Encino, CA asked in Contracts and Real Estate Law for California

Q: What kind of contract should I sign between a real estate agent and a wholesale buyer? We want to partner to buy homes.

I (a wholesaler) want to partner up with a real estate agent to help me find properties to sell to my investors (who are cash buyers). I contacted an agent who said to send over a contract between our partnership to ensure terms and agreements of work and profit. Would I use a buyer's agreement contract? What should I entail? The agent would make commission from a percentage of what my partner and I would get from selling our contract assignment to our investors. Or is there another way for the agent to make commission from the sale?

Related Topics:
3 Lawyer Answers

A: You fail to describe the exact nature of your business. Are you looking for the Agent to find you properties that you would contract to buy and then remarket (or, "assign contracts," as you put it) to investors? Have you signed the investors to an LLC? This might work but there are several ways to structure this. I think you need to be more specific to receive concrete advice.

If I have understood you, what you may be looking for is a joint venture agreement with the Agent since you are asking them to completely restate their responsibilities and defer their commissions until you "resell" to potential "investors." The core of the broker's arrangement could certainly be derived from a basic buyer-agent agreement, as you suggest but that would only be a part of the full agreement.

James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Sacramento, CA
  • Licensed in California

A: In this situation, you should consider using a Joint Venture Agreement (JVA) or a Partnership Agreement. These contracts outline the terms and conditions of your partnership with the real estate agent, including the division of responsibilities, profits, and commissions.

Key points to include in the agreement:

1. Roles and responsibilities of each party (you as the wholesaler and the real estate agent)

2. Commission structure and profit-sharing arrangement

3. Exclusivity of the partnership, if applicable

4. Duration of the agreement

5. Termination clauses

6. Dispute resolution methods

7. Confidentiality and non-disclosure clauses

Regarding the commission structure, you can agree on a percentage split of the assignment fee you receive from selling the contract to your investors. For example, if you earn a $10,000 assignment fee, you might agree to give the agent 25% ($2,500) for their role in finding the property and facilitating the transaction.

Alternatively, you could structure the commission based on the total purchase price of the property. For instance, the agent might receive 1-3% of the final purchase price as their commission.

It's essential to consult with a real estate attorney to draft a legally binding agreement that complies with California law and protects the interests of both parties. A buyer's agency agreement is typically used when a buyer engages an agent to represent them in a purchase, so it may not be the most suitable contract for your partnership with the agent in a wholesaling context.

Shawn R. Jackson
Shawn R. Jackson pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Rohnert Park, CA
  • Licensed in California

A: You have several choices ... from a straightforward partnership agreement [not recommended] ... to a joint venture agreement with good insurance ... or form an LLC with a carefully drafted LLC Operating Agreement. In these types of ventures "People, Money & Real Estate", the clarity of the agreement and the various default possibilities ... and the significant exposure to liabilities over the next ten years for each project is significant. We usually recommend different LLCs for each property ... since you want to limit your continuing exposure to lawsuits and liabilities for various required notices and disclosures... the next step for you is to schedule at least two separate initial video calls with at least two separate law firms that focus on transactional law... your thoughts?

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.