Wholesaling (Against the Law?)

86 Replies

I have not wholesaled a house and finding one that would make a acceptable deal, for a buyer, is very difficult in our area.  I have done two fix and flips and they are a lot of work and a fair amount of risk as well. Selling a deal and making a profit, with little risk, could be a better option that doing the work.  

So is wholesaling against the law?  Does anyone really know?  Do we just have a bunch of realtors out there, that resent anyone doing anything that could possiably put money in their pocket, trying to scare off wholesalers?  Do you know of anyone selling their assignable contract being prosecuted for braking some law?  It appears that most of the negative comments about wholesaling seem to be efforts to protect realtors turf and little to do with protecting the public.  Is the real truth out there because there are a lot of people promoting wholesaling.

If you are marketing the house whether or not you're under contract without a license is against the law as you are brokering without a license. You can't advertise or sell something you don't own.

So the traditional way to wholesale(find a discounted property,get it under contract and market it to a cash buyer)is starting to get the attention of state regulators especially in California,Ohio and Florida and fines and jail time are being issued to those who are marketing/selling properties they don't own without a license.

So unless you can find a way to market your contact without marketing the property itself which isn't against the law you'll need to either get your RE license or find another REI strategy.

Originally posted by @James Hiddle :

If you are marketing the house whether or not you're under contract without a license is against the law as you are brokering without a license. You can't advertise or sell something you don't own.

So the traditional way to wholesale(find a discounted property,get it under contract and market it to a cash buyer)is starting to get the attention of state regulators especially in California,Ohio and Florida and fines and jail time are being issued to those who are marketing/selling properties they don't own without a license.

So unless you can find a way to market your contact without marketing the property itself which isn't against the law you'll need to either get your RE license or find another REI strategy.

 And how many states are you licensed to practice law in?  That sounded a lot like legal advise...

Originally posted by @Todd Plambeck :
Originally posted by @James Hiddle:

If you are marketing the house whether or not you're under contract without a license is against the law as you are brokering without a license. You can't advertise or sell something you don't own.

So the traditional way to wholesale(find a discounted property,get it under contract and market it to a cash buyer)is starting to get the attention of state regulators especially in California,Ohio and Florida and fines and jail time are being issued to those who are marketing/selling properties they don't own without a license.

So unless you can find a way to market your contact without marketing the property itself which isn't against the law you'll need to either get your RE license or find another REI strategy.

 And how many states are you licensed to practice law in?  That sounded a lot like legal advise...

 Oh so by your definition if I say it's against the law to rob a bank I'm practicing law and giving out legal advice. Get real!

No it's not legal advice but if you don't believe me I suggest you either contact a RE lawyer or your states RE commission and see for yourself.

Oh by the way if that was true then a lot of us here at BP are in trouble because there are some here that been over the last few months saying the exact same thing.

It depends on your state, their laws, and your actions. If you put a property under contract in Florida and then advertise the house without owning it, yes, you could face fines of $5000 per chapters 475 and 455. You asked..and that is my final answer.

This question will result in you being told a bunch of crap by people that have no idea what they are talking about, especially if they don't live here in Texas.

There is no problem - legal or regulatory - with wholesaling in Texas.

Originally posted by @John Thedford :

It depends on your state, their laws, and your actions. If you put a property under contract in Florida and then advertise the house without owning it, yes, you could face fines of $5000 per chapters 475 and 455. You asked..and that is my final answer.

 Careful John that sounds like legal advice!

Originally posted by @James Hiddle :
Originally posted by @John Thedford:

It depends on your state, their laws, and your actions. If you put a property under contract in Florida and then advertise the house without owning it, yes, you could face fines of $5000 per chapters 475 and 455. You asked..and that is my final answer.

 Careful John that sounds like legal advice!

 Amazing how some people don't like answers to their questions:) Maybe they should not ask:)

Originally posted by @Dev Horn :

This question will result in you being told a bunch of crap by people that have no idea what they are talking about, especially if they don't live here in Texas.

There is no problem - legal or regulatory - with wholesaling in Texas.

So in Texas you can contract a property and market/sell it complete with pics,address,ect to anyone that wants to buy it without a RE license?

If so prove it or can you?

Originally posted by @John Thedford :
Originally posted by @James Hiddle:
Originally posted by @John Thedford:

It depends on your state, their laws, and your actions. If you put a property under contract in Florida and then advertise the house without owning it, yes, you could face fines of $5000 per chapters 475 and 455. You asked..and that is my final answer.

 Careful John that sounds like legal advice!

 Amazing how some people don't like answers to their questions:) Maybe they should not ask:)

Welcome to the new America where if you speak the truth,people cover their ears and go yadda yadda yadda!!!

Originally posted by @Dev Horn :

This question will result in you being told a bunch of crap by people that have no idea what they are talking about, especially if they don't live here in Texas.

There is no problem - legal or regulatory - with wholesaling in Texas.

 Since I coach nationally I need to be abreast of what states are more difficult than others as far assigning paperwork

Dev Horn, Correct me if I'm wrong but in Texas you can assign a lease or purchase agreement or option agreement no problem without a license

But it's always helpful to be licensed says you can use a listing as a possible tool when talking to the seller and also get referrals from other licensed agents about problem properties, especially with low equity pretty houses

Real Estate is local with local customs

@James Sinclair

Are you planning to wholesale for someone else or just buy really really low, pay cash so you own it outright, and then turn around and resell for profit? In a nutshell that is primarily my business model and works great! 

I often sell to other investors who THEN market and sell to the end user. (I am happy with a little profit on a lot of properties.) This is all "legal", you are not representing anyone, and not that hard. 

AND I love Texas because your part of the country is full of fantastic "unwanted" rural land deals! 

Hope that helps!

Jill

Originally posted by @Jill DeWit :

@James Sinclair

Are you planning to wholesale for someone else or just buy really really low, pay cash so you own it outright, and then turn around and resell for profit? In a nutshell that is primarily my business model and works great! 

I often sell to other investors who THEN market and sell to the end user. (I am happy with a little profit on a lot of properties.) This is all "legal", you are not representing anyone, and not that hard. 

AND I love Texas because your part of the country is full of fantastic "unwanted" rural land deals! 

Hope that helps!

Jill

So in Arizona you can market a property without a license? As I stated to Dev can you prove it if so?

Originally posted by @Jill DeWit :

@James Sinclair

Are you planning to wholesale for someone else or just buy really really low, pay cash so you own it outright, and then turn around and resell for profit? In a nutshell that is primarily my business model and works great! 

I often sell to other investors who THEN market and sell to the end user. (I am happy with a little profit on a lot of properties.) This is all "legal", you are not representing anyone, and not that hard. 

AND I love Texas because your part of the country is full of fantastic "unwanted" rural land deals! 

Hope that helps!

Jill

Jill right now I am just doing "fix and flips" and am flexable on what I will do next.  I like to understand what is in the water before I jump in.  Wholesaleing a deal may be something I need to know about but I don't have a plan for it yet.  It seems to be a subject where there a lot of opinions but few proveable facts.

Originally posted by @James Hiddle :
Originally posted by @Dev Horn:

This question will result in you being told a bunch of crap by people that have no idea what they are talking about, especially if they don't live here in Texas.

There is no problem - legal or regulatory - with wholesaling in Texas.

So in Texas you can contract a property and market/sell it complete with pics,address,ect to anyone that wants to buy it without a RE license?

If so prove it or can you?

I can't speak for Texas, but according to a past attorney that I worked with for a long time, in Georgia, you can.  A valid contract for real property conveys equitable interest in said property, and with equitable interest, it is legal to advertise the property for sale.

Again, that's just Georgia, and that's just based on what I was told by an attorney.  I'm not one, so I can't provide any personal opinion...

I have caught grief on this site about wholesaling from people.  In all honesty, Ive done a bunch with a bunch of attorneys, and I openly list them as assignments on my tax returns.  That should be enough of an answer I am hoping.  As far as marketing something that you don't own... You aren't if your doing it properly.  Be honest and upfront.  You are selling something that you do own... the contract.  That is yours, and you can sell it.  If I am wrong, there are about 4 dozen RI and MA attorneys that may be getting a call from the Bar Association after this post.

Originally posted by @Jill DeWit :

@James Hiddle

Is there another way? :) Yes. I pay cash. I take title. I have it legally recorded with the appropriate county. 

Great questions! Thanks for your interest! 

-Jill

Yes the other way is getting the property under contract,finding a buyer,marketing the property to said buyer and flipping the contract to that buyer without a license or taking title which is what is being disputed around here.