In certain states, like Pennsylvania, if you are a licensed Real Estate agent, you can use the existing Real Estate rules and regulations in your state to participate in wholesaling.
If you are a licensed Real Estate Agent you can play the role of Party B from within the context of serving as a Real Estate Agent to Party A. This is how it works. Assuming you are a licensed Real Estate Agent and you are also an Investor, you can approach a seller with the concept that you will list their property for sale under the following conditions:
- The seller determines what final sale price they would like to see.
- You enter into a listing contract for that price.
- You agree that your compensation will be any amount of money that is over and above the final sale price the seller is looking for.
You list the house for a price that you believe it could actually sell for. Here is an example: The seller Party A wants $100k for the sale of his house. You the agent/investor Party B enter a listing agreement that will net the seller $100k. You advertise the house for $125k, and you sell it for $120k. The seller gets $100k and you get $20k as your commission on the sale.
If you are a savvy Agent/Investor and the buyer of this house is going to remodel it and sell for profit (flip), you can propose the buyer also sells it with you as his Agent when the remodeling is complete and the house is ready for resale.
I’m sure you can see the tremendous potential for licensed agents in states that recognize net listings. If you are licensed agent in a state that does not recognize net listings, or you simply are not a licensed Real Estate Agent, then I recommend you set up a LLC to conduct your wholesaling business.
Note: In most states, if you transact more than five wholesale deals in a year you may be viewed by the taxing authorities as a dealer. Check with your tax accountant and/or attorney to verify the federal tax rules and the state tax laws that apply to you.
Always remember that when you are using a LLC to conduct business, you should always sign with “Your Name, member (your LLC name here), LLC” Here is an example _John Smith, member ABC, LLC
Do this on any business documents involving your LLC, wherever you would normally sign your name. If you don’t do this and you sign your name personally, it could expose you to liability if there is a problem down the road with this particular transaction.
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