RJ,
I hate sounding like a broken record on this forum, but since people seem to gloss over important but unpleasant details I thought I would being them to everyone's attention.
"Flipping MLS Listings" - Aside from the fine points Cindy makes above about title seasoning (many sellers (especially BofA) are starting to include 'no resale / change in title within 90 or 180 days') I SUGGEST TO YOU IN THE STRONGEST POSSIBLE WAY you consult a REAL ESTATE ATTORNEY about what you are planning to do.
It is common practice for wholesalers to place a property they find on the MLS under contract, then execute another contract to sell it to someone else at a higher price. Here are the problems with that strategy:
- In order for the original purchase agreement to be valid, you must be WILLING (everyone WANTS to buy good deals) AND ABLE (do you have the funds?) to purchase that home. What are you going to do if your end buyer fails to show up? In a situation like that, if you don't have the ABILITY to purchase that home yourself, when you execute a TREC agreement, you have probably committed fraud.
- You are executing a legally binding contract (with your buyer) to sell them something YOU DO NOT OWN. Last time I checked this was also called fraud. Think about it. If you used Joe Stone, a licensed Realtor, to place a home I have listed on the MLS under contract, then you presented Cindy another contract to purchase that home, what is she going to do if I fail to sell you the house? How are you then going to sell it to Cindy when I change my mind and refuse to sell it to you? While you might be busy trying to sue me to compel me to perform, what is Cindy going to be doing to you?
- If a Realtor is involved in this kind of transaction, regardless of the kind of contract used or disclosures you put in place, TREC told me on the phone if they are made aware of this, they will yank that agent's license and heavily fine their broker.
WHOLESALING BENEFIT TO REALTORS (or lack thereof):
The truth for most Realtors is there is very little benefit to be had helping wholesalers flip wholesale deals.
As an investor, you can try and buy good will / feelings with Realtors in order to access their information/expertise by building pleasant working relationships with them, but the time and effort involved in building those relationships from the Realtor's perspective to work with wholesalers is much better spent investing that same time / effort / money with Retail Buyers first, or Rehabbers second.
Additionally, if you do manage to get Realtors involved in wholesale transactions, you are most likely going to run into situations (regularly) where a Realtor says something along the lines of "I can't be involved in that" or "my broker won't let me do that."
And from their broker's perspective, wholesaling is 100% ILLEGAL. They view it as the unlicensed practice of Real Estate - cheating. In effect, you are asking a Realtor (who works for a broker) to help you take business away from licensed Realtors. That doesn't make good business sense.
If you want to be a wholesaler, I suggest you are better off learning to do your own marketing and market research analysis (comps) using existing investor tools (TAD.org / DCAD, Investway, etc.), than you are trying to partner with a Realtor in order to gain access to the same basic information (NTREIS, FAMREIS, etc.).
I fully expect to incite a lynch mob of angry wholesalers with this post, but this is information all new investors need to know, but almost no investor information sources will make available to them.
Hope this helps!
-Greg
Greg Wilson
The Real Estate Investment Mentor
