Real Estate Investor · San Jose metropolitan, CA · Member since 2008 · 4 posts · 1 vote
I'm trying to understand the line here, and obviously, laws vary from state to state, and most people here likely aren't RE attorneys, but,
what can a person do that is known to be illegal?
Not that I'm TRYING to do anything illegal, but actually trying to find out what to watch out for.
For example, I've been told that in double closing, it's important that the seller and buyer don't physically meet or you may be considered a broker and require a licence.
I happen to be talking to an accountant today and he said (I know he's not a lawyer) that for me to do any such transaction, and FSBO also fall in this boat, you are opening yourself to suit if the buyer claims what they've been sold is not per the original agreement, or something similar. He said if your licenced, your covered.
I've already done some reading here, and did a search, but I'm not finding a whole lot that's concrete on this topic.
Real Estate Investor · Katy, TX · Member since 2008 · 430 posts · 22 votes
18y
Not sure about double closings if they meet you can be liable. Who knows. I am in Texas, and have not heard too much about that, though I have only done one double close. I do know however, if you assign your contracts, you are not selling real estate, you are selling a contract. Thus you do not need to have a license to do so.
Lemme explain further. Say you get a house under contract with a seller for $50,000. You then find an end buyer and assign that contract to him for a fee of $5,000. The end buyer is paying $55,000 total, $50,000 to the seller under contract, and $5,000 fee for the right to buy the house under contract. That is why it is important to put as the buyers name "NAME and/or assigns."
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
Jason,
1. Agency rules and regulations are set at the state level. Check the CA department that regulates agents. Their website has a lot of info.
2. Anyone who is not a principal in a transaction and who is paid only when the buyer and seller complete a deal is someone who is brokering. They are being paid to match a buyer and seller. For RE most states require that the person has a license.
Some dress the transaction up and call it a marketing fee, a referral fee or any other thing. All would be illegal if the state regulates brokerage.
3. A person who is a principal is different. They have a stake in the asset being sold. If the deal does not complete they still have a position or have suffered real losses.
4. Double closes will end with you having been on the title. You are not brokering. You are buying and then you are selling. You are a principal (at one point you were the buyer, then the owner selling).
5. You can sell things you own. If you buy the right to purchase something you can sell your rights. Assigning a contract or selling an option which you purchased is an example.
There is a lot of confusion out there as to what is illegal brokerage and what is legal RE investing. One guy in OH was shut down and fined because he was using a trust system to match sellers with end buyers. No one told him he was operating illegally. He even asked the promoter of the program and an OH lawyer. Both got it wrong.
Real Estate Investor · Mobile, AL · Member since 2008 · 19 posts · 2 votes
18y
To expand a little on John's comment as well, there is nothing illegal about a transaction that is done between an investor and someone else if the investors has a contract on the property. Period. If you put something under contract and try to sell it you will be fine, stay with that line until you figure out what else you can do specifically in your state.
John is right on with the agency stuff, all states differ there, but if you are not an agent and you represent yourself you are always going to be fine in any state. Perfectly legal in all state to buy for yourself and sell for yourself.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
18y
Nothing irritates me more than a seller and/or buyer freaking out at what we're making on the deal. There is just no logic to it. If you think this may be an issue, double close. If not, just assign it.
And you have my full support to engage in any, and all, illegalities. Just the man trying to keep us down...(lol)