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Updated over 11 years ago on . Most recent reply

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Ryan Ahlgrim
  • Investor
  • Sapulpa, OK
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Wholesaling and the Law

Ryan Ahlgrim
  • Investor
  • Sapulpa, OK
Posted

I’m a new investor who is hoping to do his first direct mail campaign starting in 2014 to wholesale a few properties. I just got out of a 90 minute consultation meeting with an attorney. My purpose for going was to make sure wholesaling could be done ethically and legally.

The attorney seemed a bit put out with what I was proposing to do and very critical of wholesaling in general. He insisted that wholesalers were breaking the law by acting as unlicensed realtors and should be prosecuted if they’re ever caught, no exceptions. I tried telling him that there seem to be several legit wholesalers publicly sharing their knowledge and experience online but he again insisted they’re probably lying.

I’d appreciate anyone’s thoughts and reaction to this. Is wholesaling legal? Are wholesalers acting as unlicensed realtors? Would the contracts being used in a wholesale deal hold up in court? And what legal steps would you advise a new investor to take?

Thanks.

Most Popular Reply

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Anson Young
  • Flipper/Rehabber
  • Denver, CO
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Anson Young
  • Flipper/Rehabber
  • Denver, CO
Replied

You should ask him if assigning purchase contracts is legal? If earning an assignment fee is legal? Assignment fee is NOT commission.

Ask him if closing on a property you have owned for 30 minutes is legal, if the proceeds from the sale of a property are illegal to keep? Proceeds from the sale of a home is NOT commission.

Ask him if selling your interest in an LLC is legal? If the proceeds from the sale of that LLC are illegal to keep? Proceeds from the sale of an LLC is NOT commission.

The issue is likely 'equitable interest' and how different states handle is. Equitable interest gives you enough interest in the property (a contract, escrow opened, etc) to then market the property or contract. The proceeds of this are NOT commission, you arent acting in an agent capacity, nor are you pretending to. The seller is not your client, and you are not marketing it on his behalf, but on behalf of your contract and your interest in the property.

Someone with more legal experience will likely chime in here, I'd only meet with attorneys that were referred to me by other successful investors. I cant deal with agents/attorneys who THINK what we do is not legal, when it clearly is. I'd rather have a great referral from someone who knows what is going on rather than spend 5 minutes trying to change someone's mind about what I do.

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