Are you Illegally Acting as an Agent?

Are you Illegally Acting as an Agent?

I have been communicating with someone in the program who received a letter from a local detective with the police force. A real estate agent has reported that she is illegally acting as an agent in her business, which is wholesaling.
She seems to be following all of the principles of the program, which would make all of her operations legal, but in spite of that, there is an agent who has somehow decided she is breaking the law and reported her.
I am writing this post to define the difference between agency and ownership, and how that applies to us. I am also writing it to warn you against the activity that can get you into trouble.
Ownership of a property is a bundle of rights, benefits, and obligations, and is actually divided into two categories, according to the law.
1) Legal ownership--Basically means that your name is on the title;
2) Equitable ownership--All incidents of ownership except legal title.
Contracts between owners and other individuals transfer some of the rights away from the legal title owner of the property. A purchase contract or option agreement constitute a transfer of ownership rights to the buyer or optionee from the legal title owner.
From the time that the seller and the buyer sign the agreement until the closing, the owner holds what is called "naked" title, and the buyer has an equitable ownership claim to the property--they are now an owner.
The law says this is true because of their right to sue in court for specific performance on the contract for the transfer of legal ownership.
In other words, anyone who has a signed purchase contract or option agreement for the purchase of real estate is an equitable owner of that property--and they share that ownership with the legal owner.
So if that equitable owner wants to market the property for sale or assignment, they have a complete legal right to do so as an owner, and would be a principal in any transaction, NOT AN AGENT.
It is not possible to be a principal and an agent in the same transaction, because it is not possible to be yourself and not yourself at the same time.
As long as you place the property under contract first, you are allowed to do the things that owners do in marketing their property for sale or lease (of course, subject to the terms of the purchase contract or option agreement).
But, and here is the warning part, if you do not have a property under contract and begin sharing specific information about that property with a potential buyer for the purpose of marketing it and making a profit, you are acting as an agent, and unless you have a license, you are acting illegally. DON'T DO THAT!
In this program, we never advise people to do things that are illegal, unethical, or immoral. Using the real example above, this is not something to play around with. It can have real and severe consequences, and you never know when an insecure agent who doesn't understand what you are doing is going to feel that their position and livelihood are being threatened by a non-agent. We wish you a successful real estate investing career without being bothered with legal issues.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


Dallin

Please explain to every one the legal way to bird dog and co-wholesale. Since in both those cases you yourself will not have the property under contract.

Great post and thanks!
Michael

__________________

Knowledge is power, but execution trumps knowledge. Tony Robbins

http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site


Hey Dallin

Great post. Thanks for sharing!!
_____________________________________
Tc
Miami. FL
My journal http://www.deangraziosi.com/real-estate-forums/investing-journals/144538...

__________________

TC
Miami Florida

"If you are not doing something that help the universe or God or your family, or YOU, is that something you should still be doing?"-Dean Graziosi

"Each day do one thing to get you closer to your dreams because if you do today what others are not willing to do, then tomorrow you can do those things that others are only dreaming about doing!"- Joe Jurek

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Thank you, Dallin!

That's the first explanation of this topic that I've actually understood. Thank you for spelling it out for us.

Jason


Thank you coach Dallin!

Yes, you spelled that out quiet clearly. We must have a property under contract in order to start marketing.

__________________

www.tw4homes.com website
https://tvallc.isrefer.com/go/RehabLite/reigirl/ FREE SOFTWARE FOR WHOLESALERS, REHABBERS AND AGENTS! Present professional looking deals to buyers and lenders as well as run your numbers and get the ROI.


Curious

Curious as to why she would get a letter from a police detective rather than from the licensing authority in her state. Usually when there is a licensing issue like that you get a cease and desist order from the licensing agency.


thanks so much!

As someone that doesn't want to do the wrong things, please as Mr. Michael asked, please explain the bird dog and wholesaling thing too! I have bookmarked this! This is very insightful and helpful as I didn't know, and do not want to do the wrong thing!

Thanks!

~NickandGen

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~Blessed beyond measure and enjoying life to its fullest!~


Deflated Energy

This post is very interesting and enlightening to say the least. I have a concern however. What if I'm just getting started and I see or find or have some properties that other cash investors are in fact, looking for but I don't have earnest money to put down or am able to show a proof-of-funds to hold the property(ies)and place under contract as agents ask for? Can I NOT tell/show those investors or intermediary to the cash investors about what I have? If this is the case, it deflates the energy out of what I'm struggling to do to get started and see the benefits of investing in real estate as Dean has so candidly stated. I'll await your response.

theassociate


POF

There are folks on this site who can help with the Proof of Funds letter.

__________________

" The only difference between me and successful people is they started before me."
by Shane


Bird-dogging and Co-Wholesaling

Steve, thanks for bringing the question of Bird-Dogging and Co-Wholesaling to the table, these are also important areas that are often swept under the rug in terms of discussion about how to perform in these roles legally.
This is especially true of bird-dogging. The reasons for this are:
1) The typical bird dog fee is around $300 to $500, and infractions in this area are not watched over as closely as those that net ten times as much, or even more;
2) Most people, after 1 or 2 bird dog deals decide to move to the greener pastures of higher priced wholesaling, doing assignments and double escrows.
This does not mean that we should look at little infractions as being okay while bigger ones are not. That kind of rationalization will end people up in big trouble.
I should point out that there are certain areas of the country that allow for non-licensees to be paid commissions, referral fees, or marketing fees for finding either properties for buyers or buyers for properties.
Also, there may be other ways of putting bird-dogging arrangements together,and I would love for others to contribute their input. I am presenting here a strategy that is for educational purposes only, and should be reviewed with your local legal advisers. It is one strategy, but not necessarily the only strategy.
I prefer a two step process, which requires you to have a strong relationship with the buyer/investors that you are working with.
Step 1: For a nominal amount of money, you are given essentially a marketing arrangement (or consulting agreement) to gather general information on available properties, and to provide that information back to the buyer.
Step 2: The buyer does the leg work regarding the general marketing information and addresses provided by the consultant (bird dog). When an offer on a property is presented, the consultant is given the opportunity to sign as a co-buyer on the purchase contract, and immediately presents an assignment agreement for a reasonable "finders" fee. The consultant becomes a principal on the offer, who has "assigned" away their rights in exchange for their bird dog fee. The consultant receives their assignment fee as a part of closing, clearly identified on the HUD 1 Disclosure.
Co-Wholesaling requires a similar arrangement with a pre-agreement to do marketing research to find either properties or buyers, converting to agreements that identify a co-wholesaler as a principal prior to any arrangements which allow them to be paid for services provided on a specific property.
The salient factor here is that general marketing is different than specific marketing. If I were to provide you with a copy of the local phone book and say: "Here are some properties that you can check out since you are interested in properties in this city," no one would accuse me of acting as an agent. It's too general. If the list is smaller, yet still a list of properties, this is still general marketing, and if the buyer must then do all the leg work to narrow this down to specific properties to make offers on, all we have done is reduced the phone book to a smaller phone book.
People acting as agents are specifically directing potential buyers toward one specific property, or helping a seller to sell one specific property. Agents can not be paid by spending a day touring you around to various properties. They can only be paid by helping you to buy one specific property.
There is another approach that would require the buyer and bird dog to form an entity together. The buyer would be the managing partner in this entity, established for the purpose of procuring one or more properties, and the bird dog would be a non-voting member. When a property is placed under contract, it will be in the name of the entity, effectually making both buyer and bird dog principals in the transaction.
Once again, the best policy is to be able to act as a principal in a transaction. So when general looking changes into transactions, make sure you are safely within the legal boundaries of being a principal.
I suppose I should mention that if you are very high profile as a bird dog, even if you function well within the law, you may have real estate agents who feel that you are taking away some of their ability to get paid by serving as an agent for your buyer. Be careful about the perceptions that you create with licensees, they can make it difficult for you to do business by blacklisting you with fellow agents, reporting you to authorities, etc.
I hope that others will contribute to the body of knowledge here. Let's hear other strategies, and, as always, make sure that if you are going to implement something that was discussed in these forums, you have confirmed the legality and usability of the technique with your trusted legal advisers, who can review with you the pertinent state statutes governing these types of transactions.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


Re-Inflate Energy

While I realize that some of the information in this area does seem to put up some walls and barriers to successful wholesaling, we are talking here about some details of being a real estate investor that soon become routine. When I am driving my car, I routinely look over my shoulder before changing lanes. It takes effort and did not seem natural when I first started driving, but it is part of being a safe driver, and we want you to be safe investors.
I post in a lot of other areas in this forum, and 98% of the posts that I write are positive, interesting and fun, but the 2% that relate to using caution and maybe adding an extra step or two always seem to bring up people's fears or other concerns. I understand that, because this is all probably pretty new to a number of people. But that should not reduce our energy or desire to succeed.
The post on bird dogging really does not change your actions until the point where you are going to get paid and arrange the final paperwork. For other levels of wholesaling, most people understand that they need to have the property under agreement before presenting it to cash buyers.
If you are struggling with earnest money in working with real estate agents, find ways of finding properties that do not require agents. I have posted elsewhere in detail on that topic, including about 8 ways of finding properties that are not common knowledge to most investors.
I am hopeful that each of you will not allow obstacles to prevent you from moving forward. Obstacles are bumps in the road. If you come to a bump in the road, you do not turn your car around, go home, stay there, and blame the bump. You either go over or around the bump, but you find the way to move forward. I constantly quote my first real estate mentor, who said: "There is ALWAYS a way!" Please view some of my other posts for more creative techniques, as well as those posts from many of the other brilliant minds who frequent these forums. I hope this post is encouraging to anyone who is concerned about getting started. I began real estate investing coming out of a very devastating divorce, and had a big hole to climb out of, and no revenue and no credit. Between wholesaling and sandwich lease options, I was able to get out of that hole and attract the attention of some people who asked me if I would be willing to do some training/coaching on real estate investing. Since that time, I have been investing and providing training services, happy in the fact that both help other people as well as me.
I have seen laws and regulations change in the last 18 years of investing, as well as market up and down cycles. Real Estate investing is still the best way of building your financial future in the world. Please don't let little things ever shake your faith that you are on the right path.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


Shaken BUT not Broken..

Yes Dallin, many things in this business are a learning process, just trying to avoid learning it the "hard" way, thanks for the very informative post! Although, at times it may be easy to forget things I shouldn't do "acting as an agent" So bookmarking this one and writing it on my save to memory wall, literally so I don't forget! Sticking out tongue By the way, spouses make great realtor/partners it would be easy to do in Texas 6 month to 12 month program.

__________________

"Cut not the wings of your dreams,
for they are the heartbeat and the freedom of your soul." ~ Flavia

Kathy Wholesales TX
KM WholeSale Properties LLC
469-587-9967
1888-591-1096


Realtor in the Family

KatCanDo2, that really is an excellent suggestion, having a real estate agent spouse or partner could have a lot of advantages.
Many times the comments made on here may imply (incorrectly) that real estate agents are obstacles rather than assets. With an obvious attempt at humor, I learned that MLS has an alternative meaning that relates to real estate agents. The meaning is "Mostly Lazy Salespeople." May I emphasize the MOSTLY part. Some real estate agents have an open and far-sighted approach to their business, and these agents are genuinely worth their weight in gold. If you're dealing with some of the lazy faction, you really need to find the ones who can catch the vision (this doesn't seem too difficult to me) that if they work with an investor who wants to buy several properties this year, that will pay off much better than working with people who only want to buy a property for their family. PLUS investors don't reject a property because it has pink carpet or smells funny, they actually like that. Once an agent understands that for a little extra work, they are likely to DOUBLE the number of transactions they will do in the next year (the average agent sells 4 to 6 properties per year, so if we only do 6 deals in the next 12 months, we really will double their income.)
So ultimately, if you have someone in your family who wants to be a real estate agent, or you can train and build a relationship with a good realtor or two in your area, you have created a great opportunity for both you and them to make some really decent money from the relationship.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


TRSD

I agree with you, a detective from the police dept, would not be the one who says something.
I would question that for sure.
I have bird dogged for a couple years and now work with flipping and rehabbing.
Also have done some assignments for a fee. But not sure if some states do anything about it, have never heard of this before.
However, if a seller chooses to work with an investor vs an agent to move the property, sounds like the agent doesn't like losing a deal.
Having a contract does make a difference, but as for bird dogging and wholesaling, if the investor and the bird dogger work together as partners, I don't understand why it is a problem.
I know many people who do this all the time, and as I said, this is a first.
But remember that even in Deans training, they remind you to not act as an agent.
An agent also does a lot more than most investors. And we as investors should already know the difference,
And many of us investors have as I do, an agent as one of my partners.


Teaching The Safe Way

Sandiboots, your post demonstrates practical experience that is extremely valuable for people in the program to understand. And as you pointed out clearly, in Dean's training people are reminded not to act as an agent. We hope that everyone understands that, and what it means, but some may not.
So, this following information is directed to everyone, not to any particular respondent above.
My role working with Dean as part of the Training/Coaching team places me in a position where everything said must steer people to the MOST legal, MOST Ethical, MOST moral way of doing business as a real estate investor. When your designation in this forum identifies you as an Official Coach, that's what that means, I'm here to represent the program, help people to succeed, but also to protect the program from any liability.
To put it in another way, we have to be the ones who advise people to stay 30 feet away from the edge of the cliff in order not to fall over.
Some people will choose to walk closer to the edge than that, and do so with complete safety. But then there will be that one person who disregards the safety rules, goes to the edge, falls over, and then tries to blame the program.
We're very conscious of that one person, and the effect that can have on all of us if something happens to them, even through their own fault or negligence. I've been a real estate investor for 18 years, and just like Dean, I want to ensure that the next generations, including my children and grandchildren have an opportunity to make a great living from being a real estate investor.
So if these posts appear overly cautious, just think of me as the parent who takes their children to the Grand Canyon and makes them wear a harness. Call it overprotective, and in my personal life I may not be the uber-protective investor, but as a trainer with the program, I will always respond that way. Have fun investing, and don't forget to wear your safety helmet and knee pads gang!

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


Hey Dallin, Thanks so very

Hey Dallin,

Thanks so very much for the information. I don't look at any of the information you've given as negative or with a spirit of fear, but rather, How steep is THIS mountain! I am against some very challenging economic conditions. I believe Dean when he said real estate is the best way to overcome these challenges. At some point however, I feel severe burnout of seemingly having to keep fighting (what I perceive as) up hill battles. I'm ready for a major breather. I keep staying in contact with someone that is connected to real estate with the belief that my change is just around the corner. I want to build my business on a solid foundation. That begins with honesty and integrity I believe. The bottom line...I want to do it the right way. So, thanks again and I hope we've helped someone else out there who had the same concern as I or similar and did not / hasn't spoken up.

theassociate (Steve)
South carolina


Reinflating

All of this is very helpful and encouraging. I will look at some of your other posts as suggested. I don't know for certain that in South Carolina its a problem with agents if you share information about their properties with potential buyers. Especially when the economy was ina tailspin and they weren't making any money. I have in fact, had some to tell me personally "sure! and thanks." I also have contact with real estate agents in other states that send me properties sevral times a week or month to either buy or tell others about. I think for me, to make sure I get no negative feedback from those I know and thos e I may come in contact with, I will send to each of them an email asking if it's ok to introduce their property(ies) listing(s) to other buyers if I decide not to purchase or am unable to purchase at that thime. I will have them to respond to my email with a replied email as a matter of record should amnesia set in on the agent.

thassociate (Steve)


Thanks a lot

Thanks a lot Douglauri.

Fortunately, that issue has been resolved. I'm going to read other posts concerning the earnest money deposit and once those two are dealt with and I'm comfortable with what I've learned, I should be off and running.

theassociate(Steve)


Another Area to Tread Carefully with Agents

Steve, you have hit on one of the most important keys here, if you have contact with agents, and coordinate efforts with them, and always make sure that you are looking out for your team as well as yourself, you'll have a successful experience and agents who want to work with you.
Some general comments for all--One area that most wholesalers do not pay a lot of attention to is best described as the double commission. Although we as investors may not think of this as a missed opportunity, I guarantee that some agents are going to look at it very differently, and feel that they were cheated, and this can create friction.
When a property is bought by an investor that will then be re-sold, if the property is listed for the initial sale, and then re-listed for the resale, the agent who facilitated both the purchase for their client, and then the resale for that same client would stand to collect a commission on each side of the deal. Real Estate agents love it when that happens.
As wholesalers, however, we find the cash buyer in advance, or market to find them after the property is under contract, and we do not re-list the property with our agent. That could be perceived by them as being cut out of a commission by a greedy investor who doesn't really care about their agent.
The agent doesn't realize that there usually isn't enough money in the deal for them to receive a second commission, all they see is what happened to them. And as we all know, perceptions are realities.
It is important that we do our best to make sure that our agents get paid well, that they understand that we make our money by doing volume in wholesaling, and that if they keep bringing us properties, we will keep helping them to get paid. And as I have mentioned above, if we can simply do a minimum of 6 deals in one year, we will likely double their income from real estate for the entire year. Once they recognize that we are taking care of them and helping them to get paid on multiple deals, the sting they might feel from "losing" the double commission will go away, and they will be excited to work with you.
I hope that understanding the way your agent thinks helps you to improve your relationship with them so that you can both be extremely profitable.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


.

.


excellent

Thanks coach some very good info and it helps us all be better legal investors with out risk and that means alot,We want to be honest bin all we do and be the best investors we can with the best knowledge we can get and that lets everyone we deal with we are ethical,honest and transparent with means alot to everyone we deal with, a good name means alot and we dont need legal issues that come back to cause many unassary problems or that could wipe all we have worked for,Thanks coach really important stuff and priceless, sincerely.Jim

__________________

jbischoff


It's Our Legacy

Jim, I always appreciate your comments. I believe that the best way to look at what we do as investors is long-term. Short-term profits are wonderful and necessary, but pale to what we can make long-term if we do things properly and form solid relationships.
These things secure a future in real estate investing not only for ourselves, but for the next generation of investors, including our children and grandchildren. This has been a good industry, and we really only want people with high standards in it. I have firmly invited, and will repeat here to anyone who is going to place their profits above legality, ethics, and morality to leave the industry immediately, we don't want you in it. You poison the water for yourselves and for others.
On the other hand, those who take the high road, I want to commend and encourage you. You deserve enormous success, and will achieve it by repeatedly doing right things.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


agent??

Great info Dallin, thanks..

__________________

Dan in Seattle..


Teddy Roosevelt Quotation

Although this is a paraphrase, I think that it is an essential to our view on our responsibilities as a real estate investor. Teddy basically said that 'Every man owes a portion of his substance to the industry that supports him.' In other words, it is important for us to go beyond what we can take away from our work as an investor and begin to think in terms of what we have to give to this fantastic industry. Working on a board of a real estate investors association, or doing lobbying in regard to laws that are unfriendly to investors, and other things of this nature help to improve the industry for those who will come along in the future. This "Pay it Forward" type of principle, in my view, is not just an option, it is an obligation that I hope each of us will take seriously. Best Wishes to all on your success, and thanks, Dan for your comment.

__________________

Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall


So Dallin,

What you basically said if we are co-wholesaling a deal(which I just did)we need to have an agreement with the wholesaler that has it under contract right?

__________________

Tony

Go faster do more! GFDM!


Calitony

Hi Tony,

Yes you are correct you should have some kind of contract in place with the wholesaler you are working with that has it under contract so then you are protected and get paid.

Happy Investing,
Shah Ali


DALLIN AND SHAH WHERE ARE YOU !!!

you haven't been here in a while !!!!


Just what I needed to hear! Thank you!

WOW...thank you so much for this message! When I first read your message I was thankful that you were reminding us not to let hiccups discourage us from moving forward. I liked how you related it to learning anything new, such as driving a car. But then as I read further your message got personal and gave me the biggest hope of all. You see, I too have gone through a two year messy divorce which put me in a huge debt I didn't even think was possible. When you mentioned how you got out of your debt with real estate I felt hopeful and certain for the first time that I am on the right path. Now to build some confidence and belief that I can do this. Thank you for that example! It was just what I needed to hear.


Great thread

it was a great reminder, thx Walt. Dalin moved on to another co. Sad he was a coach & would come on here as part of his job & Shah still is would love to see him more too.

__________________

Tony

Go faster do more! GFDM!


Success Academy

Im still involved with and will contact Shah and let him know his thoughts are needed..

Aaron


A Realtor Story.

I had a situation last spring that happened to me where I got a lead from a bandit sign and placed the property under contract. A realtor called me from a zillow ad I posted through Postlets. I didn't know Postlets marketed the property through so many outlets and forget to disclose my intentions of wholesaling it BUT the Realtor did act like a buyer calling me wanting to see the home. When she showed up and we met she immediately tried to tell the seller what I was doing was illegal and that she was going to report me to the Realtor Commission and tried to take the deal from me so she can list it. All this happened in front of another lady who was a REAL cash buyer! Can you imagine how embarrassed I was? I did my studying on what she may have been talking about and there is some states like Ohio where you do need a license to do any type of assignments unless you double close. It's all about your intention and what you disclose because remember assignment of contracts are an exit strategy, how many people in this world understand that from an investment stand point let alone people who have no clue about investing in real estate?

It's kind of like how serious people take you for having a BBB Rating. Do you need one? Obviously not many of us are making a killing without it but there are many who are making a killing with it because the average person is very uneducated about real estate and they don't understand our intentions, whats legal, and what is possible. All having a license would do is make you more credible to the average person but will come with more responsibility from my understand.

Just come across as a professional in everything you do. Get testimonials, have FAQ's ready to answer, have legit partnerships with title companies and attorneys. That alone will make you extremely credible just having a strong Title Company behind you because once you let a seller know that they go, "oh well whatever they do must be legal if they have a title company/attorney closing for them."

Dallin Wall is 100 on this topic because you MUST get the property under contract before doing any marketing for it. In my opinion you should market the deal more than you market the property. Actually call your best buyers and run the numbers past them is what I mean. Don't just blast a huge email campaign first with photos and every friggin detail about the house. That's why some people think you're an agent because you're marketing the house more than you are the deal, the numbers and contract.

__________________

Adam Macias


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