Wholesaler · Charleston, SC · Member since 2015 · 21 posts · 23 votes
First, I'm a newbie and lately I've been stalled due to the ongoing conversation/discussion on whether or not wholesaling is legal. There have been a plethora of opinions and heated discussions surrounding this topic, which unfortunately leaves newbies like me at a standstill.
That said, I found this really great article, written by an attorney, and I thought I'd share.
First, I'm a newbie and lately I've been stalled due to the ongoing conversation/discussion on whether or not wholesaling is legal. There have been a plethora of opinions and heated discussions surrounding this topic, which unfortunately leaves newbies like me at a standstill.
Odd, when I do a search for this case, I come up with this article...
Unless I'm reading this incorrectly, in Appeals Court, Xarin Real Estate lost the case and was required to pay out $257,000.00. Additionally, using a case in Texas by a lawyer in Colorado in an attempt to justify wholesaling in Ohio is not a good legal opinion. Additionally, when I do a search for this attorney, he apparently fancies himself a real estate guru.
I really wish people would quit posting stuff like this - it is really misleading and clearly no research is done what so ever on the original article prior to posting.
Real Estate Transaction Engineer · Jacksonville, FL · Member since 2014 · 271 posts · 74 votes
11y
I think this topic will be a never ending post on this site, and others, until the end of time or the gurus teach otherwise.
I still feel that just getting your RE license isn't the be all, end all answer to someone who is intending on just wholesaling (assigning contracts). There is too much at stake, in my limited estimation, for a licensed person to be a wholesaler. I have read that a couple of people have been successful at just that. So, I guess it depends on you, as the wholesaler, what you want to invest in and how you want to protect that investment (time, money, blood, sweat and tears).
I believe that transparency and ethical behavior from the wholesaler is imperative. However, If you attend the closing, your seller and buyer close the deal based on the P&S contract you had with the seller, where does your fee (profit) come in? In most situations I've read about, most title companies and attys will have a problem with your role and being assigned a "fee". A double closing would be more appropriate and less "grey".
Having a buyer's list and employing that once you have a contract is not illegal if you flip to one of them. You should have a non-circumvent/non-disclosure with both parties in case they decide to boot you out of the transaction.
Assigning a contract is not illegal, but you'd BETTER read your state's laws to make sure you are not operating in a fashion that gets you fined, imprisoned and lose your business and assets. There are states that are cracking down on wholesalers and will persecute. But, those are few and far between.
Does it lessen a persons credibility just because they wrote some books, give seminars, write articles, give advice, or as an experienced person (real estate investor in this case) to question their integrity or bias? Whether or not they make billions, should that person not be giving advice? Especially if they are a lawyer? I don't like lawyers, but I have worked with a number of them. They are usually costly, don't know anything, but their respective niche, don't care about your troubles other than what it's going to cost them, and in the end, what are they getting out of the deal. I have yet to find an attorney who exhibits a different behavior. I know I might be generalizing, but that's been my experience.
For me, I have come to believe that you CANNOT do a wholesale deal, let alone any re deal, without putting up some of your own cash and taking some risks. You may not need to have good credit, but most deals don't require good credit. However, there are some lenders that do use your credit as a basis for the loan.
I say if you are upfront with the seller, put down some kind of collateral (money, EMD, Good Faith), have everything spelled out precisely and exacting in the contract, explain your intention (assign, or buy with the option to assign, or outright buy if not assigned or assignable), that is all you need to remain within the legal walls.
Nice to meet another colleague. I too am an IT Project Manager, Business Analyst (Governance and Compliance are biggies), and a Process Engineer. Been doing it since 2003 and worked on multiple projects from start-up to enterprise level. Right now, I'm a contractor employed as a Technical Project Manager.
I am working on getting my PMP and Six Sigma certificates, but I'm ok without those. Go figure. However, it doesn't mean I don't know my stuff.
I like the article you posted. That article has been referred to in multiple threads, again and again. It's nice to be able to actually read about the case (the original judgement, the appeals and the turnover). I still don't see what he "did" to get himself in the situation he found himself in. Sounds to me the buyer had a problem with the wholesaler and wanted to cry foul. For what reason? who knows? who cares?
Welcome and dream big. It sounds like you have a good head on your shoulder. I'm sure you will find the best way to do something in real estate investing. We are just like that. :)
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
11y
So when the National Association of Realtor come after you and fine you $2,500/day, or whatever stupid thing, is this attorney engaged by you to represent and get you off the hook?
1. Not every attorney is on-board with this - most are not
2. NAR is working hard against you as we speak.
Good luck with that fight...
And anyhow - this is the hardest, in terms of time commitment and effort, job in RE, and for the least amount compensation. Why not just buy and flip and make some money. Or why not buy apartments and create some equity and cash flow?
This wholesaling gig is akin to walking over dollars to get to the cents...why? Especially since there's so much regulatory uncertainty.
Nice to meet another colleague. I too am an IT Project Manager, Business Analyst (Governance and Compliance are biggies), and a Process Engineer. Been doing it since 2003 and worked on multiple projects from start-up to enterprise level. Right now, I'm a contractor employed as a Technical Project Manager.
I am working on getting my PMP and Six Sigma certificates, but I'm ok without those. Go figure. However, it doesn't mean I don't know my stuff.
Nice to meet you! A kindred spirit! I too am focused mainly in IT and I'm starting a contract shortly as a technical project manager for enterprise software implementations (specifically for regulatory compliance.) I'm working on my PMP (in addition to full time school for a bachelor's in software development) and looking at the black belt in six sigma. We're apparently on the same career path!
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
11y
Wholesaling is alive and well in Nevada Big closing companies will do double escrows. The only requirements is that the contract is an assignment and there is a form that explains to the buyer that you are assigning the contract for a fee,not the amount.
I guess I get the argument that wholesaling is legal but it seems very gray to me. It seems it would open you up to lawsuits by your buyers and prosecution by the local authorities. Not to be critical buy why wouldn't you get your RE license instead? It would remove the doubt from your position and I fail to see a downside. Not that I am not willing to be enlightened on why you wouldn't get licensed.
Neither side is clear cut but the downside you don't see is that as a licensed agent the seller legitimately has an expectation of a fiduciary relationship.
Richard a good way to have a business as a real estate investor and a licensed agent is to talk to the seller about your business model, that you are licensed, and that you can act as a principal buyer without the fiduciary relationship and have them sign off on that
Wholesaling is not illegal. However, just like driving your car is not illegal,
Except that all 50 states require you to have a drivers license to drive a car. Funny how someone can use that analogy and not even mentioned that fact!
Real Estate Attorney · Aurora, CO · Member since 2009 · 21 posts · 21 votes
9y
Here's your attorney post...
The Xarin v. Gamboa case was based on language found in nearly EVERY state statute that defines "brokerage", ie, the words "For Another". Thus the same case and logic can be applied accordingly. Simply assigning a contract is not brokering because you are not acting "for another", you are acting for yourself, selling what is yours. The horror stories you hear around the grapevine almost universally have a "catch" they are not revealing (eg, the investor either said or did something improper in the transaction that caught the eye of the state regulators).