Want to hear something that really makes my blood boil?
It’s about laws associated with real estate investing and brokering… and misinformation about it.
Here’s what happened that sets me off—I got a call on my podcast hotline from an investor who’s also a licensed Realtor…
He wanted some clarification on what his broker said… his broker actually told him that any profits from any deals he does MUST go through the brokerage firm—even a FSBO.
Literally. Even if he sells his own house—A HOUSE THAT HE OWNS HIMSELF—his broker says the funds must still go through him, and he gets a piece of the action.
Man, I’m fired up about this joker broker…
Let me be clear: If you are a licensed agent as well as an investor doing deals—you absolutely do NOT have to go through a brokerage. And if you do work with a broker, it DOESN’T mean that your broker can take a cut of every deal you close. :-/
THAT IS NOT A LAW.
(Yes, I used bold, italics and ALL CAPS…that’s how strongly I feel.)
There is no law in any state anywhere in the good ole U. S. of A. that requires you to sell your house by owner through a broker if you’re licensed.
Now, a broker may have that as a rule for their firm. But it’s NOT the law. (BTW—if your broker does have that rule—you need to find a new broker.)
I get so disappointed when this incorrect information rears its ugly head. It drives me BONKERS!
And I’ve talked about this before because it comes back up from time to time, and I really feel strongly about needing to set the record straight.
But, hang on… Allow me to be generous for a hot minute—maybe there was a lost in translation situation here…
Maybe the guy who called my hotline misunderstood what his broker was saying? Maybe the broker misspoke? Perhaps I didn’t hear it correctly?
And I wish one of those was the case, but unfortunately I don’t think it is, and (sigh) this is why it gets me so mad…
Any broker who tells a Realtor that they have to do all their deals through their firm because it’s the law—PANTS ON FIRE. That is simply not true. Anywhere in the red, white and blue.
That is NOT the law.
Shoot, if someone says it’s illegal, ask them to show you the exact statute in the law where it says you have to do a FSBO through a brokerage if you’re an agent.
They can’t. It doesn’t exist.
How do I know for sure?
Besides the fact that I’ve been doing this a long time…
A friend of mine in Tennessee was asking about this very topic. So I contacted some attorney friends there and they consulted with their other attorney friends and colleagues.
Can you guess the response?
“I can’t believe anybody would ever say that’s the law. It’s not. That is the most ridiculous thing we’ve ever heard.”
Listen—if you’re a Realtor, you can buy and sell properties by owner without a brokerage. End of story.
What you do have to do according to the law is disclose that you’re a licensed Realtor when you’re buying and selling. (And that’s actually a good thing, because it also helps your credibility.)
Look, wholesaling is not illegal.
You’re assigning or selling the contract, NOT the property. You don’t advertise the house—you advertise the contract.
It’s also about the intent… when you see a good deal and you intend to buy it, it’s okay to change your mind and sell the contract. Whether you’re an agent or not.
Having said that, I do recommend that investors get their real estate license.
And I disclose that I’m an agent.
But you don’t need it to wholesale deals. You can flip contracts.
Just do it the right way: advertise the contract NOT the house.
And know this too—if you can, it’s better to close on the deal and then sell it.
DISCLAIMER: I am not an attorney. I am not giving legal advice. I am sharing information based on my experiences. Always consult a local investor-friendly attorney for all legal matters. Find one with a referral from a Realtor or fellow wholesaler.
So, besides from our joker broker, you’ll likely encounter title companies and attorneys and Realtors who will say you can’t wholesale properties legally. Or you must do deals through a brokerage.
If I stopped doing deals every time someone told me, ‘No, Joe, you can’t do that,’ I wouldn’t be where I am today. And I like where I am. I REALLY like it. 🙂
Know your rights—know what’s legal in your state. And don’t let people bluff you.