FAQ Forum Question: Is Wholesaling Legal?
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votesFAQ Forum Question: Is Wholesaling Legal?
Most Popular Reply
Rick SteinPro Member
Investor · Austin, TX · Member since 2014 · 248 posts · 181 votesPutting the arguable legality aside for a moment, let's talk ethics. I have been a real estate broker for 31 years and been an REO agent for about 25 of those years. I have been an investor for about the same length of time. I am on the board of directors of my local REIA and we hold numerous education sessions for wholesalers or wannabees.These sessions are always packed!! Yes, it is true that the vast majority of people entering the real estate investment industry do so because they do not have the cash to purchase a property.
Many of these people, although perhaps well intentioned, are dangerous because they do not know what they are doing. They do not do proper due diligence. They knowingly or unwittingly inflate the retail value, understate the rehab costs, have no ability to close on the deal if they do not find an assignee, who often times are as ignorant as they are, and, in short, give a very bad name to the industry as a whole.
On the other hand, there are many very successful wholesalers, licensed or not, who enter into a contract, make an earnest money deposit with their title company so they have an equitable interest, do their homework property, disclose to the seller exactly what they are doing, find a knowledgeable assignee who closes the deal and every one is happy. In my humble opinion, the latter example is perfectly ethical and does a service to investors such as myself. I recently was the assignee on a property that I closed on. I was happy to pay the assignment fee as I was getting value greater than the fee I paid. I did a nominal rehab and have rented the property to a lovely family generating a nice cash flow.
85 Replies
The Ohio Legislature recently passed HB 532, which amends and changes state law regarding Brokers and Agents. I'd have figured that they would have done something like Oregon just did, @Jay Hinrichs but they didn't address Equitable Interest in the definition of practicing real estate.
It appears that the biggest changes to our law is dropping the requirement of classroom instruction to get licensed and specifically allowing agents to present contemporaneous offers from different buyers as long as they disclose in writing that they are doing so.
Not a lick in there (that I can find with my, "I stayed at Holiday Inn Express last night" law degree) that makes it harder to wholesale.- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
I like @Ned Carey's statement he often says on this subject...that wholesaling can be done legally anywhere, it is just a matter of figuring out how to do it legally in any given jurisdiction....or something to that effect.
District Invest Group545 Reviews - Real Estate Professional · Dublin, OH · Member since 2013 · 251 posts · 165 votes9y
What I hate is wholesalers saying that they are cash buyers and going to close when realistically all they are doing is tying up the home and wasting the sellers time. Theres currently a duplex that I am interested in that I have seen on various different wholesalers list. Now I don't know if the seller will come down to a price that makes sense to me, but I would like, as an actual cash buyer, to have the opportunity to discuss.
Wholesaling should be a tool you use if in the event you have a high probability of helping the seller out and make a little $$ in the process. I don't believe it should be the main business model.
I often wholesale property, but its significantly spelled out and disclosed, and I only do this if I believe I can solve the homeowners problem and have a high probability of success.
"Real Estate is a numbers game, but the people are whats important"
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes9y
Originally posted by @Ted Lanzaro:
I did caveat my answer to state that different states are cracking down on wholesaling activities but to my knowledge, marketing a property you have under contract is legal.
With that being said, the world of real estate investing is constantly evolving and I would be happy to be better informed on what law it is you are speaking about.
The better to help my clients understand.
Thanks!
Ted
You did caveat your answer but I picked that one line out because simply having a purchase contract does NOT give you the legal right to publically market the property, no matter what state you are in. Additional steps need to be taken to have the legal right to do that and now in some states, even that is not enough to make it legal.
- Fairfield CT · Member since 2017 · 63 posts · 77 votes9y
Show me the statute where it says that. I would be happy to learn something new. I have been an investor for close to 20 years, represent over 500 real estate investors, know 100+ real estate attorneys and have personally both purchased and sold wholesale properties. In all those years, I have never heard of anyone being prosecuted or fined for marketing a property they had under contract. But, perhaps it is because I only deal with quality clients.
The most successful wholesalers (the ones I deal with) and the only ones who have any business doing it are the ones with huge buyers lists, primarily from opt-ins so they are not generally marketing the property to the general public, they are marketing it to their list which probably cost them thousands of dollars or more to build. they are typically guys like you, Will Bernard, who do a lot of deals but can't do them all so they sell them to people on their buyers list.
I am not an advocate of wholesaling to get into investing and I personally don't take them as clients because for the most part, I feel they are wasting their time unless they have tens of thousands of dollars to spend on marketing. If they do, I point them to rehabbing or landlording.
Have a great night,
Ted
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Ted Lanzaro not to debate this at all ... and to have a friendly debate on the subject.
Being a CPA you have far more knowledge then the average person and ability to look up state statues and understand them.
Have you ever looked up your states real estate sales code.. IE most states have a definition of activities that require a license.. and most of them all say bringing two parties together however that is done.. just curious really what you opinion is of your states definition of licensure and who needs one.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Will Barnard this year saw me doing my continuing ED for my CA re brokers license my state of Oregon mortgage bankers license..
So I pass the CA brokers which I have been doing for 40 years.. then I have to do on the RE Bureau website and pay my fee and such... what stood out for me was a big bold tab at the bottom of the page.. ( If you suspect anyone of selling RE without a license make complaints here ).... LOL
Then on my mortgage bankers CE for state of Oregon for some reason they go into great detail of what you need to SELL real estate in ORegon and have this big carve out for equitable interest along with the business and professions codes that relate to the subject. I had never seen equitable interest described as an act requiring licensure in Oregon.. But one thing I know about our tiny state you do not have the correct licenses.. IE contractors license or Developers license or Mortgage banker or RMLO or RE license these folks will hunt you down and fine you and issue cease and desists.. I got one personally a while back NOT fun.. and I have all the licesnes they did not like the way I set up a certain note transaction...
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes9y
@Will Barnard I know the multiple list service in MD allows you to list properties that you have under contract.
This isn't very clear. The agent wouldn't have an equitable interest. They are not party to the contract.
@Mindy Jensen this is a very hard question to answer because there are so many scenarios that are possible. Some of these scenarios are clearly legal and some clearly not legal and some in a gray area.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Ned Carey Ned what they were saying is any one dealing in equitable interest needs to be licensed..
- 9yDarrin CareyPro MemberLender · Dayton, OH · Member since 2008 · 1k+ posts · 705 votes
IS WHOLESALING LEGAL?
I'm not going to get too far down into the weeds here. As you know, with any post there are a lot of "What ifs", ways for people to misinterpret, and look for a way to weasel around what is said.
First, people must stop equating "Assigning the Contract" as everything wholesaling. Assigning is a useful tool, but only one of several ways to wholesale a property. I understand people's attraction, as it's always promoted as a way to “invest” with little or no money, and make a nice chunk of change doing it.
The following applies specifically to unlicensed people in Ohio. Most, if not all states are probably very similar.
WHOLESALING BY CONTRACT ASSIGNMENT
The first two are absolutely absolute (redundancy intended). Direct from the Ohio Revised Code and the Division of Real Estate attorneys. There is NO wiggle room.
- Assigning a contract is perfectly legal. However, what people are doing to get from contract to assignment is frequently not. Driving to the Beach is legal. Driving 90 miles an hour to get there is not. Assigning a contract simply takes a few sentences to accomplish. Of course, a specific contract can prohibit assignment, but the law clearly allows it.
- You cannot advertise a property for sale unless you legally own it. Having it under contract is NOT the same as owning it. And for the weasels, "Equitable Interest" does NOT give you ownership and allow you to advertise the property for sale. You must have legal ownership. There are still questions on precisely where the line for "advertising" is drawn. The Division would not take a solid position on where the line was if you were just advertising “The Contract” for the property.
The next one should be absolute, but there may be a loophole somewhere.
- Do not put a property under contract unless you are ready, willing, and able to close on it personally. (For me, this is an absolute.) There are all kinds of issues with entering any contract when you have no intent or ability to perform on the contract. And you're screwing the seller if you don't perform. Don't do it. This is one of the key points for the State to determine if you are acting as an agent.
- If you assign multiple deals, but never close on one personally, you’re going to have a hard time saying you’re not acting as an agent.
- If you’re putting properties under contract, but have no intent or ability to close, you’re violating contract law, and trying to act as an agent. (Imagine the seller suing you for contract fraud and specific performance.)
- If you leave behind a trail of purchase agreements you didn’t close on if you couldn’t assign it, then you’re probably acting as an agent.
Now for the licensees:
Being a licensee allows you to advertise a property you don’t own when you have the owner's written permission. You can have it under contract and be acting for yourself, and not as an agent. However, consider this. I can easily imagine a seller filing a complaint/lawsuit on how they were taken advantage of by the unscrupulous licensed, skilled professional real estate agent. You know the one who put their home under contract, then assigned the contract for a lot more than a commission. The agent clearly took advantage of the unsophisticated seller, and stole their home for less than it was worth for their own personal gain. Guess who wins that?
Being a licensee MAY hinder you. At the very least, it requires extensive disclosures, and the broker’s approval.
Wholesaling and all real estate activities MUST comply with the three rules above.
In case you're wondering, I primarily focus on rentals and flips. I do wholesale some properties, which may include assigning the contract.
For additional information, here is a link to the video with Attorney Jeff Watson interviewing the attorneys for the Ohio Division of Real Estate on the specifics of wholesaling legally. https://www.youtube.com/watch?v=9fi54S8nwUA
ASSIGNING THE CONTRACT
So you’ve followed the rules, and successfully assigned the contract. Now, time for the closing and get paid. It’ll be a great day right? What could go wrong? Remember these two points:
- When you assign a contract, you are giving ALL your rights to the contract to the buyer. You are removing your name on the purchase agreement replacing it with your buyers. You're out of the picture on the purchase agreement.
- Your assignment agreement is ONLY with the buyer. In exchange for replacing your name on the contract, you agreed to receive a fee.
The buyer and seller both have the right to change the purchase agreement. So, the buyer and seller could legally cancel the existing contract and create a new one. (Remember, you're no longer the buyer) You could be sitting at the closing table, and you wouldn’t be able to legally stop it. The title co also wouldn’t be able to stop those changes, as the buyer and the seller have the right to change their agreement. A newly written agreement could take the assignment out of play from the title co perspective. The title co is simply a facilitator for the written agreement in the transaction, even when the buyer and seller make a last-minute change.
Ok, so most buyers and sellers wouldn’t do that. But some would and do. You could try to sue the buyer for not paying you, but how do you think that would go, and what would it cost?
IN CLOSING
How do you prevent all the questions and problems above? Simple.
- Find a great deal
- Buy the property (use a lender or partner as needed)
- Sell a good deal
Clean, neat, simple. And no argument about whether it’s legal.
- 9yAllie PfannenstielPro MemberReal Estate Agent · Scottsdale, AZ · Member since 2017 · 159 posts · 59 votes
Very interesting topic! Thanks for sharing.
So wholesaling is when you buy and resell property for a profit or is it when you assign a contract to another investor?
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jeffrey Hotz in the situation you describe.. were their a property being shopped by multiple wholesalers or what is common in Texas trying to tie up MLS properties then wholesale those.
whats stopping you if you really like the property to just contact the owner and make a back up offer.
We make back up offers all the time on MLS listed props.. and or like one I have now I made an offer and the seller took me in second position.. I find that we end up with a lot of these as the people in first can't or won't close then they come back to us.. at that point we can usually renegotiate a tad.
but for you simply write or call the seller of the duplex let them know its being shopped and if for some reason it does not close you would like to offer on it.. Or to Mr. Seller here is my back up offer in writing with my EM check.. if your current sale does not go through this one will... Seems to be a easy fix for those situations.
And as such getting on wholesalers lists and then just making back up offers seems like a good way to go.. If wholesaler pulls it together fine.. if they don't you swoop in and close.. nothing wrong with that.
@Mindy Jensen - Just take @Darrin Carey's post and make it the only answer to the FAQ. He hit that one out of the park: all the information, clear, and concise. I was trying to say some of the same things, just much more poorly. Great answer Darrin!
- I'm with Ted on this one. Putting a house under contract is not illegal. Assigning the contract is not illegal. Trying to advertise a house that you don't own is not legal, that's why you have a buyers list. Telling people that you are going to close on the house and having no intention of doing so. Is that illegal? It's unethical and immoral and you'll look like an idiot when you can't come through, but I don't know weather it's illegal. I started out as a wholesaler. The difference between me and the others was that if I didn't want to do the deal, I mean seriously went out and looked for money to do it myself, I never put it under contract. I was also very open with the property owners and told them what to expect.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes9y
I don't see why I need to retype the same thing over again, my posts have already addressed the legal side many times over, so those can be found.
I see Ted got a positive response from simplified logic, however, sorry, but one's logic does not prevail at law. And yes, it IS illegal to market real estate you do not have legal title to unless you are representing the owner, I'll cover that later.
This same question has been posed many times, same basic question as asked above, usually we get opinions from unqualified legal eagle wannabe types, some have no clue. Then some have had limited legal training related to insurance or real estate training such as agents or brokers; often enough to be dangerous as these folks may sound good, even logical (they may be correct too) but they don't have a law degree or practice law in the state they are speaking about. None can give competent legal advice related to any local jurisdiction much less on a national scale. Which is why I generally say "see your local attorney".
Understand too, we have members who are attorneys and, IMO, due mostly to professional ethics and restrictions of their practice they rarely chime in as to the legalities of wholesaling. We can't really speak to wholesaling unless we define several aspects and the way wholesalers conduct themselves.
Keeping that in mind, let's say we get two hundred opinions in this thread. Actually, you won't be any better off than you were from your first question, are we going to select the most popular answers? Do aspects of legal and ethical dealings as well as business conduct fall to a popular vote on a site which is filled with members that may have some motive, expectation or hidden agenda? Then, who selects the best responses to publish? That takes us back to the question of who has the knowledge and experience to make reasonable determinations of accepted real estate practices, applicable rules and regulations. (?????)
There is another issue as well, most members are new to the real estate business, they are also new to business in general. Evidence of the lack of business knowledge can be found in the questions asked on BP such as; when do I need an LLC, I do I protect myself, am I liable, can I advertise a property if I have a contract but no license, can I assign this seller financing contract?????
Being a consumer in the business world doesn't give anyone experience on the other side of the fence in business. Baking bread, processing it, transporting it, selling it to the public is entirely different than walking into a store and buying at a good price.
Having a job in the workforce is also much different than being at the helm of any enterprise, directing a Broadway Play requires more than what any one actor can provide in any performance.
All said simply to say, starting off in real estate business is more complicated than is generally disclosed to get new blood on board in this industry, especially wholesaling as the gurus present it. Frankly, your wholesaling gurus are either uninformed concerning contract law and licensing or they are simply scammers, scamming you into unethical and illegal conduct which really opens the doors to your personal liability, character and integrity being questionable at best.
BP is loaded with opinions and comments pointing to real estate laws, especially licensing laws. What is often overlooked, unknown by new folks and overlooked even by seasoned dealers, are other laws related to business operations.
We have the Uniform Commercial Code, these generally cover dealings in personal property sales and leasing, business contracts, installment sales, banking, negotiable paper and notes, investment securities and secured transactions. It can be difficult at times to avoid pitfalls of the UCC dealing in business, even the real estate business. Remember, when assigning contracts in wholesaling your sale contract is personal property, not real property!
Two footnotes as to the UCC: One, the UCC has a long history in its standing and a few states have not adopted the (entire) code, they don't ignore matters but have adopted similar state statute or regulatory powers addressing such subject matters and restrictions will be very similar. Secondly, the UCC has specific exemptions related to certain real estate dealings, such as with installment sales, but such exemptions then fall under other federal and state law addressing such topics in a similar or even a more restrictive fashion.
And, now comes the Federal Trade Commission (FTC), they have very broad powers to enforce fair dealing and advertising laws. Advertise something you don't own or you're not licensed to broker in advertising and facilitating a transaction, you'll be crossing into their domain. The FTC covers false or misleading representations in business transactions. There is no question that representing yourself as a buyer who will actually buy when you don't have the intent or ability to buy is misleading. At that point, you're entering the arena of fraudulent dealing lying about your true position in contracting.
Without a license to act as an agent or broker you cannot represent an owner to facilitate another transaction even if you do have a valid equitable interest. There are situations where a non-licensee may "represent" an owner with a power of attorney or in estate matters, wholesaling is not an exception claiming an equitable interest in or to any real property. You may convey your equitable interest but you cannot represent the owner in conveying they're legal interests. Your equitable interest which is gained legally in good faith, by the way.
In real estate there are two different aspects to title interests, an equitable interest being the right to obtain full ownership (ultimately) a financial interest and legal title being the right to use, enjoy and transfer ownership.
A valid sale contract conveys an equitable interest to the buyer, but not legal title which is retained until the contract closing. That is a "VALID" sale contract conveys an equitable interest or standing! A void or invalid contract doesn't convey any contract rights!
Common Contract Law specifies the essentials of a valid and enforceable contract. You can google "essential elements of a real estate contract". Going further into those requirements you will find "performance" "ability to perform" "intent" "meeting of the minds" "specific performance" and defensive aspects as to these matters.
A voidable contract is tainted, from several angles, when lacking any of the essentials of a binding contract, when there is no clear "meeting of the minds" and one party has any intent other than what is conveyed or lacks the ability to act as stated to the other party, you have misrepresentations.
There are two types of misrepresentations that apply to wholesalers (or anyone contracting): Fraud in factum and fraud in inducement. When a buyer knows they cannot perform lacking the ability to carry out the contract as stated, or they have no intention of acting as stipulated in the contract you have fraud in factum or of the facts. (Misrepresenting material facts) Expressing that you buy houses, that you will buy, is an inducement for the other party to agree to the contract and you'll have fraud in that inducement when you don't perform as claimed, or haven't ever performed as you claim.
A saying; "A dirty dog will not find justice in a court" (close if not quoted exactly), meaning here that one with "dirty hands" will not prevail in contracting. The inducement of "I will buy" without disclosing that you do not have the intent or ability also gives you "dirty hands" in your dealing.
Now, let's consider what you are attempting to sell, your contract.
Your contract is personal property, not real property, the UCC applies as applicable. Your fraudulent conduct and dirty hands follow your contract, if your contract was made by misleading the other party, (the property owner) that contract is invalid, voidable and it could be void if your intention includes illegal conduct, like brokering without a license.
To say the least, you don't have a good and valid contract to market to another party, it is tainted. Not disclosing that fact is simply another fraudulent act and inducement made to the contrary is another infraction. You have a dirty contract!
Your ill gotten contract carries no or questionable equitable interests to convey, contracts that are obtained or made with misrepresentations, unethical and illegal means do not convey contract rights. So, with your "real" buyer, you're likely selling an undisclosed tainted contract with assurances of you having a solid, enforceable and valid contract, well, hog wash. That is another misrepresentation and fraudulent matter.
As a voodoo guru following wholesaler, your stuff is really flapping in the wind! I have addressed tortuous conduct law before and another mention is in order here. Two issues, one the use of weasel clauses will take you into dealing out of the norm of accepted real estate contracting practices, you may be seen as dealing unfairly and taking undue advantage of a homeowner. Not saying you can't have a reasonable contingency but loading up with make believe partners, inspections just increases your liability and exposure to legal actions.
Secondly, a tort is a civil wrong, if you cause an owner a financial hardship you can certainly be held accountable for their loss. Screwing around with real estate contracts is serious, an owner may act in a reasonable manner to prepare for a sale, they may move furniture to storage, they may rely on your contract to enter into another purchase, spend and deposit money, they may lease a place. I've even seen where the owner was entitled to motel stays, eating out, travel expenses and deposits. You can be held responsible for every dime spent. And, if you force them into another marketing season like winter, or loss on a sale, you had better watch your tail if you misrepresented yourself.
Putting a property under a (bogus) contract in hopes of finding a buyer is a very bad idea!
Okay, so, is wholesaling illegal? It certainly can be the way the guru clowns present it, but it can be accomplished legally and ethically!
The first thing to address is your ability to buy and close as contracted. This can be done by using private funds or transactional funding. You can also close your purchase with seller financing, disclosing that you will be selling and paying off the seller's note at an agreed time. You can also close in a business name with your real buyer and then back out of that business after closing. In some cases you can use a tenants in common agreement and close with a buyer and later convey that legal interest. So, there are ways to skin this cat, but it is not by lying to an owner, getting a contract to purchase and then selling rights to purchase with an assignment of a tainted contract!
Make sure you have customers to buy before you fill up your store with things to sell, make sure you have buyers for three bedroom homes before you buy one to sell!
And, to those arguing about licensing laws and acting as an agent or broker,you need to look up "Laws of Agency" and the different types of agency relationships,how agency relationships are created and formed by law, what duties an agent has to a principal. When you cross over into the laws of agency creating these relationships you better have a license.
If you're going to deal in real estate only a fool wouldn't want to understand the applicable laws of business, contracting and real estate, so, stay away from gurus with easy to follow step by step junk and start learning! IMO! :)
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Bill Gulley There ya go the Oracle of BP has spoken.
Although those points Bill makes are basically irrefutable.. it won't stop the majority of empty pockets folks giving this a try as they have it drummed into their brain that this is the start activity if you want to be a RE investor.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
I second Bill Gully's opinion though I didn't have two days to read the entire novel:)
Saw a deal in progress yesterday: property under contract for 51K....the buyer is paying roughly a 70K assignment fee. Another public service! As a member of the public, the scammer served HIMSELF well.
And without a doubt he brought up so many legalities others have no idea of. They only know what they were taught: sign a contract, sell it and make tens of thousands, repeat over and over for instant riches. No money needed!
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
Not sure if you read the entire thread and saw my post relating to FL Chapter 475.43. This addresses the unlicensed broker games and pretty much should put an end to them.
475.43 Presumptions.—In all criminal cases, contempt cases, and other cases filed pursuant to this chapter, if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, or such party has maintained an office bearing signs that real estate is for sale, lease, or rental thereat, or has advertised real estate for sale, lease, or rental, generally, or describing property, the title to which was not in such party at the time, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved. - Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes9y
Originally posted by @Ted Lanzaro:
Show me the statute where it says that. I would be happy to learn something new. I have been an investor for close to 20 years, represent over 500 real estate investors, know 100+ real estate attorneys and have personally both purchased and sold wholesale properties. In all those years, I have never heard of anyone being prosecuted or fined for marketing a property they had under contract. But, perhaps it is because I only deal with quality clients.
The most successful wholesalers (the ones I deal with) and the only ones who have any business doing it are the ones with huge buyers lists, primarily from opt-ins so they are not generally marketing the property to the general public, they are marketing it to their list which probably cost them thousands of dollars or more to build. they are typically guys like you, Will Bernard, who do a lot of deals but can't do them all so they sell them to people on their buyers list.
I am not an advocate of wholesaling to get into investing and I personally don't take them as clients because for the most part, I feel they are wasting their time unless they have tens of thousands of dollars to spend on marketing. If they do, I point them to rehabbing or landlording.
Have a great night,
Ted
No need to be defensive or post your resume. My post was very clear and very simple, learn from it or don't, your choice. Just because you don't know anybody busted for illegally wholesaling does not mean nobody has and it also does not mean that every transaction you know about was in fact done 100% legally. I would also add that there are likely hundreds of thousands that are not in line with all the laws that do not get reported, I have personally seen close to a thousand of them and I am just a small fish in a big pond.
@Bill Gulley pointed out in great detail (and did a fine job of it I might add) what I basically said in my first post. I don't know any of the specific statutes you ask for and don't see the point in adding anything more than what Bill wrote.
- Fairfield CT · Member since 2017 · 63 posts · 77 votes9yBill Gulley Will Barnard Thanks! These are good clarifications of my post. This is definitely a situation where "the devil is in the details". This is what I love about this site - investors of all experience levels sharing incredible amounts of wisdom. My simplified logic did not take into consideration "ability to close" and the definition of "marketing". Plus, I figured out how to do the @ thing! To Bill, thanks for the insights! To Will, apologies if my last post was defensive. As far as "posting my resume", that's marketing, ha ha!
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
There is another post on BP that was put up yesterday from a wholesaler in MI that just got a cease and desist and it killed her deal.
up shot and going by memory here.. but seller was un happy cut her out and turned her in to the state.. and state did give her a cease and desist..
I suspect most states have these laws on the books ( selling RE without a license) its just whether they want to spend the money chasing them.
Although with Craigs list this would be a pretty easy chore... for a regulator.. probably could tell in 5 minutes whether the person with the add actually owned the property.
I tried to read this whole thread and I have a couple of comments and a question.
The question first: What constitutes marketing? Someone said "Don't post it on craigslist...that is why you have a buyers list." If I e-mailed an unclosed deal to a buyers list isn't that also marketing?
Also, I have never done this, but I know a broker who has put properties on the MLS while they are under contract, but before his client closed. I was told they did all their due diligence and it was legal. Personally, I don't mass market anything until I close. I'll show it to a few people but that is it. I always plan on closing myself, although I have and will assign them too.
My comments:
First, there are great posts in this thread I cannot rival. My main problem with any wholesaling discussion is every single time it is allowed to be reduced to the wholesaler as "having no money, sending out letters, never intending to close, planning on weaseling out if they can't find a buyer, etc." Thus the entire discussion is built on a strawman. Of course that type of business model is unethical and (almost always) illegal. But that is not the only way to wholesale. I'm not naming names, but some people on this forum basically have this definition copy and pasted and somehow shift every thread into arguing over this definition of wholesaling. Now the discussions becomes like discussing politics, all strawman, no facts, big generalizations, and just a waste of time.
I also don't blame people who think that is how you do things at first. The first real estate seminar I went to AT MY REIA had the instructor say "now, in your contract put subject to business partner's approval, and WE ARE ALL YOUR BUSINESS PARTNERS *exaggerated wink*, so you can say we did not approve and back out." This guy was on the board of my REIA, which BiggerPockets told me to go to. I have enough business experience to know that was some garbage logic and god bless defending it in court, but most people would think it sounds logical. After all, this is a position of authority (successful investor, REIA board member, etc) telling them it is OK. You don't need Robert Cialdini to tell you most newbies will believe someone with that much authority.
This is where these constant hijackings hurt the wholesaling board by the way. Berating someone as a criminal, as was happening in the wholesaling forum quite often (I quit going to it because of the constant hijackings) will never let anyone learn why bs contract clauses are wrong. Maybe it has changed, but darn near every thread flew off the rails with brokers posting about how terrible it is.
- Builder, House Flipper · OKC, OK · Member since 2012 · 42 posts · 15 votes9y
I am not an attorney or judge and most of you are not either I'm sure. Ee all can quote law as WE interpret but It all boils down to this:
Until someone files a complaint on what your doing and cause that action to be seen by a judge and defended by attorney's to get a true ruling in your state to set case law (if it hasn't already been done) then really not one of us has the right to tell another person what he can and can't do to make living. As long as everything is disclosed in the beginning to the seller and buyer of what your doing (I believe) it's going to be hard to find a person guilty. Now we all know that there are several (a whole hell of alot actually) of less than honest people out there trying to wholesale and messing it up for the rest of us. Do the right thing, be honest with people and follow through with what you said you will do and the wolves will leave you alone.
Just my 2 cents :)
Join the conversationCreate a free account to reply, vote on answers and follow this thread.