votes Thank Flag Link Thu Jun 5, 2014
Additionally, as to the fee vs commission issue revolves around agency. When you establish that there is NO agency expected or paid for (Article 1 Code of Ethics) then you can ethically purchase on your own. Then it is between you and your brokerage as to any potential split. However as a truly wholesale deal is considered not a "Real Property" transaction, they are typically not subject to commission splits. Remember! Assignments of contract (wholesaling) can be done by the unlicensed because they are simply selling then"right to purchase" the home. Not actually "flipping" the home in most cases. Again, more specific info at tenminuteskill.com.
0 votes Thank Flag Link Thu Jun 5, 2014
The answer is yes.
REinvestconsultants.com

This is what our brokerage does everyday :)
0 votes Thank Flag Link Thu Sep 13, 2012
I always hate to post several times on the same question but forgot a really important point. To take a house over using a quit claim deed then negotiate a short sale leaves the origional owner the one on the financial hook and is never an ethical way to go. If somehow the negotiations did not go the way the associate expected the origional owners gets all the financial burdon and has no physical claim to the property for which they are still owing a mortgage. Almost all mortrgages have a clause about the ability to lease or transfer title to the property without the authorization of the mortgage company. Lease purchases and contract for deed sales violate many of those clauses and the loan can be called due and payable and once again the origional owner is on the financial hook. Very risky business!!!!!!!!!
0 votes Thank Flag Link Mon Feb 23, 2009
There are so many red flags that want you to consider. What if you could not find an investor? Would you be prepared to close as the purchaser yourself. The "fee" you speak of is called a commission and must go through your broker An associate must also remember to abide by the code of ethics when presenting CMA information and be dilligent about not "lowballing" the seller to make it extra attractive to the investors for the associates own profit.
0 votes Thank Flag Link Mon Feb 23, 2009
One thing I forgot to mention is that if an agent is representing themselves as a buyer of certain bank owned or REO properties the bank/seller will state that that particular agent will NOT be paid a commission.

I do not think there is anything keeping a Realtor representing themselves from negotiating a below market transaction price on a property and then selling it to someone else and receiving a profit. If the Realtor has the where withall to do so more power to them and in most cases they will be helping the distressed home owner out of their own trouble.

Lynn Bowen
0 votes Thank Flag Link Sun Feb 22, 2009
If an agent has a valid listing with the owner/seller of a property or properties h/she is is paid whatever amount of commission is specified in the listing agreement should that property sell during the listing time period. The amount of commission is always stated in a listing, it can either be stated as a percentage of the sales price or a lump sum fee.

Hopefully this helps you out. If I am missing your true question please let me know.
0 votes Thank Flag Link Sun Feb 22, 2009
Justin,

Let me try to make sense of your question. Are you suggesting that if an agent is selling a portfolio of properties (i.e. an investor's investment truned sour and how he's disposing of all the properties) that rather than charge a commission, the agent charge a fee for this service?
0 votes Thank Flag Link Sun Feb 22, 2009
Please explain a little more about your question. I am not sure I understand what you are asking
0 votes Thank Flag Link Sun Feb 22, 2009
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