WHOLESALING REAL ESTATE IS LEGAL...IF DONE CORRECTLY!!

WHOLESALING REAL ESTATE IS LEGAL...IF DONE CORRECTLY!!

Every state has their own unique laws regarding real estate transactions, please research the laws in the states where you operate to make sure you are operating within the laws. Don't assume just because someone else is doing it, or you read some post on social media, or the internet that its legal.

If you already own a property, you can do whatever with it. But you cannot negotiate to sell someone else's property to someone else in return for any type compensation or fee, unless you have a real estate license, or are a regular employee of the entity that owns the property, otherwise you’re brokering without a license.

Wholesaling is an "exit strategy" only. By definition wholesaling is "to sell something at low prices to be retailed by others". However, you cannot sell something that you do not own. So, if you buy a property at one price, close on it, own it, and turn around and sell for a higher price, that is wholesaling.

So, how are so many people wholesaling property they do not own… They’re not exactly, its more complicated. Some are operating illegally, while others are operating within the laws.

Here’s how… First, they contract to purchase a property. By law as long as that contract does not say it's not assignable, you can legally sell your position in the contract. This is where wholesaling prior to closing becomes legal. You can legally market and sale your contract. But cannot legally sale that piece of real estate that you do not own yet. Otherwise you would be brokering without a license.

Now, before contracting to purchase real estate though you MUST have the "intent and ability" to close on every deal. Otherwise you'll end up breaking the laws and brokering without a license.

However, that ability does not necessarily have to be your own money. It could be cash, bank funding, private money loan, hard money loan, a Joint Venture, partnership, creative financing, etc.

Where this all becomes a major issue is those unethical or uneducated people who are contracting to purchase real estate without the intent or ability to close, and they're only planning on trying to sell the deal to an investor, and if they cannot, they use BS contingency clauses to walk away from the deal, and they never had any intent or ability to close in the first place. There’s gurus out there teaching this, but it’s still illegal, unethical, and can leave homeowners in even worse situations then they were before and can get you contacted by your local real estate regulators, and in a lot of trouble.

Contingency clauses are meant to protect both parties interests, not a slick way to do something illegal, or unethical. There’s nothing wrong with having legitimate contingencies, such as an inspection period, or pending funding approval. But these are not meant to be used to give the buyer time to try to market the deal and walk away if they cannot find a buyer.If you’re doing this, you never had the “intent to close” and are breaking the law.

Conclusion…

You can be very successful wholesaling, and make a lot of money if you treat it like a real business…But you have to follow the laws, operate with ethics, and have compassion about helping homeowners!! 

Today, I own 10 investment properties free & clear with no mortgages, with enough cash-flow to live off of if I decided to retire. Those 10 properties are now my free & clear “nest egg” that could survive a real estate crash. But I also continue wholesaling and rehab/flipping as a full-time business, and flipped or wholesaled 27 deals in 2017. My goal is to continue building more capital to be able to expand acquisitions into larger apartment complexes in 2019, while also looking to help others learn how to build their own real estate business.

Feel free to reach out to me thru my contact information on my BP Profile anytime for free advice.

Good Selling!! Keep Grinding!! Follow me on social media for daily motivation, and read more of my Blogs - Jeff Filali (OklahomaCashHomeBuyer.com)

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Disclaimer: Author is not an Accountant, Attorney, Financial Advisor, Tax Advisor, Broker, or Agent. This is for general information, and not tax or investment advice. Readers should do their own due diligence and seek professional counsel prior to making any kind of tax changes or investments.