Wholesaling - Is It About to Change?

[Patrice Boenzi]

The Real Estate License Act (RELA) of 2000 is about to sunset. Check out the changes they are making to the RELA regarding wholesaling. How do you think this will affect things? 

Excerpt is taken from the article posted by Illinois Realtors

Title: SB 1872 or Real Estate License Act of 2000 - Explained (full link at bottom of post)

As you may already be aware, the Illinois Real Estate License Act of 2000 (RELA or the Act) was due to “sunset” at the end of 2019.

This is a regular “thing” for licensing laws, and knowing this was on the horizon Illinois REALTORS®set to work organizing a task force to study, consider and recommend changes for a rewrite of RELA.

Accordingly, the Illinois REALTORS® task forces were focused on consumer protection from the start. In addition, IDFPR has a mission of consumer protection together with establishing the standards for professional real estate licensees in Illinois.

• With regard to business practices, in Section 1-10, the definition of “broker” has been amended to include the practice of “wholesaling” if done as a business model. Generally, “wholesaling” involves the practice of entering contracts to purchase property, then quickly assigning that contract to another buyer for a profit. When done as a business practice, “wholesaling” will now come under RELA’s enforcement provisions and the wholesaler will need a real estate broker’s license, as well as be subject to consumer protection provisions such as disclosure of self-interest and prohibition against dual agency.

Full Link: https://www.illinoisrealtors.org/blog/sb-1872-or-real-estate-license-act-of-2000-explained/?fbclid=IwAR34h8ys5z-ea3ks6ufLTwSPNNos-XAR1unslWPbcLlGQQ7tSnpCmxSw24M#consumer

[Chuck Walker]

@Jay Hinrichs I appreciate your post and have spreading these thoughts in my area as well. I truly believe 99% of wholesalers are an unnecessary cog in the wheel. D it both comical and troubling to hear wholesalers say they are providing a needed service to particular sellers and solving that sellers problem. Ahhh, I couldn’t disagree more. If you want to truly solve the problem of a seller who is trying to unload an undesirable property, help them find a buyer who will give them a legit price. Oh wait, that’s what a realtor does. Of course, I run into my fair share of unethical realtors and brokers who take kickbacks from wholesalers for funneling traffic their way. But not as often as I am bombarded with ridiculous letters, emails, text, etc from wholesalers either wanting to buy one of my rentals, or sell me a highly overpriced rehab.

I will say this, for as unnecessary to the process a wholesaler is...they continue to find ways to artificially drive up prices and still get rehabber, investors, retail buyers to cut checks. I would have thought we would have hit that breaking point at which wholesalers drove themselves out of business by asking for such inflated prices. I Guess as a collective we’re not there yet. I, on the other hand, hit that mark a couple of years ago.

[Jay Hinrichs]

Originally posted by @Brandon Dukes:

@Syed H. I’m not blaming anyone. All I’m saying is if an 85 year old grandmother sign a contract for 200k to a wholesaler and that wholesaler re-assigns that contract to a Rehabber for 100k(300k-200k) and that Rehabber rehabs the property and sell it for 520k. Explain to me how is the grandma being taking advantage of when she walks away with 200k for a property that is in As-is condition.  

as politely as I can if you cannot see the issue here there Is nothing more to say .. you have your morals and ethics and others have theirs. 

just sad really.. very sad were this type of transaction would be congratulated and others want to emulate.. Wow.

[Elbert D.]

Originally posted by @Mike B.:

Originally posted by @Elbert D.:

Originally posted by @Jay Hinrichs:

Originally posted by @John K.:

I am not going to comment on the bill or what the state of Illinois thinks it's going to stop, by writing this into law. Instead I will point out some actual facts that should have been considered, prior to wasting taxpayer resources. 

I won't pretend to know the motivation behind the state's desire to draft this bill, because I was never invited to the discussion. I will simply go on a limb and say that one of those factors, was probably this gross misconception that we steal equity, and I would guess that it's this 50% number that has the "ouch" factor. 

It would be my guess that the wholesaling industry makes up less than half of 1% of the overall market, or worse. That alone should have been enough to make anyone realize that this law is going to have zero effect, overall. However, it's easy to say that the investor industry out numbers wholesalers, by a bunch. Would 100x, 1000x or more, be reasonable? 

Now I would suspect that those agents/brokers and investors themselves, that are quick to put a wholesaler on blast for their thievery, utilize the very popular 70% rule when it comes to evaluating a property. This of course means that according to that rule, you should never offer more than 70% of its value. Now I have no idea who came up with this rule, but I feel comfortable in saying that it was NOT a wholesaler. So let's see what that looks like, in real numbers. 

Little bit of a test here.

Subject Property
3/2 1800 sq ft. ARV 200K
Needs the following:  HVAC system replaced and updating of kitchen/baths, paint and floors. No other mechanicals are needed. 

Let's start:
200K ARV * .70 = 140K purchase price. Right out the door 30% equity, GONE!
For those that have actually renovated/updated a home of this size, what are the odds you get this done for 40K? Because if the 50% equity creates the problem, you only have 40k to spend to renovate and state within that 50% equity grab. Of course, this math only works if you do NOT use HML or private money, only if you use cash.

Let's be real. Doing a professional renovation on a 200K home that needs updating and an HVAC system, for 40K, is going to be very very difficult. With over 100 renovations to my credit, I can tell you the only way this stands a chance, is you have a rock start crew that turns this within 3 weeks, or you are stealing the material. 

To summarize my point in paragraph 3. If theft of equity was a strong motivator and investors grossly out number wholesalers, then by the popularity of the 70% rule, it would actually be the investors causing more of this problem, than us wholesalers. The irony that there are many agent/brokers that are investors themselves, and live by this rule, yet preach fiduciary responsibility, is not lost. 

However, I am not going to be the one that criticizes and then not offer an alternative view, in fact, a solution that apparently would satisfy all. 

If there is so much concern over the theft of equity, the solution is real easy. 

To the fine folks of BP that provide this great community for all of us to speak freely and offer advice. 

Would you please dropkick the 70% rule calculator out of the window, because it is causing a lot of stress for those brokers/agents and investors that have an issue with wholesalers bringing 50% deals, but they can only buy at 50%, themselves. 

Are all of you that are actual investors that fix/flip and buy/hold, willing to backup what you are arguing, by promising to only buy at 80% or higher, before repairs?

In the spirit of showing my flexibility, how about 70% or higher, before repairs?  I would be fine with either personally, as a wholesaler or investor. 

If so, please join me in my effort of asking BP to remove this calculator, or at least modifying it to say, 125%? I am open for negotiations, so whatever the majority thinks is fair, I am good with it.

I mean, it's in the best interest of the seller, right? 

for these very reasons wholesaler who have no clue which is unfortunately many.. they tie up property and never close.  thereby hurting sellers who thought they had a deal. and made other financial arranges because this nice wholesaler told them he would close with cash on a day of their choosing.. ever heard that one before LOL 

I agree with U on fix and flip..  buy and hold is different though in a hot market someone may take a 10% discount off of retail and be happy as heck.. 

That’s so funny.....I heard wholesalers telling s guy they can close on his 3 unit stone and brick that he was asking 250k in 7-10 days LOL....I wanna know what title company this guy used because after 3-5 days of the title search being ran that means the buyer has 250k liquid just landing around in a bank LOL  funny because of the time time those wholesalers don’t even have a buyer lined up already. It’s things like that which really p i s s off a lot of people. I don’t say nothing about people whom are new because I was new at a point  but after a year and a half or two and your still doing the exact same thing. That’s saying something. 

With all due respect, just because you can't close in 7-10 days doesn't mean everyone can't. 

I wholesaled a Pilsen property to @Chris Titcomb, he performed in 4 days. I have used @Yan P. to finance several deals within 7 days (He doesn't't prefer it, but always gets it done). I've used Barrister Title, Network Title and GNT Title to close within 7 days on several deals as well. A delay will pop up here and there but it usually has to do with the water reading or zoning cert...not about funds to close.

I agree with everyone in regards to ethics. The bulk of my deals come from time sensitive properties. 

-Someone was left a property that they can't afford via probate and they want out yesterday. They were barely making it with their own bills and now have an additional house filled with expenses that they can't keep up with. 

-Pre-foreclosures with a 30 day or less sale date. If someone doesn't show up with cash right away, the bank takes it and they get nothing.

-Hoarders who are too embarrassed to let you take pictures let alone advertise to the public that they live this way.

-The rental owner whose tenants stopped paying rent and can't afford the mortgage.

-The cancelled/expired listing who was previously lied to by a RE agent and overpriced their house to secure a listing. They are now frustrated, have a bad taste in their mouth in regards to RE agents and just want out.

Quite honestly, the law doesn't affect me negatively as my company is licensed...as a matter of fact, we're working with our lawyer now to see how we can market to wholesalers to sell their deals for them. When life hands you lemons...

Hello Mike hows it going. Long time no see...i know @Chris Titcomb he’s a good guy.  I never said it can’t happen. It’s rare that it has in my experience and the many deals I been in. And I never once mention it was because of funds. The closing could be held up by many things a lot times more than not its small things like water cert , etc...my point was it more often than not closing 7-10 days isn’t common unless you know what your doing and even then it’s not like every closing will for sure happen in 7-10 days because as a wholesaler your the middleman. Things could be going with the buyer or things could be going on with the seller. I see some wild stuff....

[Gary L Wallman]

Originally posted by @Jay Hinrichs:

Originally posted by @Chris DeSisto:

@Eric Micheals

For the most part I'll agree to disagree.

ill agree a very small minority of wholesale deals are the problem. I am not one for to much government, they screw things up most of the time with wide blanket reforms that are not thought out. They are slow to fix things and over react to a very small amount cases. This really just comes down to NAR wanting a bigger piece of the pie, it's just disguised in "keeping the vulnerable people safe". Come...on... This about money, not saving the little people. It's always about the money. They don't like people profiting and not getting their share.

Man I have to totally disagree with you.. you think this is a money grab..  your just not that experienced in real estate to think that.

the state makes no money on real estate licensees  just like they make no money issuing drivers license.. this is consumer protection from predators.. simple as that..  Just like the ragging gun debates..  granted very few kill people with guns % of the population wise so its the same with this aspect of real estate ..  only people that would condone or agree that taking huge profits from elderly or minority or non English speaking owners are those that are financial sociopaths they don't care they only care about what they make.. I have been doing this end of the business for 3 decades now.. I see the carnage the all hat no cattle buyers do to people either in stealing equity or failing to close and owners either get total goofed up making other financial arrangements thinking their deal is going to close.. to people losing their houses at foreclosure because they believed the wholesaler was going to close and in fact had no means to close unless they found another mark.

 Jay,

While I agree with you wholeheartedly regarding wholesaler ethics, nearly everything in government is a money grab.

No the state doesn't make money from license fees.  The politicians stay in power from contributions from their special interest groups. Nearly ALL licensing is about protecting existing business entities from competition including this one in Illinois requiring wholesalers to license.  Continuing education was a scam to get inactive part time realtors off the books, etc.

In my youth (I'm in my 60's) there were very few jobs that required licensure. Those that did were highly specialized and technical. Think doctors, engineers, lawyers.  Fast forward 4 decades and you need a license to braid hair in most states. Freaking ridiculous if you ask me.

This is likely why our millennial's hate capitalism. I think it is because capitalism doesn't exist in this country in it's purist form (the form that made us the most envied economy on the planet).  Way to many barriers to entry for young people who don't have the funds necessary to comply with every legal nuance and license fee.

2000 hours for a cosmetician to get a license to cut hair. $150,000 to get a taxi license (medallion) in NYC to drive a cab. $350,000 to get a liquor license in some FL counties? Capitalism my butt. Give me a break.

[Irina Belkofer]

Originally posted by @Brandon Dukes:

@Syed H. I’m not blaming anyone. All I’m saying is if an 85 year old grandmother sign a contract for 200k to a wholesaler and that wholesaler re-assigns that contract to a Rehabber for 100k(300k-200k) and that Rehabber rehabs the property and sell it for 520k. Explain to me how is the grandma being taking advantage of when she walks away with 200k for a property that is in As-is condition.  

So, how the wholesaler improved the property that it worth $100K more?

All he did - found elderly lady who didn’t know real value of her house in as-is condition.

How it’s not taking advantage? What if it were your mom or grandma? 

When rehabber makes his money, it’s justified: the property gets improved, the value increased - that’s why it’s sold for $520K.

The wholesaler in this example is a scam bag and I hope his family will get scammed as well......there is such thing as karma 

[Elbert D.]

Sticking with that 200k example....I want to know how much the rehab is of this property? How big is it? City violations? Back taxes owed? Water bill lien? Is the loan on the house paid off???? I want to know everything. And who’s to say the flipper will actually sell it for sure for 520k lol. Things like this could be potentially a mess for everyone. If it’s not in a B+ area or above that property will could sit for a long time.  Not to mention the closing cost the buyer will have to incur. 

The verdict: not enough information. More is needed. Could be a bad deal for the seller and the buyer both. We don’t know that yet. 

[Brandon Dukes]

First, I do want to apologize if I have offended anybody that was not my intention. I was just trying to understand because I’m seeing it from a different perspective. I see it as solving a persons’ problem. If the house the grandmother was living in was a distress situation and the wholesaler is able to solve that problem for her then to me it’s not anything unethical in my opinion. Which I’m entitled to just like everyone else.

 @Jay Hinrichs and @Irina Belkofer. 

[Jay Hinrichs]

Originally posted by @Gary L Wallman:

Originally posted by @Jay Hinrichs:

Originally posted by @Chris DeSisto:

@Eric Micheals

For the most part I'll agree to disagree.

ill agree a very small minority of wholesale deals are the problem. I am not one for to much government, they screw things up most of the time with wide blanket reforms that are not thought out. They are slow to fix things and over react to a very small amount cases. This really just comes down to NAR wanting a bigger piece of the pie, it's just disguised in "keeping the vulnerable people safe". Come...on... This about money, not saving the little people. It's always about the money. They don't like people profiting and not getting their share.

Man I have to totally disagree with you.. you think this is a money grab..  your just not that experienced in real estate to think that.

the state makes no money on real estate licensees  just like they make no money issuing drivers license.. this is consumer protection from predators.. simple as that..  Just like the ragging gun debates..  granted very few kill people with guns % of the population wise so its the same with this aspect of real estate ..  only people that would condone or agree that taking huge profits from elderly or minority or non English speaking owners are those that are financial sociopaths they don't care they only care about what they make.. I have been doing this end of the business for 3 decades now.. I see the carnage the all hat no cattle buyers do to people either in stealing equity or failing to close and owners either get total goofed up making other financial arrangements thinking their deal is going to close.. to people losing their houses at foreclosure because they believed the wholesaler was going to close and in fact had no means to close unless they found another mark.

 Jay,

While I agree with you wholeheartedly regarding wholesaler ethics, nearly everything in government is a money grab.

No the state doesn't make money from license fees.  The politicians stay in power from contributions from their special interest groups. Nearly ALL licensing is about protecting existing business entities from competition including this one in Illinois requiring wholesalers to license.  Continuing education was a scam to get inactive part time realtors off the books, etc.

In my youth (I'm in my 60's) there were very few jobs that required licensure. Those that did were highly specialized and technical. Think doctors, engineers, lawyers.  Fast forward 4 decades and you need a license to braid hair in most states. Freaking ridiculous if you ask me.

This is likely why our millennial's hate capitalism. I think it is because capitalism doesn't exist in this country in it's purist form (the form that made us the most envied economy on the planet).  Way to many barriers to entry for young people who don't have the funds necessary to comply with every legal nuance and license fee.

2000 hours for a cosmetician to get a license to cut hair. $150,000 to get a taxi license (medallion) in NYC to drive a cab. $350,000 to get a liquor license in some FL counties? Capitalism my butt. Give me a break.

well I am your age.. I got my RE license in 75.. my dad got his in 55 .. our old surveyor got his in the early early 1900s  I always remember looking at his license in CA and it was like number  350 or something and he surveyed in Saudi Aribia in the beginning of big Oil.

YOu can blame the knee jerk reaction I think on the guru's who are teaching folks how to act like a broker without being one.. and of course the consumer side of this.. IE taking advantage of the elderly minority's and non English speakers. 

[William C.]

Originally posted by @Mark Fries:

@Patrice Boenzi

Because wholesalers are hustlers by nature. And by virtue of this they always find a way to make it happen. Maybe they come up with another name for what they are doing or find a different angle but I'm sure it will continue . Wholesaling is a billion dollar industry across America. The economy needs it, whether or not anybody likes it is a different story.

** Please note I am not a wholesaler but I am a realist and this is how society works

To answer OP, I sure hope so.

But  @Mark Fries I think you may be confused by the law change, and what it would mean for wholesalers if it were changed and more importantly enforced properly.  No one is trying to stop, nor will they ever stop people from buying homes, and THEN marketing them and selling them for more money creating a profit.  Nor is anyone trying to stop people from bringing buyers and sellers together, and earning a commission.  No one is trying to do away with wholesaling.  I think those that follow the law are just asking that every follow the law, at least that's what Id like to see happen.  The problem at hand is the business model of 99% of 'investors" in the market wholesaling who are flat out misinforming homesellers into believing they are purchasing the home, in cash, on the date agreed upon.  Then illegally marketing this home for sale, bringing a buyer and seller together, and earning a fee by telling the seller its a dump, needs more work than it does, is worth less than it is, and just leaving out the fact there are actual investors lining up to purchase the home for way more money.   When in reality not only do they have zero intention of purchasing but in fact would not even be able to purchase it if required.   Only to call on their handful of investors buddys to see if he can talk one of them into overpaying for the thing.The issue isn't the small minority who are providing real value to investors and sellers and bringing them together and earning a reasonable fee to do so, all while being 100% transparent, open and honest with the buyers and sellers throughout the entire process.   The good news is for those few who do it right the new law simply means laying out the $1000 it cost for the course and passing a simple test to become licensed by the state.  In fact your response is what frustrates me the most about this constant debate.  Why must these "hustlers" need to find an angle?  It's not that hard to follow the law, nor is the cost a good enough excuse to avoid it.

 For the masses, the idea of getting licensed seems like hard work and too much money.  It's a barrier to entry, albeit small, yet it's enough to prove you have at least have enough money in the bank to clear the measly deposit check you just wrote for the house you don't intend on buying.  It also requires even the slightest knowledge of how real estate is transacted before you are in the living room with a seller giving them advice and guidance regarding the largest asset they'll ever own.  Lastly, it would hold them accountable to fully disclose information to all parties involved.  You know the important things like who is actually buying it and how much they are paying.  Having to disclose all these pesky  little details might make it harder for these scam artists to prey on distressed sellers. 

It's pretty simple in my opinion.  Either buy the house, and then market it, and sell it.  Or get licensed and wholesale for as long as your little heart desires.  Option 1 eliminates a large percentage by having to come up with the funds, but almost anyone can get a hard money loan if you are able to rip off a seller by enough the lender simply can't lose.  So what Option 1 truly does to protect seller is it creates risk for the wholesaler.  With risk should come a reward.  Its when the risk gets removed, that the power becomes imbalanced. What if I have no clue what I'm doing and can't sell it after I purchased it?  Well by marketing it while only under contract, if you were wrong about what it would sell for IN THE OPEN MARKET, you simply back out and leave the seller hanging.    Option 2 eliminates the wannabes and the fly by the nighters and protects the seller from scam artists.

After rereading your post for about the 4th time Im beginning to think maybe what you are really trying to say is scammers will always find a way to scam?  I'm not really sure.   The economy certainly does not need wholesaling in its current form, that I know for certain.  Just because it's a billion dollar industry does not make it right.  Illegal drugs make up an even larger portion of the economy, so do we NEED illegal drugs too in order to keep the economy afloat?  I'v tried to lay out the reasons I feel the law needs to be changed and enforced.  I know your not a wholesaler but I welcome you or anyone for that matter to give me a few good reasons why these so called hustlers can't by virtue simply buy the home, THEN market and sell, or just get licensed like everyone else?

[Jay Hinrichs]

Originally posted by @Brandon Dukes:

First, I do want to apologize if I have offended anybody that was not my intention. I was just trying to understand because I’m seeing it from a different perspective. I see it as solving a persons’ problem. If the house the grandmother was living in was a distress situation and the wholesaler is able to solve that problem for her then to me it’s not anything unethical in my opinion. Which I’m entitled to just like everyone else.

 @Jay Hinrichs and @Irina Belkofer. 

For sure you are entitled to your opinion I just don't share it..  that is gross profiteering at some point its just not right.. the wholesaler saw a victim ripped 100k of equity from her .. did nothing but flip a contract .there was no value added to the seller and did not help a seller out of a problem..  And I suspect the kids are going to sue the person for unconscionable  profits.. it can happen and does happen.  License or not.

But like Fox news to be fair and balanced. I have bought timber properties right off the MLS for full price... or with my new software system that we are rolling out were we find hidden gold in properties .. blow the doors off of any wholesaler guru training out there.. this is no wholesaling though this is for those that can close and want to make 100 plus per deal in 3 months like we do.

[Gary L Wallman]

Originally posted by @Jay Hinrichs:

Originally posted by @Gary L Wallman:

Originally posted by @Jay Hinrichs:

Originally posted by @Chris DeSisto:

@Eric Micheals

For the most part I'll agree to disagree.

ill agree a very small minority of wholesale deals are the problem. I am not one for to much government, they screw things up most of the time with wide blanket reforms that are not thought out. They are slow to fix things and over react to a very small amount cases. This really just comes down to NAR wanting a bigger piece of the pie, it's just disguised in "keeping the vulnerable people safe". Come...on... This about money, not saving the little people. It's always about the money. They don't like people profiting and not getting their share.

Man I have to totally disagree with you.. you think this is a money grab..  your just not that experienced in real estate to think that.

the state makes no money on real estate licensees  just like they make no money issuing drivers license.. this is consumer protection from predators.. simple as that..  Just like the ragging gun debates..  granted very few kill people with guns % of the population wise so its the same with this aspect of real estate ..  only people that would condone or agree that taking huge profits from elderly or minority or non English speaking owners are those that are financial sociopaths they don't care they only care about what they make.. I have been doing this end of the business for 3 decades now.. I see the carnage the all hat no cattle buyers do to people either in stealing equity or failing to close and owners either get total goofed up making other financial arrangements thinking their deal is going to close.. to people losing their houses at foreclosure because they believed the wholesaler was going to close and in fact had no means to close unless they found another mark.

 Jay,

While I agree with you wholeheartedly regarding wholesaler ethics, nearly everything in government is a money grab.

No the state doesn't make money from license fees.  The politicians stay in power from contributions from their special interest groups. Nearly ALL licensing is about protecting existing business entities from competition including this one in Illinois requiring wholesalers to license.  Continuing education was a scam to get inactive part time realtors off the books, etc.

In my youth (I'm in my 60's) there were very few jobs that required licensure. Those that did were highly specialized and technical. Think doctors, engineers, lawyers.  Fast forward 4 decades and you need a license to braid hair in most states. Freaking ridiculous if you ask me.

This is likely why our millennial's hate capitalism. I think it is because capitalism doesn't exist in this country in it's purist form (the form that made us the most envied economy on the planet).  Way to many barriers to entry for young people who don't have the funds necessary to comply with every legal nuance and license fee.

2000 hours for a cosmetician to get a license to cut hair. $150,000 to get a taxi license (medallion) in NYC to drive a cab. $350,000 to get a liquor license in some FL counties? Capitalism my butt. Give me a break.

well I am your age.. I got my RE license in 75.. my dad got his in 55 .. our old surveyor got his in the early early 1900s  I always remember looking at his license in CA and it was like number  350 or something and he surveyed in Saudi Aribia in the beginning of big Oil.

YOu can blame the knee jerk reaction I think on the guru's who are teaching folks how to act like a broker without being one.. and of course the consumer side of this.. IE taking advantage of the elderly minority's and non English speakers. 

Jay,

Taking advantage of someone is never acceptable in business or life.  I'm not naive, but I think that happens less often then people think.  Most folks want to build a business and they are aware reputation is everything.

That being said, I think our statutory environment is nuts.  Small guys can't compete because only the big guys can afford the compliance lawyers. Plus, our government always passes laws after the horse has left the barn.

Hate the loss of freedoms.  I remember 9-11 with a heavy heart. Still I hate to fly.  Going through a TSA checkpoint makes me long for our past freedom and makes me wonder what has happened to our country.

[Jay Hinrichs]

Originally posted by @Gary L Wallman:

Originally posted by @Jay Hinrichs:

Originally posted by @Gary L Wallman:

Originally posted by @Jay Hinrichs:

Originally posted by @Chris DeSisto:

@Eric Micheals

For the most part I'll agree to disagree.

ill agree a very small minority of wholesale deals are the problem. I am not one for to much government, they screw things up most of the time with wide blanket reforms that are not thought out. They are slow to fix things and over react to a very small amount cases. This really just comes down to NAR wanting a bigger piece of the pie, it's just disguised in "keeping the vulnerable people safe". Come...on... This about money, not saving the little people. It's always about the money. They don't like people profiting and not getting their share.

Man I have to totally disagree with you.. you think this is a money grab..  your just not that experienced in real estate to think that.

the state makes no money on real estate licensees  just like they make no money issuing drivers license.. this is consumer protection from predators.. simple as that..  Just like the ragging gun debates..  granted very few kill people with guns % of the population wise so its the same with this aspect of real estate ..  only people that would condone or agree that taking huge profits from elderly or minority or non English speaking owners are those that are financial sociopaths they don't care they only care about what they make.. I have been doing this end of the business for 3 decades now.. I see the carnage the all hat no cattle buyers do to people either in stealing equity or failing to close and owners either get total goofed up making other financial arrangements thinking their deal is going to close.. to people losing their houses at foreclosure because they believed the wholesaler was going to close and in fact had no means to close unless they found another mark.

 Jay,

While I agree with you wholeheartedly regarding wholesaler ethics, nearly everything in government is a money grab.

No the state doesn't make money from license fees.  The politicians stay in power from contributions from their special interest groups. Nearly ALL licensing is about protecting existing business entities from competition including this one in Illinois requiring wholesalers to license.  Continuing education was a scam to get inactive part time realtors off the books, etc.

In my youth (I'm in my 60's) there were very few jobs that required licensure. Those that did were highly specialized and technical. Think doctors, engineers, lawyers.  Fast forward 4 decades and you need a license to braid hair in most states. Freaking ridiculous if you ask me.

This is likely why our millennial's hate capitalism. I think it is because capitalism doesn't exist in this country in it's purist form (the form that made us the most envied economy on the planet).  Way to many barriers to entry for young people who don't have the funds necessary to comply with every legal nuance and license fee.

2000 hours for a cosmetician to get a license to cut hair. $150,000 to get a taxi license (medallion) in NYC to drive a cab. $350,000 to get a liquor license in some FL counties? Capitalism my butt. Give me a break.

well I am your age.. I got my RE license in 75.. my dad got his in 55 .. our old surveyor got his in the early early 1900s  I always remember looking at his license in CA and it was like number  350 or something and he surveyed in Saudi Aribia in the beginning of big Oil.

YOu can blame the knee jerk reaction I think on the guru's who are teaching folks how to act like a broker without being one.. and of course the consumer side of this.. IE taking advantage of the elderly minority's and non English speakers. 

Jay,

Taking advantage of someone is never acceptable in business or life.  I'm not naive, but I think that happens less often then people think.  Most folks want to build a business and they are aware reputation is everything.

That being said, I think our statutory environment is nuts.  Small guys can't compete because only the big guys can afford the compliance lawyers. Plus, our government always passes laws after the horse has left the barn.

Hate the loss of freedoms.  I remember 9-11 with a heavy heart. Still I hate to fly.  Going through a TSA checkpoint makes me long for our past freedom and makes me wonder what has happened to our country.

WEll thankfully for the non license wholesalers in IL to comply its less than 1k to get a license if they cant handle that then they wont make it in the business anyway.. As for TSA this is why you see some pretty cool charters starting up that work out of General Aviation terminals and have either no screening or limited.. now I hope the bad people don't figure that out..  cost a little more but it does skip TSA. 

[Ola Dantis]

Originally posted by @Brandon Dukes:

@Syed H. I’m not blaming anyone. All I’m saying is if an 85 year old grandmother sign a contract for 200k to a wholesaler and that wholesaler re-assigns that contract to a Rehabber for 100k(300k-200k) and that Rehabber rehabs the property and sell it for 520k. Explain to me how is the grandma being taking advantage of when she walks away with 200k for a property that is in As-is condition.  

This is really an interesting conversation. Some wholesalers can get ridiculously greedy; however, I believe in the grand scheme of things, our capitalistic economy does encourage this kind of activity, purposefully or otherwise. 

A good example: I watched a documentary where the KY state pension fund invested pension money with some Wall Street private equity firm, and the person who introduced the private equity got more than a million dollars as an introductory fee 😲😲😲(taxpayers' money). Now, adding value or not, this is a pretty high fee to pay for a couple of handshakes and an introduction. Oh, the private equity firm lost all that the capital by the way. 

Back to the wholesaler discussion, it's a tough debate for sure!  

[James Wise]

Originally posted by @Chris DeSisto:

@Irina Belkofer

That is what I am saying though. You don't want to let agents buy their own properties.. I don't see how making someone get a license makes sense then. Insurance won't cover, well how can they possibly force people to get a license knowing most brokers can't or won't let someone do it? They are making it impossible basically. If I want to wholesale, I can't with or without a license? There is no logic to it. It is like saying a person can't FSBO just because I don't want them too....

 If you want to make money as a wholesaler what you want to do is remain unlicensed. Buy a property then resell it. When I say buy a property I mean actually buy it. As in you sign the title company's closing paperwork and your name is recorded with the county on the deed. Then you resell that sucker for as much money as possible. What all these yahooooos out there are preaching as wholesaling is simply brokering real estate. Brokering real estate requires a license in the USA. The USA also frowns upon licensed agents selling properties for seller's without disclosing to them how much they will be making or doing their fiduciary duty and getting them the best price. In the industry this is usually called a NET listing and the govt doesn't dig it.

[Chris DeSisto]

@James Wise

Not really looking to wholesale, I'd do it if something presented itself and it made sense. People talking about ripping grandma off for 100k and using it as an example is a little silly. Something like this (where a WS is making 100k on a 300k house) is probably extremely rare and happens like .000000001% of the time. 

Nobody should be ripping people off but this is an extrem example in my opinion. At what point is regulation in any industry to much? I mean you can't protect every person in the 10 trillion different scenarios. Regulation strangles movement of any kind. 

There is unlimited information on the internet, pretty much anyone can do a little bit of research and think to themselves, maybe I should ask another person... Being ignorant isn't excuse because your being a little lazy. 

There is less and less excuses to be completely ignorant on pretty much any subject. You can get the gist of things by taking 30 minutes of reading.

[James Wise]

Originally posted by @Chris DeSisto:

@James Wise

Not really looking to wholesale, I'd do it if something presented itself and it made sense. People talking about ripping grandma off for 100k and using it as an example is a little silly. Something like this (where a WS is making 100k on a 300k house) is probably extremely rare and happens like .000000001% of the time. 

Nobody should be ripping people off but this is an extrem example in my opinion. At what point is regulation in any industry to much? I mean you can't protect every person in the 10 trillion different scenarios. Regulation strangles movement of any kind. 

There is unlimited information on the internet, pretty much anyone can do a little bit of research and think to themselves, maybe I should ask another person... Being ignorant isn't excuse because your being a little lazy. 

There is less and less excuses to be completely ignorant on pretty much any subject. You can get the gist of things by taking 30 minutes of reading.

 I don't know what grandma has to do with what I stated. Whether an unlicensed person brokers a deal and makes $1 or $100,000 is irrelevant to the fact that you need to be licensed to broker real estate in the USA. No sense for us to argue that point as neither you or I make the laws.

[Jay Hinrichs]

Originally posted by @Chris DeSisto:

@James Wise

Not really looking to wholesale, I'd do it if something presented itself and it made sense. People talking about ripping grandma off for 100k and using it as an example is a little silly. Something like this (where a WS is making 100k on a 300k house) is probably extremely rare and happens like .000000001% of the time. 

Nobody should be ripping people off but this is an extrem example in my opinion. At what point is regulation in any industry to much? I mean you can't protect every person in the 10 trillion different scenarios. Regulation strangles movement of any kind. 

There is unlimited information on the internet, pretty much anyone can do a little bit of research and think to themselves, maybe I should ask another person... Being ignorant isn't excuse because your being a little lazy. 

There is less and less excuses to be completely ignorant on pretty much any subject. You can get the gist of things by taking 30 minutes of reading.

chris NOT TRUE at all its very common in low value assets for wholesalers to mark up properties 100% or more.. I see the huds I see what they make.. its not a rare thing at all like you think..   

[Chris DeSisto]

@James Wise

I was referring to the post from many others complaining about taking advantage of grandma. Honestly, the first part telling you that I don't really wholesale was the only part I was tagging you for... I just got off on a tangent about the other stuff, wasn't meant for you, just talking in generalities about the topic.

[Chris DeSisto]

@Jay Hinrichs 

Well if I doubt they make 100k that often. Maybe 20k to the seller and the wholesaler is making 15-20k? I bet most wholesalers average 10-15k, maybe less. I am someone that truly believes in taking responsibility for yourself. To many ways to find out information on any topic on the planet. We have access at all times. 

If a wholesaler offers 50k and turns and sells to a fix and flipper for 100k, wasn't there multiple wholesalers right behind him offering 90k to make a 10k fee? That seller isn't getting multiple people hitting them up? If the seller wants more, ask an agent, ask on FB, ask friends and family. Find someone willing to buy it for more then 50k. 

[Michelle Bey-Williams]

IT IS THE LAW

The Illinois law limiting wholesaling business to licensed RE Brokers was passed and signed into law and is now in force as of 8/9/2019

[Jeff Christian]

So I'm just curious. If the wholeseller and the home owner partner on the deal and split profit 50/50 couldn't this law be avoided. The seller has interest in the transaction and the wholeseller is doing the leg work... 

[Patrice Boenzi]

@Jeff Christian they way I understand it is not about the money (even though they talk about that) it is about practicing real estate without a license as a business model.