Do I need a RE license to wholesale?
Woodland Hills, CA · Member since 2015 · 23 posts · 7 votes
Do I need a RE license to wholesale?
Most Popular Reply
@Todd Rizzardi Probably not.
However, it's rare that a person new to real estate is successful by beginning with wholesaling.
Wholesaling, as the name suggests, means buying or controlling a product or service acquired at one price and reselling at another for a profit. They have money or some form of consideration beyond sweat in the bargain.
This is arbitrage.
Truth be told, most people who start by wholesaling do not have the capacity to purchase the property they get under contract, so they are not investors.
The best wholesalers are people who are also experienced investors, have money and a significant Dealflow and use wholesaling as a way to profit from deals that are not right for their own investment purposes.
Mike Cantu is the best wholesaler I've ever met and he is in So Cal.
Rather than wholesaling, suggest you do some lead generation (bird dogging aka deal finder) and become a great opportunity detective for others. Yes, you'll get beat up with unrealistic ideas about values, costs and expenses and complexity of problems, but you'll learn your craft and create less havoc in the marketplace. Since you're in LA, they'll try to kill you with your lack of market knowledge or skills.
26 Replies
- Residential Real Estate Broker · Indianapolis, IN · Member since 2009 · 477 posts · 304 votes10y
It depends on the state you are wholesaling in...
There is a couple of school of thoughts on it.. Some will say you are making money on the purchase and sale of a house, in which case you need a RE license. Others will say you are selling the assignment paperwork which does not require a license... In the end, if you do not get your license, and your state attorney general wants to go after you, you are going to fight it out in court and pay a lot of lawyer fees.
Typical EM(Earnest Money) funds are $10.
There is a wholesaler out of Cincinnati I recommend.. Vena Jones-Cox(http://regoddess.com/). She practices what she preaches as well.. Very creative person. She has a transactioneering class that is very good, but that is an advanced subject. - Rental Property Investor · Los Angeles, CA · Member since 2015 · 24 posts · 5 votes10y
From what I have researched, you don't need a RE license to wholesale. There are some pros and cons of having a license which you may find by searching on the forums. Do you need a down payment? Well, that would depend on the closing method that you are using. But typically, you are not using any of your cash.
- Residential Real Estate Broker · Indianapolis, IN · Member since 2009 · 477 posts · 304 votes10yYou have to be very careful wholesaling... Reputation is EVERYTHING!!!! If you get a property under contract and your numbers are wrong, people are going to think you are either
- Incompetent....
- a liar and crook....
- Flipper/Rehabber · Warren, MI · Member since 2015 · 24 posts · 15 votes10y
No, you don't. As long as you don't market/post the property anywhere, you're not doing anything wrong. You're trying to help someone with a problem, and in the process make some money. Most people have their list of buyers they contact and offer the contract to. That is not illegal.
Sometimes I see Craigslist ads that mention a house in a certain area and nothing more (I personally don't), but they usually don't have a solid buyer's list, (if one at all), so they need to do that; or it may be a ghost ad (an ad they keep up even though contract is no longer available, to "collect" buyers for the future). That is all okay imo.
Realtors are good to work with at times. Some see the benefit in working with a wholesaler, but some definitely don't. Some like helping people get rid of their piece of cra* house through a wholesaler. Some only work with a traditional real estate investor as opposed to a creative real estate investor (wholesaler) and some will just not list those houses and eventually just lose contact with that potential seller/person who especially needs to get rid of their property. Everyone has a different agenda and different things they are willing to do and not do, and that is okay ;).
On down payment: Earnest money will vary deal to deal. On my last one, it was $10, and he would have accepted nothing. In some it will be 0. Realistically, you can't leave large deposits on every property you put on agreement, and it's okay to say that to a potential seller who may balk at your offered deposit (you always want to use the word 'agreement' with sellers, btw). You will come across that person who will demand a specific amt. they have in mind and that's okay if you have the money (after your 1st or 2nd deal you will). Sometimes you'll have to offer to pay for someone's probate because they can't afford it. EVERY deal is different. That's why no book can really help you. A mentor is your best bet; or just focus on finding someone who needs your help (as in a potential seller in distress). Experience is the best teacher, after all.
A book titled Rich Dad Poor Dad mentions a great wholesale deal and the author talks about it like it was the easiest money he ever made, and it probably my was. The best wholesalers did not learn from a book. Get a contract in hand. If you didn't just contract a property to contract a property, and it's actually a good one, you'll sell it in no time. The hard stuff is done by the title company. There are no books on this. There are some great you tubes and of course the podcasts on BP. There is a plethora of information on BP relating to wholesaling. Use the search bar.
I'm currently reading the book: The Milllionaire Mind by Thomas J. Stanley. HIGHLY recommend it.
Everyone should read it imo.
I love the real stories he mentions.
Even parents should read it. I would skip the intro and read that at the end. Intros sometimes make me put books down and not pick them up for a while :p.
Thought I would mention it since you mentioned books and that is what I was about to pick up when I saw your post. BP is addictive!
Hope this helps. Good luck. Feel free to PM me anytime.
@Todd Rizzardi Probably not.
However, it's rare that a person new to real estate is successful by beginning with wholesaling.
Wholesaling, as the name suggests, means buying or controlling a product or service acquired at one price and reselling at another for a profit. They have money or some form of consideration beyond sweat in the bargain.
This is arbitrage.
Truth be told, most people who start by wholesaling do not have the capacity to purchase the property they get under contract, so they are not investors.
The best wholesalers are people who are also experienced investors, have money and a significant Dealflow and use wholesaling as a way to profit from deals that are not right for their own investment purposes.
Mike Cantu is the best wholesaler I've ever met and he is in So Cal.
Rather than wholesaling, suggest you do some lead generation (bird dogging aka deal finder) and become a great opportunity detective for others. Yes, you'll get beat up with unrealistic ideas about values, costs and expenses and complexity of problems, but you'll learn your craft and create less havoc in the marketplace. Since you're in LA, they'll try to kill you with your lack of market knowledge or skills.
- Professional · Sammamish, WA · Member since 2016 · 34 posts · 15 votes10y
Check with your state laws to be absolutely sure, but the answer is probably not. Here in Washington, the answer is no. Be careful though! You need to make sure you are doing it as follows:
1. Obtian rights to the house through the contract.
2. Assign the contract, not the house
3. When you assign, disclaim all warranties and representations so you don't get sued if something goes wrong at closing.
Other than this, you are in pretty good shape to go forward without a RE license.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes10y
I actually typically recommend that licensed agents not participate in wholesaling. So if you want to wholesale, I think it is a good idea not to have your license.
District Invest Group545 Reviews Originally posted by @Michael Hy:
From what I have researched, you don't need a RE license to wholesale. There are some pros and cons of having a license which you may find by searching on the forums. Do you need a down payment? Well, that would depend on the closing method that you are using. But typically, you are not using any of your cash.
Are you sure about that in CA? You could put someone in jail.
Wholesaling is a contract of mutual interest in the property. The seller basically puts their name on a paper that makes you a slight partner in that property. How you work it is how you make money.
Up side, you get 2k-20k to find a buyer or the house can't be sold without your acknowledgement.
Downside, you put your name on a total accident and the county comes by the next day to tear it down. Financial loss would still be zero but you'd look like a used car salesman who runs a chop shop.
- Maple Falls, WA · Member since 2015 · 18 posts · 1 vote10y
I have been learning wholesaling in the last year and recently met Vena Jones-Cox and am now going through her system.
No, you do not have to be licensed.
No, you are at no point part owner of the property.
Yes, you do need to put down some earnest money to get the property on contract if on the MLS. If not, than it may not be necessary, depends on owner.
Yes, you can assign contracts in Washington.
Land Trusts are another option for wholesaling properties if you purchase them first.
The reason brokers frown on this, is that it is not a commission that can be split. Contrary to brokers, a wholesaler works only with contracts and sells them for a fee, not a commission, and works for their own interest. They are not working for the seller or the buyer. They may have a seller's and buyer's lists, but are not seeking property specifically for any individual.
Wholesaling is ethical and produces leads that may not make it on the MLS otherwise because of the rundown or dilapidated state of the properties.
Wholesaling is done all over the world. Most popular is grocery stores. The store manager is not calling to Peru trying to find out where the next shipment of banana's will come from. The wholesaler's, like Dole, are the ones who find the farmers, broker a reasonable deal, margin in their profit, margin in the stores profit and makes the deals with Store Managers all over the world. So the Store Manager only needs to call the distributer/wholesaler and buy a contract to get a shipment each week of bananas and not have to worry about anything previous to that order.
So here, you find a property you want to wholesale. You negotiate a sale price with the owner based upon the comparables in the neighborhood, and figure a After Repair Value (ARV). Then subtract the cost of materials, cost of labor, holding and closing costs, the flipper's profit and of course your wholesale fee (about 7%). What you are left with is the highest negotiating price you can offer for the property. The difference between the seller's price and the buyer's price is your wholesaling fee. I have heard of it ranging from $2,500 to $51,000 for a commercial property. - Rental Property Investor · Los Angeles, CA · Member since 2015 · 24 posts · 5 votes10y
@Manolo D Are we talking about having a RE license? :)
Originally posted by @Michael Hy:
@Manolo D Are we talking about having a RE license? :)
We are talking about wholesaling in CA without an RE license.
- Rental Property Investor · Los Angeles, CA · Member since 2015 · 24 posts · 5 votes10y
@Manolo D. Yeah your probably right that I shouldn't be giving legal advice to anyone. But from a vast majority of wholesaler in California that I talked to, they have wholesale for years without one.
- 10yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
SOME state real estate licensing agencies believe that most wholesaling techniques violate state laws when performed by non licensed individuals. The enforcement in these states range from issuing directives to filing enforcement actions. Most seem to rely on issuing cease and desist orders.
One needs to evaluate the laws of the state they're operating in, the state agency's interpretation of these laws, and the agency's historical enforcement actions as well as the political climate relating to the above.
Blanket statements by responders while well intentioned are inaccurate; each state is different and research undertaken on the local level.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes10y
Very well put Don. I refer to it as the blind leading the blind. Good intentions pave the road to disaster. Wholesaling myths and folklore spreads like wild fire, more forum chatter here.
Good points by Rick, Russel ad Don.
You can find out who is clueless about real estate when they justify transactions being accomplished as they might be with personal property. Ethical business practices are different by industry, what is accepted by a used car salesman selling a used car isn't always ethical (or legal) in real estate. Ethical is not really an opinion of an individual as to what they think; what is accepted practice, fair, honest dealing, where you have sufficient consideration, a meeting of the minds and informed parties are legal aspects that our ethics are grounded in.
$10 isn't sufficient consideration in real estate in any state from the value of consideration in any sale contract that is not under duress. A buyer and seller can agree to one dollar and they can close the contract so long as both remain motivated to do so. It's when a seller gets a better offer, or gets ticked off, or they drop dead or chose not to perform is where your $10 contract can go to the trash. This is basic contract law, real estate contracts having legal requirements of sufficiency, no judge is going to force a sale on a $100,000 home with ten bucks down showing good faith! Can you do it? Yes, will it stick, probably not, trust me, the seller's attorney will laugh. Why contract if it won't stick? It's different with a buyer, you can be obligated to perform.
If you don't have money, give the seller an earnest money note! If they will take it and make it for enough, like 1 to 3/5% of the sale price to put glue in your contracts.
Wholesaling as taught by the gurus, just assigning a contract is not ethical nor do you have a good, binding contract if you enter as a buyer and have no intentions or the ability to purchase. Contract law, not the guru ideas that prevail. That is why brokers have a problem with it, they are taught and required to consider the public's rights to fair dealing. Has nothing to do with commissions it has to do with legal and ethical dealing.
Wholesaling can be done ethically and legally, lean how to take title and/or work in partnerships with real buyers, what your assigning gurus tell you is not the way to be in business. Have a great day :)
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Bill Gulley the replys on this thread just indicate to me how much of the RE business regardless of what it is ... is regional
how some can pro offer that a 10$ EM is acceptable .. and then some one on the West coast thinks that's how its done.. you would get laughed out of the transaction.. We run into this in Orygun a little its been a traditional LOW money EM environment at least from my perspective of working in the SF Bay area for 30 years.. were EM is traditionally 10% of purchase price or at least 5 to 10k to even get your contract looked at.. when I came to Oregon people would use 500 and 1,000 and that was the norm here. now to be competitive they have upped that I see 30 to 5k very often and sometimes higher.
But if your in low value asset markets IE wholesaling old tired homes that your buying for 1k to 50k I can see lower EM being the norm..
Most fail at wholesaling or some variant of it.. because for some reason they think its real estate investing when its nothing of the kind.. Its sales and Marketing.. How many sales and Marketing threads do we see on BP.... Not many but those are the skills needed if your not going to actually buy the asset.. Just like a great realtor they have superior sales and marketing chops.
- Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes10y
@Jay Hinrichs In the midwest our typical EMD is 500-1k. I really like your sales/marketing picture. I think that's why I was able to start out as a wholesaler. We viewed it as inventory and moving product at the beginning.
If you're going to get into wholesaling you really need to understand the laws in your particular state. In some state the Real Estate Commission have no issues with it. In others it's a great way for an agent to lose his license. If you're in a state where it's frowned upon.. Just close on the deals. Then re sell them.
- Woodland Hills, CA · Member since 2015 · 23 posts · 7 votes10y
@Lee Smith Yes, Reputation is everything. The last BP podcast on "modeling" the guest speaker talks about this, so that is a very good point to remember. I will check out Vena Jones, thanks for the tips!
@Lina Sitto I appreciate the detailed response, you're experience is invaluable. I just mentioned this to a buddy of mine and he said "If its on the MLS," then that's when you need a license to make any kind of offer or agreement to secure the property. I have not verified, but that sounds logical. I'm reading about a book every two weeks right now so I will check out the Millionaire Mind. I might just PM you sometime. My Aunt lives in the UP. and I was just joking with her that I should move up there and start a real estate business. lol.
@Rick H. That makes a lot of sense. That leads me to believe all the more I need to connect with someone local who knows the lay of the land. Thanks for the insight.
I second that sentiment.
While a great many watch (lurk?) behind their online screens, others are out there in te trenches doing deals.
You just keep doing what you're doing so you can keep getting what you're getting.
Watching, circling, dancing, never taking any meaningful action. It's like property porn, I tell you!
Go out and knock on some doors , talk to people and make some offers, for crying' out loud.
- Woodland Hills, CA · Member since 2015 · 23 posts · 7 votes10y
@Rick H. haha That's definitely true, and I completely agree. That's why I asked the question about wholesaling...Is that my first move? ... Buy a 2nd house? Sell my house and try to parlay the money into something else? .. Find someone to go in on a Flip w/me? I'm still lip syncing and doin the moonwalk over here until I find my own show. lol
Find active dealmakers in your market and find what kind of deals they want.
Become a lead generator. Learn how they make money, how they research, document, how they finance, how they exploit the opportunities.
Your job is to interject yourself into the thick of opportunities, become a detective and go where the pain is highest...off market.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes10y
I agree with Rick and Jay, "all real estate is local" the point was that when you read about using $10.00 down to hold real estate, your BS Meter should be going off.
I don't mind being ignored Todd, many attorneys give free initial consultations, before you leap ask a local attorney about your plan, whatever it might be.
New real estate investors really need to read a bit (an hour's worth) about TORT LAW and what a Tort is. Do the same with FRAUD and especially Bank Fraud, you'll be surprised at what you find. Don't let gurus or anyone tell you wholesaling has no personal risks, just understand your position before you go knock on doors! :)
- Passaic, NJ · Member since 2016 · 22 posts · 9 votes10yA lot of great info. Plenty of questions I myself have had have been answered. I'm new to real estate and decided that wholesaling might be the way to go as well. On the advice of some here I will be looking deeper into NJ law. I agree when someone said wholesaling is like sales and marketing. Luckily I work a job that requires just that. I'll be able to apply the skills properly. Still amazed at the plethora of information this website has. Better than any guru course out there.
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