Wholesaler · Philadelphia, PA · Member since 2016 · 124 posts · 81 votes
Wholesalers are a significant segment in real estate investing, especially in Philadelphia. The city has now passed into law new regulations to crack down on wholesalers. According to an article in the Philadelphia inquire, Philly is the first city in the nation to take measures against wholesalers. Given the nature of the wholesale transactions, it could be difficult to enforce these laws since wholesalers rarely acquire deeds to the properties they contract for resell making it somewhat of a shadow transaction.
But it think the attempt by lawmakers to regulate the wholesaling could be significant. Could Philadelphia prompted other cities/states to follow suite to put a squeeze on wholesaling or stop it all together? Curious to know what you all think.
Many homeowners in Philadelphia receive repeated calls, letters, and visits from “We Buy Houses” residential property wholesalers offering cash to buy their homes or other property they own. Often, these wholesalers target people who are going through financial hardship and use high-pressure tactics to convince homeowners to sign agreements to sell. They target homeowners in neighborhoods with rising home values, especially in Black and Latinx communities.
These wholesalers often offer far less than the actual value of their property. As a result, long-time homeowners lose valuable wealth and family homes are lost.
Investor · Richmond, VA · Member since 2020 · 108 posts · 135 votes
5y
@Franky Aikens I am not specifically familiar with the Philly market, but as I understand, Illinois already legislated that wholesalers must have their RE license if they transact more than one deal per year. That said, it looks like Philly is the second jurisdiction to do this, and I anticipate more will eventually follow suit. I believe the main driver is the Realtor Associations. At the end of the day, it doesn't hurt Wholesalers to get a RE license; it just adds some additional complexities. We are upfront with our sellers about all aspects of the transaction, including equity, estimated repairs, options such as listing, etc. (main ethical contentions raised by agents, Realtors, and Brokers), so I don't think it will be a huge issue, as long as they don't start trying to target assignability. If so, there are still methods, such as private funds, transactional funds, etc., to effect a purchase. Nevertheless, there are ways to get the deal done legitimately.
Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
5y
According to this article: wholesalers can become "legit" with a simple $200 license fee, and not even have to take any classes. The only restrictions are a disclosure 3 days before closing advising they can get an attorney or agent and forbidding the wholesaler from basically lying to anyone. It also sets up a "do not solicit list" for people not interested in selling their property to wholesalers.
This really doesn't seem like that bad of a compromise.
Investor · Richmond, VA · Member since 2020 · 108 posts · 135 votes
5y
@Account Closed I agree. I don’t think it’s a heavy lift at all, and being honest and demonstrating integrity shouldn’t even need to be legislated. Still, if having a special license means you have an official third party adding a nod of credibility to your business, that’s not too bad. The “do not solicit list” is also a great idea; I am on the acquisition side of our business, and knowing this in advance would be great.
Many homeowners in Philadelphia receive repeated calls, letters, and visits from “We Buy Houses” residential property wholesalers offering cash to buy their homes or other property they own. Often, these wholesalers target people who are going through financial hardship and use high-pressure tactics to convince homeowners to sign agreements to sell. They target homeowners in neighborhoods with rising home values, especially in Black and Latinx communities.
These wholesalers often offer far less than the actual value of their property. As a result, long-time homeowners lose valuable wealth and family homes are lost.