Selling other people's contracts for them. License? E&O?

Question

I've been talking to two acquisition people who both said the same thing: they hate the selling half and would pay someone to handle it. My side of it would be taking their signed contracts, working a buyer list, and getting to a closing. Fee per closing or a share of the assignment, we haven't settled that.

What I can't get a straight answer on is the paperwork around me. Do I need a real estate license to do that, and if not, do I need errors and omissions coverage anyway? A land broker I know said E&O is only sold to licensees, which if true means I'd have nothing. I also don't know whether I should be doing this in an LLC from day one or whether that's overthinking a fee arrangement.

Rena Guide · Accepted Answer

The licensing question turns on what you're selling. When a wholesaler sells the contract they hold, they're selling their own equitable interest in the property, which is a principal acting for themselves. When someone is compensated for finding a buyer for property they have no interest in, that looks like brokerage in most states' statutes. Your arrangement sits between those, and how it lands depends on your state's language and on how the fee is structured, so this is a question for a real estate attorney licensed where you'd operate. Several states have added specific rules about marketing property under contract, and a few require the person doing it to be licensed.

On insurance, errors and omissions as sold to real estate professionals is generally underwritten for licensees, so the broker's comment isn't far off. What an unlicensed service operator can usually buy is general liability and, from some carriers, a professional liability policy written for consultants. Whether a given policy would respond to a claim about a deal you marketed is a coverage question for the carrier in writing, not something to assume.

The entity choice is not overthinking. If you're contracting with two different wholesalers on fee splits, you want a separate bank account and clean books from the first payment, and mixing that into a personal account gets messy fast.

The piece people skip: the two acquisition people you're talking to are also your single point of failure. If both dry up, your buyer list has no deal flow, and a dispo service with no deals is a spreadsheet. Most operators end up sourcing from more than two.

laurenkim53 · Answer

Out in the counties I look at, the commission answers the phone and will tell you what activity they consider licensed. Free call, twenty minutes.

Rena Expert · Answer

Two structural things to settle before the fee percentage.

First, define the base. "A share of the assignment" is ambiguous the second a deal double closes, because now there's transactional funding cost, a second set of settlement charges, and possibly a price reduction negotiated at the table. Write down whether your cut comes off gross assignment or net after those costs, with an example calculation in the agreement. On a $30,000 gross with $7,000 of double close cost, a 30% share is $9,000 or $6,900 depending on the answer, and that argument will happen on the deal where everything else already went wrong.

Second, decide whether you're ever a party to the contract. If you're outside it entirely you have no standing when your wholesaler decides to close on it himself after you produced the buyer. Some operators handle that with a JV agreement that names them on the deal, which strengthens the principal argument on the licensing side too, and simultaneously puts them on the hook for the earnest money. That trade is real and it's worth pricing.

On the buyer side, keep a record of what you told each buyer about condition and numbers. Claims against dispo operators usually come from an end buyer who says the rehab scope or the rent figure in your email was represented as verified. If you're passing through your wholesaler's numbers, say so in the email in those words, and don't restate an ARV as if you pulled the comps yourself. That written trail matters more than any policy you buy, because coverage disputes start with what you actually said.

bmoreno23 · Answer

The point about two sources being your whole business hit me. I'd assumed the buyer list was the hard part to build and the deals just show up.

Selling other people's contracts for them. License? E&O?

4 replies