I am no different than a lot of you reading this post. We were all intrigued by the concept of “no money down” real estate investing. It’s one reason many people look to enter into the real estate industry via wholesaling.
However, with new revised state regulation, I really would like to revisit the discussion: Is wholesaling illegal?
New Wholesaling Regulations
This topic has been discussed for years on BiggerPockets, and with new legislation being passed in August 2019, I would like to get some feedback from you.
Full disclosure: I am a licensed Realtor (in Arizona), so you may believe this will be a biased article. Hear me out before passing judgement.
If you’re wholesaling in Illinois, you should know exactly what I am referring to—and this may sweep the nation. SB1872 is a revision to the Illinois Real Estate License Act.
Part of this act is simply clarifying what is the true practice of facilitating a real estate transaction. You may not act in the capacity of a broker.
This is not a new law. Again, it’s clarifying the roles in a transaction.
I’m sure I will hear from many of the readers trying to refute what is stated in law. However, the law is clear on this topic.
As a licensee in the state of Arizona, I understand clarifying the legalities around the law. I am not an attorney, but in speaking with my attorney, it’s clearly stated. Anyone conducting more than one transaction yearly is coordinating or structuring transactions without a license. That individual can be fined $25,000.
That is enough clarity for me to understand what the law is stating.
Why Should Wholesalers Be Concerned?
You maybe wondering by now why am I concerned about it.
I currently virtual wholesale, and one of my markets is Illinois. As such, this does affect business operations.
Although licensed in Arizona, it was always a part of the plan to become licensed in Illinois. With this bill, it will expedite my timeline on completing the course work to become a licensee in Illinois, as well.
Will Other States Follow Suit?
You may be asking yourself that question. You maybe thinking, I don’t wholesale in Illinois, so why does this matter?
I bring this up because this revision in SB1872 was initiated by the Illinois Association of Realtors, which is part of the National Association of Realtors (NAR).
NAR is a very strong lobbying body. This is just my opinion, but I believe this will be an effort the association will look to institute on a national level. If not now, in the future I’m sure.
A Word of Caution
Wholesalers are hustlers by nature. I know many of you will try to find a loophole or some gray area in the law.
Again, I am not too far removed from having a similar mindset in the past. People will believe, I’ll just double close all transactions. I’ll find a way to make some provision in the contract with creative verbiage. Or I’ll use multiple LLCs to contract and close the deal.
This is totally up to you to take the risk.
I would love to hear your feedback. Is wholesaling illegal? Is it about to be?
Let’s have an open discussion in the comment section below.