"Wholesaling" without a real estate license?
Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes
"Wholesaling" without a real estate license?
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Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
10y@Account Closed hit the nail on the head. The key is "equitable interest"...as in, you can't market a property you don't have "equitable interest" in without a license.
Disclaimer...I'm not a lawyer. This isn't legal advice. Check the laws in your state.
Unless it's already disallowed by law in your state, as a wholesaler, you gain equitable interest by having an effective (signed by both buyer and seller) sales contract with EMD attached. Then, as a wholesaler, you ARE NOT selling the property, you are selling your contract. Period.
There are a lot of people on this site who are likely to jump in and start the wholesale bashing. There are good wholesalers and bad wholesalers, just like good and bad licensed agents. Sell what you own. You own the contract. You paid for the right to the contract. It's a lot like an NFL team trading (selling) a draft pick. If I hold the #1 overall pick and don't believe there is a fit for my team at #1. I can sell that draft pick for your lower #1, plus your #2, #3 and your #1 next year. I didn't sell the player. I don't own a player. I sold what I own...the pick.
18 Replies
- Real Estate Professional · Dayton, OH · Member since 2015 · 423 posts · 187 votes10y
You need a license when you are representing someone else in a real estate transaction and have no interest in it yourself.
You don't need a license to sell your own property or a property in which you have some ownership interest.
A lot of realtors or people who hold licenses bad mouth wholesaling and scare people into thinking it is illegal. My theory is that their ultimate goal is to get state laws passed so that you have to have someone with a license involved in any transaction whether you are an owner or not.
That's freeloading in my book. If a licensed agent wants a commission, go out and earn it. Getting state laws passed to force me to use a licensed agent or hold a license "just because" to add cost and no value, or take a piece of something that isn't yours is not earning.
- Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes10y
Absolutely. Thanks for your input!
I'm more than anything looking how to possibly structure my "Wholesaling," Essentially I just want to get paid for finding deals, What do you think that would look like?
- Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes10y
@Account Closed hit the nail on the head. The key is "equitable interest"...as in, you can't market a property you don't have "equitable interest" in without a license.
Disclaimer...I'm not a lawyer. This isn't legal advice. Check the laws in your state.
Unless it's already disallowed by law in your state, as a wholesaler, you gain equitable interest by having an effective (signed by both buyer and seller) sales contract with EMD attached. Then, as a wholesaler, you ARE NOT selling the property, you are selling your contract. Period.
There are a lot of people on this site who are likely to jump in and start the wholesale bashing. There are good wholesalers and bad wholesalers, just like good and bad licensed agents. Sell what you own. You own the contract. You paid for the right to the contract. It's a lot like an NFL team trading (selling) a draft pick. If I hold the #1 overall pick and don't believe there is a fit for my team at #1. I can sell that draft pick for your lower #1, plus your #2, #3 and your #1 next year. I didn't sell the player. I don't own a player. I sold what I own...the pick.
- Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes10y
Originally posted by @Frank Eimiller:
Absolutely. Thanks for your input!
I'm more than anything looking how to possibly structure my "Wholesaling," Essentially I just want to get paid for finding deals, What do you think that would look like?
That's what is known as "being a bird-dog": you find a deal for someone else. If they are successful at offering and closing on it, they can bury your "bird dog" fee in certain expenses paid from buyer funds at closing on the HUD-1 (or its successor).
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict - Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes10y
Originally posted by @Hattie Dizmond:
@Account Closed hit the nail on the head. The key is "equitable interest"...as in, you can't market a property you don't have "equitable interest" in without a license.
Disclaimer...I'm not a lawyer. This isn't legal advice. Check the laws in your state.
Unless it's already disallowed by law in your state, as a wholesaler, you gain equitable interest by having an effective (signed by both buyer and seller) sales contract with EMD attached. Then, as a wholesaler, you ARE NOT selling the property, you are selling your contract. Period.
There are a lot of people on this site who are likely to jump in and start the wholesale bashing. There are good wholesalers and bad wholesalers, just like good and bad licensed agents. Sell what you own. You own the contract. You paid for the right to the contract. It's a lot like an NFL team trading (selling) a draft pick. If I hold the #1 overall pick and don't believe there is a fit for my team at #1. I can sell that draft pick for your lower #1, plus your #2, #3 and your #1 next year. I didn't sell the player. I don't own a player. I sold what I own...the pick.
Thanks for chiming in, that's a really good analogy!
I don't think bashing this situation like you said is completely fair-- I was at the Y and someone was telling me about a property they just having sitting, nobody is marketing to this market, who knows how many people live out of state, etc with houses just sitting.
Without going to far into it or getting a license (i don't intend to) maybe I should just work with my broker and try to work out finder fees? Essentially i'll just be doing marketing for him? Just tossing around ideas! Hopefully nobody gets offended by how "green" I am to the subject haha.
- Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes10y
Originally posted by @David Dachtera:
Originally posted by @Frank Eimiller:
Absolutely. Thanks for your input!
I'm more than anything looking how to possibly structure my "Wholesaling," Essentially I just want to get paid for finding deals, What do you think that would look like?
That's what is known as "being a bird-dog": you find a deal for someone else. If they are successful at offering and closing on it, they can bury your "bird dog" fee in certain expenses paid from buyer funds at closing on the HUD-1 (or its successor).
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ BenedictAs a bird dog could I write or track down owners and just inquire information about their property then refer them to my broker friends? I assume from what others are saying I can't outright tell them I'm "going to pay cash and close quickly?"
Thanks for joining the discussion!
- Real Estate Professional · Dayton, OH · Member since 2015 · 423 posts · 187 votes10y
Originally posted by @Frank Eimiller:
Originally posted by @Hattie Dizmond:
@Account Closed hit the nail on the head. The key is "equitable interest"...as in, you can't market a property you don't have "equitable interest" in without a license.
Disclaimer...I'm not a lawyer. This isn't legal advice. Check the laws in your state.
Unless it's already disallowed by law in your state, as a wholesaler, you gain equitable interest by having an effective (signed by both buyer and seller) sales contract with EMD attached. Then, as a wholesaler, you ARE NOT selling the property, you are selling your contract. Period.
There are a lot of people on this site who are likely to jump in and start the wholesale bashing. There are good wholesalers and bad wholesalers, just like good and bad licensed agents. Sell what you own. You own the contract. You paid for the right to the contract. It's a lot like an NFL team trading (selling) a draft pick. If I hold the #1 overall pick and don't believe there is a fit for my team at #1. I can sell that draft pick for your lower #1, plus your #2, #3 and your #1 next year. I didn't sell the player. I don't own a player. I sold what I own...the pick.
Thanks for chiming in, that's a really good analogy!
I don't think bashing this situation like you said is completely fair-- I was at the Y and someone was telling me about a property they just having sitting, nobody is marketing to this market, who knows how many people live out of state, etc with houses just sitting.
Without going to far into it or getting a license (i don't intend to) maybe I should just work with my broker and try to work out finder fees? Essentially i'll just be doing marketing for him? Just tossing around ideas! Hopefully nobody gets offended by how "green" I am to the subject haha.
Your broker will not pay you a finder's fee because you are not licensed. In fact, he can't by law (at least in Ohio).
You are better off working this deal with an experienced wholesaler if you want to get paid.
- Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes10y
Originally posted by @Account Closed:
Originally posted by @Frank Eimiller:
Originally posted by @Hattie Dizmond:
@Account Closed hit the nail on the head. The key is "equitable interest"...as in, you can't market a property you don't have "equitable interest" in without a license.
Disclaimer...I'm not a lawyer. This isn't legal advice. Check the laws in your state.
Unless it's already disallowed by law in your state, as a wholesaler, you gain equitable interest by having an effective (signed by both buyer and seller) sales contract with EMD attached. Then, as a wholesaler, you ARE NOT selling the property, you are selling your contract. Period.
There are a lot of people on this site who are likely to jump in and start the wholesale bashing. There are good wholesalers and bad wholesalers, just like good and bad licensed agents. Sell what you own. You own the contract. You paid for the right to the contract. It's a lot like an NFL team trading (selling) a draft pick. If I hold the #1 overall pick and don't believe there is a fit for my team at #1. I can sell that draft pick for your lower #1, plus your #2, #3 and your #1 next year. I didn't sell the player. I don't own a player. I sold what I own...the pick.
Thanks for chiming in, that's a really good analogy!
I don't think bashing this situation like you said is completely fair-- I was at the Y and someone was telling me about a property they just having sitting, nobody is marketing to this market, who knows how many people live out of state, etc with houses just sitting.
Without going to far into it or getting a license (i don't intend to) maybe I should just work with my broker and try to work out finder fees? Essentially i'll just be doing marketing for him? Just tossing around ideas! Hopefully nobody gets offended by how "green" I am to the subject haha.
Your broker will not pay you a finder's fee because you are not licensed. In fact, he can't by law (at least in Ohio).
You are better off working this deal with an experienced wholesaler if you want to get paid.
Awesome. Thanks Rod
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Frank Eimiller @Account Closed
Frank we had this discussion particular to WI last year.. I took Rod's position that anyone can sell any property that they OWN or have title to without a realtor.. I was then summarily corrected by Wisconsin professionals who state you need a license agent regardless.
I had never heard that before.. and this has nothing to do with swapping contracts but actually advertising and selling homes whether you own them or take the quasi equitable ownership argument.
I would simply contact your State Department of Real estate and get clarification.. this could very easily be why you see no bandit signs etc.
Rod,, As for anti wholesaling being a commie plot of the RE brokers can't agree with that one.. Most brokers I know and I is one.. could give a rip about wholesalers they are so far and few between in our market as to not be relevant.. there are a few very big one's here in PDX but they are licensed brokers as well who happen to wholesale.
- Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes10y
Originally posted by @Frank Eimiller:
Originally posted by @David Dachtera:
Originally posted by @Frank Eimiller:
Absolutely. Thanks for your input!
I'm more than anything looking how to possibly structure my "Wholesaling," Essentially I just want to get paid for finding deals, What do you think that would look like?
That's what is known as "being a bird-dog": you find a deal for someone else. If they are successful at offering and closing on it, they can bury your "bird dog" fee in certain expenses paid from buyer funds at closing on the HUD-1 (or its successor).
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ BenedictAs a bird dog could I write or track down owners and just inquire information about their property then refer them to my broker friends? I assume from what others are saying I can't outright tell them I'm "going to pay cash and close quickly?"
Thanks for joining the discussion!
As a bird dog, you wouldn't necessarily approach the seller - that's your buyer's job.
As a wholesaler, you can only make claims that you know your buyer can fulfill. That means you aren't "speculating". If you put a property under contract, you are "filling an order" for a buyer who has told you what they will buy. It also means you disclose up front to the seller that you reserve the right to sell your purchase contract to someone else who will then take the deal thru to closing. Full disclosure always - no "surprises".
On the subject of wholesaling and licensure, by the way, there is a realtor in the Chicago area who advertises that if they can't find a buyer on your terms they will buy your house. Now, I don't actually know, but I will speculate that this agent will put the seller's house under contract then market that contract to their stable of buyers.
Outside of that, I've never actually heard of an agent or broker buying properties for resale, though I'm sure it actually happens occasionally - just not as a matter of practice.
The whole question of licensing for wholesaling seems to be a legal grey-area, especially when one gets a MLS-listed property under contract with the intention of then selling that contract to another person/party. The State of Ohio is notorious for using the courts this way to clamp down on the various abuses in the wholesaling realm.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict - Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes10yI have no issue with wholesaling, I am a broker, and have no interest in defending my license, Wisconsin law says if you sell more that 3 in 5 years or 5 in 10 years you need a license, how ever I don't know who enforces it. And FYI there are several "We Buy Houses" guys in The Fondy area, I worked and lived there for 10 years until a year ago. But there is a market, but margins will be small.
Originally posted by @Account Closed:
You need a license when you are representing someone else in a real estate transaction and have no interest in it yourself.
You don't need a license to sell your own property or a property in which you have some ownership interest.
A lot of realtors or people who hold licenses bad mouth wholesaling and scare people into thinking it is illegal. My theory is that their ultimate goal is to get state laws passed so that you have to have someone with a license involved in any transaction whether you are an owner or not.
That's freeloading in my book. If a licensed agent wants a commission, go out and earn it. Getting state laws passed to force me to use a licensed agent or hold a license "just because" to add cost and no value, or take a piece of something that isn't yours is not earning.
Great post, Rod! Wholesaling is the purchase of a property via a contract (or option), and then assigning the your interest to another buyer. That is not an activity which requires a real estate salesperson's license.
- Real Estate Broker · Chicago, IL · Member since 2014 · 3k+ posts · 1k+ votes10y
Originally posted by @Frank Eimiller:
How can someone wholesale without a real estate license?
- Put the property you want to sell under a legal binding contract.
- Assign the contract to another buyer for a fee or
- Close on the property. Unless there's a deed restriction you can immediately sell it (called a double close) or hold it for a while then sell it w/o making any improvements
Put the term wholesaling aside.
- Put the property you want to sell under a legal binding contract.
- Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes10y
Originally posted by @Crystal Smith:
Originally posted by @Frank Eimiller:
How can someone wholesale without a real estate license?
- Put the property you want to sell under a legal binding contract.
- Assign the contract to another buyer for a fee or
- Close on the property. Unless there's a deed restriction you can immediately sell it (called a double close) or hold it for a while then sell it w/o making any improvements
Put the term wholesaling aside.
Interesting, thank you for the post! I thought wholesaling was exactly those things-- maybe i was confused
In your state, that entire process is legal w/out a real estate license?
- Put the property you want to sell under a legal binding contract.
- Investor · Madison, WI · Member since 2015 · 17 posts · 6 votes10y
Originally posted by @Scott Schultz:
I have no issue with wholesaling, I am a broker, and have no interest in defending my license, Wisconsin law says if you sell more that 3 in 5 years or 5 in 10 years you need a license, how ever I don't know who enforces it. And FYI there are several "We Buy Houses" guys in The Fondy area, I worked and lived there for 10 years until a year ago. But there is a market, but margins will be small.
The numbers given are not exactly accurate. Earlier this week I passed the Real Estate License exam, so I have been studying the most recent rules.
In Wisconsin making five (5) sales in one (1) year, or ten (10) sales in five (5) years is presumptive evidence of the need to have a Broker's license.
- Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes10yChristopher Patterson thanks, I wasn't aware of the change.
- Real Estate Sales/Leasing Agent · Cleveland, OH · Member since 2016 · 24 posts · 4 votes10y
Originally posted by @Christopher Patterson:
Originally posted by @Scott Schultz:
I have no issue with wholesaling, I am a broker, and have no interest in defending my license, Wisconsin law says if you sell more that 3 in 5 years or 5 in 10 years you need a license, how ever I don't know who enforces it. And FYI there are several "We Buy Houses" guys in The Fondy area, I worked and lived there for 10 years until a year ago. But there is a market, but margins will be small.
The numbers given are not exactly accurate. Earlier this week I passed the Real Estate License exam, so I have been studying the most recent rules.
In Wisconsin making five (5) sales in one (1) year, or ten (10) sales in five (5) years is presumptive evidence of the need to have a Broker's license.
Congratulations on passing the exam. I will be taking mine next week.
If my non-licensed real estate company obtains an option to purchase a property, can my company then market the property for sale?
Also, I have my license and do not have any interest in putting this property on the MLS for various reasons.
If I can sell the house for more than appraised value (which is my option amount), I am entitled to keep the difference.
I suppose I can't market it as FSBO, since I don't own it. What's the best way to market this property I have an option to buy?
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