Cracking down on wholesalign in Texas - Abbott signs SB 2212
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Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
9yLike all laws...it only keeps the honest folks honest and will have little impact on the dishonest investors....of which there are many.
14 Replies
- 9yKerry BairdPro MemberRental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
Good to know. Glad you posted.
- Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes9y
Like all laws...it only keeps the honest folks honest and will have little impact on the dishonest investors....of which there are many.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Guy Gimenez does this mean that wholesalers that are assigning now MUST BE licensed as agents ??? to assign contracts ON TOP of making full disclosures to ALL parties IE... buyer and seller..
Would be nice if they just had a TREC disclosure form that was filled out by buyer and seller kind of like the property disclosure form. that would help things I would think..
IE to the buyer... Wholesaler has tied up this property for _____________ and is now assigning it for ____________ Seller signs knows what is being marked up.. Buyer understands the premium wholesaler is making ( which is really just a commish)....
- Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes9y
Not a crackdown on wholesaling but a crackdown on unlicensed brokerage. Acting as if you were the owner of a property that you were really just wholesaling has always been against the rules, now it is just more clear. This is the key sentence: ..."discloses the nature of the equitable interest to any potential buyer..."
A BILL TO BE ENTITLEDAN ACTrelating to certain real estate brokerage and advertising activities and to certain functions of the Texas Real Estate Commission. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter A, Chapter 1101, Occupations Code, is amended by adding Section 1101.0045 to read as follows: Sec.1101.0045.EQUITABLE INTERESTS IN REAL PROPERTY. (a) A person may acquire an option or an interest in a contract to purchase real property and then sell or offer to sell the option or assign or offer to assign the contract without holding a license issued under this chapter if the person: (1)does not use the option or contract to purchase to engage in real estate brokerage; and (2)discloses the nature of the equitable interest to any potential buyer. (b)A person selling or offering to sell an option or assigning or offering to assign an interest in a contract to purchase real property without disclosing the nature of that interest to a potential buyer is engaging in real estate brokerage. SECTION 2. Section 1101.156(b), Occupations Code, is amended to read as follows: (b) The commission may not include in rules to prohibit false, misleading, or deceptive practices by a person regulated by the commission a rule that: (1) restricts the use of any advertising medium; (2) restricts the person's personal appearance or use of the person's voice in an advertisement; (3) relates to the size or duration of an advertisement used by the person; [or] (4) restricts the person's advertisement under an assumed or [a] trade name that is authorized by a law of this state and registered with the commission; or (5)requires the term "broker," "agent," or a similar designation or term, a reference to the commission, or the person's license number to be included in the person's advertisement. SECTION 3. Section 1101.652(b), Occupations Code, is amended to read as follows: (b) The commission may suspend or revoke a license issued under this chapter or take other disciplinary action authorized by this chapter if the license holder, while engaged in real estate brokerage: (1) acts negligently or incompetently; (2) engages in conduct that is dishonest or in bad faith or that demonstrates untrustworthiness; (3) makes a material misrepresentation to a potential buyer concerning a significant defect, including a latent structural defect, known to the license holder that would be a significant factor to a reasonable and prudent buyer in making a decision to purchase real property; (4) fails to disclose to a potential buyer a defect described by Subdivision (3) that is known to the license holder; (5) makes a false promise that is likely to influence a person to enter into an agreement when the license holder is unable or does not intend to keep the promise; (6) pursues a continued and flagrant course of misrepresentation or makes false promises through an agent or sales agent, through advertising, or otherwise; (7) fails to make clear to all parties to a real estate transaction the party for whom the license holder is acting; (8) receives compensation from more than one party to a real estate transaction without the full knowledge and consent of all parties to the transaction; (9) fails within a reasonable time to properly account for or remit money that is received by the license holder and that belongs to another person; (10) commingles money that belongs to another person with the license holder's own money; (11) pays a commission or a fee to or divides a commission or a fee with a person other than a license holder or a real estate broker or sales agent licensed in another state for compensation for services as a real estate agent; (12) fails to specify a definite termination date that is not subject to prior notice in a contract, other than a contract to perform property management services, in which the license holder agrees to perform services for which a license is required under this chapter; (13) accepts, receives, or charges an undisclosed commission, rebate, or direct profit on an expenditure made for a principal; (14) solicits, sells, or offers for sale real property by means of a lottery; (15) solicits, sells, or offers for sale real property by means of a deceptive practice; (16) acts in a dual capacity as broker and undisclosed principal in a real estate transaction; (17) guarantees or authorizes or permits a person to guarantee that future profits will result from a resale of real property; (18) places a sign on real property offering the real property for sale or lease without obtaining the written consent of the owner of the real property or the owner's authorized agent; (19) offers to sell or lease real property without the knowledge and consent of the owner of the real property or the owner's authorized agent; (20) offers to sell or lease real property on terms other than those authorized by the owner of the real property or the owner's authorized agent; (21) induces or attempts to induce a party to a contract of sale or lease to break the contract for the purpose of substituting a new contract; (22) negotiates or attempts to negotiate the sale, exchange, or lease of real property with an owner, landlord, buyer, or tenant with knowledge that that person is a party to an outstanding written contract that grants exclusive agency to another broker in connection with the transaction; (23) publishes or causes to be published an advertisement [, including an advertisement by newspaper, radio, television, the Internet, or display,] that: (A) misleads or is likely to deceive the public; (B) [,] tends to create a misleading impression; (C)implies that a sales agent is responsible for the operation of the broker's real estate brokerage business; [,] or (D) fails to include [identify] the name of the broker for whom the license holder acts, which name may be the licensed name, assumed name, or trade name of the broker as authorized by a law of this state and registered with the commission [person causing the advertisement to be published as a licensed broker or agent]; (24) withholds from or inserts into a statement of account or invoice a statement that the license holder knows makes the statement of account or invoice inaccurate in a material way; (25) publishes or circulates an unjustified or unwarranted threat of a legal proceeding or other action; (26) establishes an association by employment or otherwise with a person other than a license holder if the person is expected or required to act as a license holder; (27) aids, abets, or conspires with another person to circumvent this chapter; (28) fails or refuses to provide, on request, a copy of a document relating to a real estate transaction to a person who signed the document; (29) fails to advise a buyer in writing before the closing of a real estate transaction that the buyer should: (A) have the abstract covering the real estate that is the subject of the contract examined by an attorney chosen by the buyer; or (B) be provided with or obtain a title insurance policy; (30) fails to deposit, within a reasonable time, money the license holder receives as escrow or trust funds in a real estate transaction: (A) in trust with a title company authorized to do business in this state; or (B) in a custodial, trust, or escrow account maintained for that purpose in a banking institution authorized to do business in this state; (31) disburses money deposited in a custodial, trust, or escrow account, as provided in Subdivision (30), before the completion or termination of the real estate transaction; (32) discriminates against an owner, potential buyer, landlord, or potential tenant on the basis of race, color, religion, sex, disability, familial status, national origin, or ancestry, including directing a prospective buyer or tenant interested in equivalent properties to a different area based on the race, color, religion, sex, disability, familial status, national origin, or ancestry of the potential owner or tenant; or (33) disregards or violates this chapter. SECTION 4. Section 1105.003(f), Occupations Code, is amended to read as follows: (f) Not later than August 31 of each fiscal year, the agency shall remit [$750,000] to the general revenue fund the sum of $750,000 minus amounts expended each fiscal year to construct or maintain a building in the Capitol Complex, including for repayment of a construction loan. SECTION 5. Subchapter D, Chapter 5, Property Code, is amended by adding Section 5.086 to read as follows: Sec.5.086.EQUITABLE INTEREST DISCLOSURE. Before entering into a contract, a person selling an option or assigning an interest in a contract to purchase real property must disclose to any potential buyer that the person is selling only an option or assigning an interest in a contract and that the person does not have legal title to the real property. SECTION 6. (a) Except as provided by Subsection (b) of this section, this Act takes effect September 1, 2017. (b) Section 1105.003(f), Occupations Code, as amended by this Act, takes effect September 1, 2019.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jason Hirko you can read this a few ways.
one way is to say you can engage in this with out a license as long as you don't engage in broker activities
definition of broker activities is usually ... Advertising a house.. bringing two parties together etc etc.
So you can't advertise the house... as a house.. you can't have a website showing the house you can't put a craigslist add in.. you can't blast e mail the house..
Am I reading this right... kind of following OHIO and FLA in this and CA and Oregon.
as with all things in the law I suspect it will come down to case law when someone gets wrung up and they go through the full process..
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jason Hirko Or do you think its as simple as when you do advertise it you must say.
Hey I don't own it .. I just have an interest in it.. and am making a middle man fee. and then leave it to buyer and seller to determine what the fee is and if all parties sign off that's fine.. ???
- Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes9y
@Jay Hinrichs You know I would never argue with THE JAY HINRICHS, but... Here's how I read this
"A person may acquire ... sell the option or assign ... the contract without holding a license issued under this chapter if :
1. the person does not use the option or contract to purchase to engage in real estate brokerage (a person selling ... a contract to purchase real property without disclosing the nature of that interest to a potential buyer is engaging in real estate brokerage); and
2. discloses the nature of the equitable interest to any potential buyer."
Feel free to educate me :-)
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jason Hirko OK so wholesaler just has to advertise I am a wholesaler not the owner and I am making a middle man fee...
that's on the buyer side
wonder how they handle the seller side when they tie up a property for far less than true market value??? do they have to disclose that to the seller as well... ???
like I said I think this one gets clarified with case law over time..
and really depends on where the state wants to put energy and money protecting the public.
I have always said why have a real estate industry at all if no one needs a license to act as a middle man in these deals..
One thing that could clarifiy this and were the most abuse is .. is in the 1 to4 .. mom and pop.
Maybe you follow like Dodd frank does in 12 states and make the rules for 1 to 4.. any commercial property bare land 5 units or more exempt.. and nothing required.. with the idea that the buyers and sellers are more sophisticated.. and its Caveat Emptor .
- Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes9y
No Sir, it is a subtle reminder that harsher regulation is coming if Assignors in Texas continue with their current practices, and it also gives them advanced notice that TREC will be watching their activities more closely.
All a Assignor has to do is clearly disclose in their advertising that they are not selling the home because they do not own it, but instead they are selling their interest in the purchase contract on that home. Since I close on almost all my properties before re-selling.
TREC has a very limited number of forms and TAR will not likely want to encourage license holders to dabble in assignments, so it will ultimately be up to the Assignor to get their counsel to approve some strong verbiage for their assignments.
- Investor · Dallas, TX · Member since 2017 · 26 posts · 6 votes9yGood article from law firm which adds some color and clarity http://silblawfirm.com/real-estate-law/the-legality-of-wholesaling-real-estate-in-texas/
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
More states to follow...YEA!
The fact is, the assignment clause was NEVER intended to allow unlicensed brokerage. It has legitimate reasons such as putting into various entities one may own, taking on a partner and putting into an entity, etc. This "wholesaling" garbage has gone nuts and there are more uninformed people believing they will make a ton of money. Worse than that is the FRAUD being pulled upon sellers, some desperate. I can only imagine the level of FRAUD coming to SE TX now that Harvey is gone. - Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes9y
@Jay Hinrichs I do not see it changing much. It is more clear that the wholesaler must disclose they only have an option on the property.
The new law specifically allows the sell of options.
The only real limit is not operating as a broker. In this case, that is going to mean DO NOT suggest an agency relationship. Don't EVER say I am going to charge you (the home owner) a fee. Don't tell them how much the house "is worth." Don't say "I am going to advertise the house for you."
Of course if I forwarded the huge number of yellow letters and cards I get to TREC they would be over loaded with cases of people acting as brokers without a license.
But if people cannot figure out that an LLC owning four boarded up houses side by side is not looking for a wholesaler then they will not be able to follow the law either.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed that's the issue enforcement .. Like you we get 2 to 5 yellow letters pretty much daily.. everyone of them BS .. but it would take an army to chase all these folks down.. And of course the amount of people that blow money on yellow letters without ever doing a deal has to be off the charts :).. but hey its America right ?
- Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes9y
Originally posted by @Jeremy Michiels:
Good article from law firm which adds some color and clarity
http://silblawfirm.com/real-estate-law/the-legality-of-wholesaling-real-estate-in-texas/
Thanks for posting this link @Jeremy Michiels, goes into good detail of how any ads should be placed in the future. What I get is as long as you are advertising it as you have equitable title by paying the earnest money, you can advertise the sale of the contract or option, though does anyone know if you can mention the price of the house, or put for them to call you?
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