Hello all. After many hours/weeks of research and communication with members on BP, I decided to go ahead and get my RE license for different reasons that will aid my personal goals in RE investing. I was considering starting out in wholesaling which is why I started research on doing it without a license. Now, whether you operate as a wholesaler with or without a RE license is your business, I'm not here to judge. To each their own. However, in studying for the RE exam, of course I am now being exposed to tons of FL - RE laws, etc and I ran across an interesting piece of information. See below: *****Florida Real Estate License Law requires that an individual who, for another, in Florida , for Compensation* or valuable consideration will need a real estate license if they perform any of the following when dealing with real property: • Appraises • Auctions • Sells • Exchanges • Rents • Negotiates a sale • Advertises or represents as an individual involved in the real estate business, through either oral or written representation • Procures sellers, purchasers, lessors, business enterprises or business opportunities • Closes any transaction which results in or is calculated to result in a sale or exchange and who expects to receive ANY compensation or valuable consideration Real property or real estate means any interest or estate in land, or enterprise or business opportunity, including any assignment, leasehold, sub-leasehold or mineral rights. It does not include a cemetery lot or right of burial in any cemetery; nor does it include the renting of a mobile home lot or recreational vehicle mobile home park or travel park. *Compensation is anything of value, paid, received, or expected to be paid or received or remuneration for services rendered.***** I know many will have different opinions as to what this means, but in my understanding, it seems as though wholesaling without a license is indeed illegal in FL. I understand that many insist, "We are not selling properties, we are selling "equitable interest" in a property to another investor"... Sure, but at the end of the day, you are going into a binding contract with a seller under the "pretense" of an investor/buyer, "knowing" that you are not interested in buying and therefore that constitutes a "Business Opportunity", or "Negotiating of a sale", no? Either way, it does not matter what others do, I am concerned with what I do. But, I would like to hear what others on BP have to say about this as I am new to the entire RE industry. Thanks for sharing your thoughts.

I worked as a wholesaler in the DC area for about 3 years and closed 9 deals in that time. For most of the time, I was unlicensed. I got my license towards the end but found it pretty useless as a wholesaler and never did anything as an agent. I am confused: how does one use one's RE license to wholesale? The whole idea behind wholesaling is that as a wholesaler, you are representing your own interest and not the interest of anyone else in the transaction, not the seller, not the end buyer. As a RE agent, you are representing some other party in the transaction with a legal obligation to work for that person's best interest. You can't do both in the same transaction. Even as a wholesaler with an RE license, you have to make sure the seller and buyer understand that you are not working on their behalf but on your own behalf. As for wholesalers being shady, that is a character trait, not an occupational trait. RE agents can be shady. And getting your RE license in not a substitution for training or a sign of competence in real estate. It means you passed a background check and a test (although I will allow that that does have its own value). If your argument is against lack of training or ethics or both, then your argument is not with wholesalers but with human nature.

Kurt the reality is the real estate laws read the exact same in 99% of the states.. if you did not need a license to put a buyer and seller together for compensation.. there would be no need at all for a real estate industry and or a real estate commission to regulate it all. this is the doing of Guru's and those that want to circumvent the laws.. and or get rich quick as they have been brainwashed into thinking this is the way to start in the industry if you have no money. However as we know this I much more difficult than it appears.. and in some states they are starting to crack down on this.. unleashing Non educated folks into peoples financial lives is never a good thing.. folks get on here and are encourage to start anywhere with no thought as to the potential harm they can do a seller and or buyer.. its one of the most narssistic attitudes I have ever seen. LOL

@Jacob Pereira Close, but not quite. Most people trying to say wholesaling is legal, the typical assignment route, like to quote the above language "for another", and "you're selling your contract, not the property" don't read the full statute. As you'll see below, this is also covered in FS 475.43 475.43 Presumptions.—In all criminal cases, contempt cases, and other cases filed pursuant to this chapter, if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, or such party has maintained an office bearing signs that real estate is for sale, lease, or rental thereat, or has advertised real estate for sale, lease, or rental, generally, or describing property, the title to which was not in such party at the time, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved. And BTW, "most" wholesalers do Not buy the property if they can't find a buyer because they simply don't have the funds to do so.

I am think a lot of good opinions have been expressed. It would be great to have some examples of legal cases that have been prosecuted so that we can see the laws cited in action. I have learned something from this thread that is going to change how I operate as a wholesaler. I am not convinced that I need to be licensed to wholesale by flipping the contract. I don't need a RE license to enter into a purchase contract as a buyer, and I don't need a RE license to sell my contract to someone else for a fee. Based on what I have learned, I do think that when I am looking for an end buyer, I have to be careful of what I say I am selling and how I market it. I don't want to appear to be marketing a house that I don't own. Frankly, I think that would be a pitfall for a licensed agent as well. If marketing a house of which you are not the legal owner (i.e. not on title) is illegal, then that is true of an "unlicensed broker" or a licensed RE agent that does not have a listing agreement with the owner (unless the sales contract is somehow a substitution for the listing agreement - which I cannot see being true since a listing agreement gives an agent permission to list on behalf of the owner and to act in the owner's best interest but in a wholesale transaction, the agent is acting on his own behalf and in his own best interests). Again, I see a lot of arguments about unethical behavior, untrained/naive newbies, "unconscionable profits", etc. that again is not inherent to wholesaling without an RE license but is just the result of bad practices that can be found in any activity/profession. There is a reason that when the DBPR spoke to that REIA, that they could not define a "reasonable" EMD. That is because all EMDs are "reasonable" if the purchase contract that the seller and buyer signs says they are reasonable. The only time that EMD stops being reasonable is when one party challenges the contract in court and presents sufficient evidence to the judge/jury/arbitrator to convince them otherwise. Same goes for "unconscionable profits": it is only unconscionable when a court of law says so. And when it comes to "informed sellers", I encourage every homeowner I deal with to seek advice from the relevant expert (tax expert, RE lawyer, RE agent, psychic/medium, tea leaves, whomever they feel is working in their best interests) on what is best for them in the transaction. I do not advise a homeowner that I am buying from of FMV. I advise them that I am looking to buy the house for my own investment purposes. I am not accepting liability for a seller making the decision to sell based on what I say the property is worth; I can only say what it is worth to me. But again, I would love to see some examples of cases that have been prosecuted and see how the law was actually applied. I think the 3 points of contention are 1. does the sale contract give "equitable interest" 2. acting on one's own behalf vs as an agent for someone else and 3. how one markets for an end buyer. Please let me know if I have missed something in the list.

@Jay Hinrichs that's funny! I suppose it's just the nature of the site with all of the new people that find the site and ask the same sort of questions that we've all seen, along with the same folks being active and/or having keyword searches set up. I'm beginning to get a complex, though. Probably not all that different than how ambulance chasing attorneys, er personal injury attorneys feel.Remember kids, rarely using the words "all", "none", "always", and "never" is a good idea. So few things in life are that easily categorized.To the topic at hand, I'll speak to my experience in Ohio, which is decidedly unfriendly to wholesalers/wholesaling. The biggest issue that gets people in trouble here is advertising. If your buyer's list is small enough or you know it well enough to only market via voice communication, you can probably operate with impunity in the State. If you send out mass emails or post things on (pick your favorite website) with full property details, you'll get really familiar with the Division of Real Estate and not in a good way.There are ways to advertise without running afoul of the folks in Columbus, some of which have been shared on BP in the past. I won't share the other tips I've learned, as it cost me a ton of time and headaches to figure out and it's one of the only barriers to entry in my chosen line of work. It can be done, though.Generally speaking, I'd counsel everyone to remember the truism "If you lie with dogs, you're bound to get fleas." Operate with integrity and surround yourself with people who do the same, and things will have a tendency to work out in your favor. "The arc of the moral universe is long, but it bends toward justice." Don't try to get one over on anyone. Be a good person. Be the type of businessperson that you'd want to do business with. Don't sit on BiggerPockets lumping ALL of anyone into any categories. Just because you don't agree with their chosen line of work doesn't make you any more right than they are. Say something nice about someone you don't agree with.Happy New Year (again)

Hey, another "All Wholesalers Are Crooks" thread that's trending on BP. It wouldn't be a week on BP without one of these with the same cast of characters taking the same sides over and over.Happy New Year.

Might be missing more of the legal points and ethical point; They don't have a valid sale contract because they entered into the contract without the ability or intent to perform under that contract, they are not dealing in good faith and that contract is voidable. Next, the voidable contract is simply a substitute for a listing agreement, the listing agreement being a contract between the owner and an agent. Substitute listing agreement with bogus sale contract and agent with buyer, there you have the reality of what is done. Agent = Straw Man Sale Contract = Contract to control a transaction or Listing Agreement Buyer = Agency Capacity, no intent to buy but to transact business. When you couple these points to our guruized wholesalers learning from the shady types, they probably don't have any real estate business or even a business background, newbies can't value a property properly, they don't understand the risks of tortuous conduct dealing with owners, frankly, they are taught to mislead, hype, advertise property they don't own and use illegal advertising methods to find owners and sure couldn't define equitable interest and legal interest if they had to, which is why they are a public nuisance! You don't need a license in any state to wholesale legally by taking title and then selling it, it's an educational problem and doesn't fit well with the lazy, entitled, shady simple minded folks that try to get into real estate, and those types will always be with us. :)

From my understanding (I'm not a wholesaler), it's legal due to a technicality. A wholesaler doesn't actually find a buyer or seller, what they do is they find a house and then put it under contract. In other words, they make themselves the buyer. After that, they sell off their contract on the house, not the house itself, to another person. It's shady, but at no point are they finding a buyer for the seller or a seller for the buyer, so the wording you listed is circumvented, depending on how you interpret it. If it makes any difference, every serious wholesaler I've ever met has an RE license, so they're obviously aware of how legally tenuous it is.

I love reading the forums, but the sheer amount of wholesaling related posts is getting absolutely absurd. Maybe BiggerPockets should create an offshoot.. call it "SmallerPockets" - A forum for terrible ideas.

As Jay mentioned, all states are very similar in regard to who is required to hold a license. A real estate license may not be the answer for wholesaling the way guru's teach it, you'll have "Net Listing" issues which is illegal in most states but not all, but in all states the National Association of Realtors places net listings in unethical dealing as the Realtor's responsibility is to obtain the highest and best price for the client/owner. I believe in CA you can dance around this issue with certain disclosures and there may be other states as well. Plain and pretty simple, if any wholesaler does an assignment deal and makes significantly more than a Realtor without improving the property in any way, they are just a crook, stealing equity. You'll hear wholesalers try to justify the bigger bucks, nine ways to the moon, but it's a psychological issue doing so, not business, not fair dealing, not the real estate business. All services have a fair value, from digging a ditch to doing brain surgery, it's not about an opinion with justifications. :)

RE wholesaling in Florida is highly illegal?

John Thedford

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

9y

@Wayne Brooks

You hit it on the head. As I have referred to is as "skirting the laws" and you describe it as "circumventing" the laws...THAT is the issue with most of these operators. Why get a license and operate honestly when you can play games? I filed two complaints this week so far--and it isn't over:)

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Bill Gulley I had never heard or seen a EM note until I came to Orygun and they were SOP.. write a note.. get your offer accepted then cash in the note within a few day of acceptance .. and in some instances note was all you needed.. the seller can SUE on the note in Small claims and win easily if its not redeemed as promised.

Although the no money folks your giving them a loaded gun with that one.. I can now see them running out trying to figure this one out.. its hard to scrap up 100 ... bucks but print off notes that's easy.. LOL..

Now our market is so darn hot .. sellers generally and listing agents will advise against them and require bonafide buyer to provide a check with the offer to be cashed in the statutory time frames.

EM in Orygun used to be very small as well.. again a big shock coming from SF were EM even in the 80S were 10 to 50k if you wanted the deal.. here it was common for mr or mrs home owner to write a 500 dollar check on a 200k home.. that was the days of NO money down.. when folks could buy owner occ with little to no down.. they simply did not have it.

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Sekelle O.

Real Estate Investor · Irmo, SC · Member since 2012 · 106 posts · 90 votes

9y

And in Ohio, does having a real estate license mean that you can publicly market a property that you have contracted to purchase as a principal to the transaction?

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

9y

VALUE!

This is something that really needs to be understood by those wanting to be in business, especially the real estate business.

We have different kinds of value in business and economics. intrinsic value, monetary value, market value, book value naming a few. We usually speak of a monetary value in business transactions in the exchange of goods or services for compensation.

All goods in our economy have a relevant value, that is a range of value in terms of money that sets a fair and reasonable price. We have economic laws of supply and demand that effect pricing, but relevant value moves with the market demands. In the January, peaches may cost more than in August.

Laws of substitution also apply in valuations, what a good or service might be valued at is influenced by other goods or services that may be substituted that provide the same or nearly the same benefit.

I can make an apple pie instead of a peach pie, I'll have a desert for dinner, but since apples are cheaper than peaches, it is the best economic choice to enjoy a similar experience with apple pie.

This concept applies and is the basis for establishing a monetary value for all goods and services.

When someone attempts to "value" goods or services far above the pricing range, they are then acting in a predatory manner, they can be acting illegally as well as unethically, attempting to take an undue advantage of another party.

Fair pricing is under the domain of the Federal Trade Commission as well as state laws. It is also a factor in predatory dealing.

We all know and can understand that the price asked for a bottle of cold water in the middle of the desert on a very hot day will be more than the same bottle sold at a local cafe, the price can be higher when there is no or a very limited substitute to address your thirst. But, this is also limited by constraints of value before pricing becomes predatory.

A business that marks up gasoline or generators to 4 or 5 times the usual price after a disaster is predatory dealing, price gouging and is illegal.

This all applies to services as well, the value of any service is subject to the concept of substitution, what the price of a similar service would be by service providers who can provide the similar function and quality of service.

So, now let's get to wholesalers and Realtors.

The basic service function provided by each is to facilitate or cause a property to be sold. The economic law of substitution is alive and very well because both of these actors play the same role, the only difference really is how they conduct themselves to accomplish the same objective.

Perhaps you can see where this is going in line with ethical and legal constraints in pricing for services.

Since we can substitute the services of a Realtor for the services provided by a wholesaler, you need to understand that the price charged by the wholesaler needs to be in line with that of the Realtor.

So, we have an established price range to deal within, what is usual and customary will be acceptable under normal market conditions. Generally we are talking about a 3 to 6 to 10% commission, and that is very applicable as to the fair pricing of the same service.

Now, let's not forget the bottle of water in the desert. a property that is distressed that is not marketable may cost more to dispose of by a Realtor, they will have more advertising, fewer market alternatives and it may require more work. However, a reasonable Realtor's fee is still very relevant before a middle man becomes predatory, stealing equity and taking advantage after a disaster.

So, when you hear that some wholesaler got $10,000 off a deal, look to the sale price, the value of the property, from that you can see if they are attempting to deal ethically and legally.

Another point too, a Realtor is worth more than an unlicensed straw man assigning contracts, the Realtor isn't acting unethical or illegal, they have competency which has been demonstrated by licensing and they are insured as well as bonded in the event they are in error or do something wrong. The typical wholesaler is pretty much a fly by night deal maker with few guarantees, so their value is even less in most cases.

Now, big point......./ when you take title you are no longer providing a service, that means you are no longer under the pricing constraints as a service provider, you're an owner and now you can set the price of the property to its fair market value and profit is viewed differently in that light.

So, fair dealing is absolutely not what gurus preach, whatever the market will bear is not the pricing constraint as to value, supply and demand are already functioning in the fair pricing aspect with any goods or services.

Learn how to close a deal to wholesale it! :)

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Sean Cole I think you and are a lot more alike than not.

back in 1977 I received my CA broker license after my 2 year incubation period.

I was a land guy.. I just sold dirt.. ranch's farms rec properties in Napa Sonoma Mendo and Lake counties ... and I doubled ended everything I ever did.. I never co opt any property.. Agents could not find them half the time.. there are few agents that specialize in ranch's and such and we are very much like a commercial broker who double ends all their deals.

So I was working on some deals in the mountains above Silicon valley.. Los Gatos Saratoga etc.

high priced dirt even back then.. but I wanted access to MLS to see other dirt available I did not mind selling others listings.. but I always double ended my own.

Well the MLS said you can only join MLS is you join the board.. I told them I don't want to join the board. and there had been a court case were someone before me won.. and I had to have my attorney write the board a letter and say they could not force me to do this.. and I won that one..

I did not join NAR until I came to Orygun.. these guys force you.. if your whole office does not join they won't give you MLS and of course these are retail agents so they need it.. and its only 550 a year so for me no sweat.. but nothing I really work with ...

The only difference I suppose between myself personally is I simply don't assign contracts I buy what I contract for. other than the above stated subdivision plats that I have done pass through deals to DR and lennar and Schollander ( won Olympic medal in swimming and became a big builder here).. those deals have always been mid to high 6 figure profits.. BUT.. I put up decent EM and spent usually right at 100k or more risk money getting entitilements...

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Sekelle O.

Real Estate Investor · Irmo, SC · Member since 2012 · 106 posts · 90 votes

9y

Originally posted by @John Thedford:

@Wayne Brooks

You hit it on the head. As I have referred to is as "skirting the laws" and you describe it as "circumventing" the laws...THAT is the issue with most of these operators. Why get a license and operate honestly when you can play games? I filed two complaints this week so far--and it isn't over:)

What exactly is "circumventing the law"? Is that breaking the law or not breaking the law?

Also, when you ask "Why get a license and operate honestly when you can play games?" again you are implying that you cannot operate honestly unless you have a license, and that those with licenses do not play games. As I have said before, ethical behavior is not attached to getting a license. You can be ethical with or without one.

1 Reply

Sekelle O.

Real Estate Investor · Irmo, SC · Member since 2012 · 106 posts · 90 votes

9y

@Bill Gulley That is a very interesting point to say that a wholesaler's fee should be in line with what a Realtor makes. Can you point me to the case law or other law/regulation that supports that?

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Sean Cole

Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes

9y

Originally posted by @Sekelle O.:

And in Ohio, does having a real estate license mean that you can publicly market a property that you have contracted to purchase as a principal to the transaction?

Nope. However, not having a license doesn't prevent the Division from claiming jurisdiction over your activities. I don't have my license for any other reason than collecting commissions on deals I was already doing and letting someone else take the free money. Well, not the only reason, but it was the only reason I had when I started taking classes.

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Sean Cole

Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes

9y

Originally posted by @Jay Hinrichs:

@Sean Cole I think you and are a lot more alike than not.

back in 1977 I received my CA broker license after my 2 year incubation period.

I was a land guy.. I just sold dirt.. ranch's farms rec properties in Napa Sonoma Mendo and Lake counties ... and I doubled ended everything I ever did.. I never co opt any property.. Agents could not find them half the time.. there are few agents that specialize in ranch's and such and we are very much like a commercial broker who double ends all their deals.

So I was working on some deals in the mountains above Silicon valley.. Los Gatos Saratoga etc.

high priced dirt even back then.. but I wanted access to MLS to see other dirt available I did not mind selling others listings.. but I always double ended my own.

Well the MLS said you can only join MLS is you join the board.. I told them I don't want to join the board. and there had been a court case were someone before me won.. and I had to have my attorney write the board a letter and say they could not force me to do this.. and I won that one..

I did not join NAR until I came to Orygun.. these guys force you.. if your whole office does not join they won't give you MLS and of course these are retail agents so they need it.. and its only 550 a year so for me no sweat.. but nothing I really work with ...

The only difference I suppose between myself personally is I simply don't assign contracts I buy what I contract for. other than the above stated subdivision plats that I have done pass through deals to DR and lennar and Schollander ( won Olympic medal in swimming and became a big builder here).. those deals have always been mid to high 6 figure profits.. BUT.. I put up decent EM and spent usually right at 100k or more risk money getting entitilements...

I'm sorry if my posts have come across counter to my intentions. I enjoy reading your posts here on BP and find you to be thoughtful and respectful. I think that we're on the same side of the coin re: wholesaling, maybe just different areas on that side.

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Mike CumbieBusiness Member

REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes

9y

@Sekelle O.

"What exactly is "circumventing the law"? Is that breaking the law or not breaking the law? "

Say you have to be licensed to fix brakes on a car (pass a test and get certified), unless it's your own car. Now you bring your car to me and sell it to me for $1, then I fix the brakes and sell it back for $80 is that "breaking the law"?

It all works well until the brakes fail, then is the judge going to say "It wasn't illegal?", is a jury of peers? is a prosecutor? The family of the 12 year old ran over?

As I have said many times I have zero problem with Wholesalers. To be honest I think the "guru equitable interest" ones that are new do more for keeping the commission structure like it is than the NAR does. Just by shining light on it to regulators.

I am all for people running their business how they see fit, to save $300 in getting a license, the risk must be worth it. and if it is, go that route.

0 Reply

Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

9y

Originally posted by @Sekelle O.:

Originally posted by @John Thedford:

@Wayne Brooks

You hit it on the head. As I have referred to is as "skirting the laws" and you describe it as "circumventing" the laws...THAT is the issue with most of these operators. Why get a license and operate honestly when you can play games? I filed two complaints this week so far--and it isn't over:)

What exactly is "circumventing the law"? Is that breaking the law or not breaking the law?

Also, when you ask "Why get a license and operate honestly when you can play games?" again you are implying that you cannot operate honestly unless you have a license, and that those with licenses do not play games. As I have said before, ethical behavior is not attached to getting a license. You can be ethical with or without one.

The key word in this is "trying" to circumvent the law, which the FL statute quoted before addresses. Personally, I don't really care if wholesaling is deemed legal, or illegal.....it's just the manner in which the individual operates. A wholesaler tying up someone's property who is facing foreclosure, or really needs to sell for some other reason, and making that person believe their house is actually sold only to have the wholesaler walk away later because they couldn't flip it, thereby not giving the homeowner time to sell it to a real buyer before their foreclosure, are the worst offenders to me. This is often the case with wholesalers trying to flip short sales, and pre foreclosures in general.

1 Reply

Sekelle O.

Real Estate Investor · Irmo, SC · Member since 2012 · 106 posts · 90 votes

9y

Originally posted by @Sean Cole:

Originally posted by @Sekelle O.:

And in Ohio, does having a real estate license mean that you can publicly market a property that you have contracted to purchase as a principal to the transaction?

Nope. However, not having a license doesn't prevent the Division from claiming jurisdiction over your activities. I don't have my license for any other reason than collecting commissions on deals I was already doing and letting someone else take the free money. Well, not the only reason, but it was the only reason I had when I started taking classes.

I guess that answers the question of needing a license for wholesaling to be legal, at least in Ohio, It sounds to me that the crux of the matter is in how you market your contract, licensed or not licensed. The general theme of this thread has been that wholesalers marketing a property for sale without a license are doing so illegally, but that if they had a license, then it would be legal. Not in Ohio, apparently.

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

9y

@Sekelle O. you remind me very much of another member who use to be very active on BP and who constantly asked for "case law". Without legal training the average person cannot really interpret case law findings, other than Willy got fined for false advertising.

Where you need to look is in business law, contract law, what is required to have a legal, binding contract between the parties. Basic business law, if your contract is not valid it cannot be enforced, if it can't be enforced it doesn't give you any benefit at law or in equity. Ya got noth'n!

Let me point you to fair dealing, predatory dealing, what constitutes value and taking undue advantage in contracting. These are basic legal and economic rules of business. They are not an opinion, such is not based on any personal belief as to someone being fair, the base line is what is usual and customary, the value exchanged, the conduct of the parties and the legal purpose.

Often, we go by the old, get whatever you can get, but that is really in dealing with personal property. Personal property is not unique by definition, it can be replaced, it can be destroyed and rendered useless easily, it wears out, it can be moved from one place to another, it might be more difficult for another owner to enjoy or benefit from the same asset.

Real property has none of those aspects, investors and operators need to understand the difference between real and personal property, that is the foundation of how we are to deal in real property differently than widgets of personal property.

I'll also say, you can have an invalid contract, so long as both parties agree to the arrangement a transaction may still be accomplished, without objection. A real estate contract is nothing more than a written agreement to facilitate or guide the parties to a settlement, if they close the deal is perfected of done.

The issue of an assigned contract is that the buyer acquiring that assigned contract probably is not aware they are getting an invalid voidable contract, they are relying on the contract being good and enforceable, the seller of that contract is touching on fraud if they represent that contract as being made in good faith and enforceable.

One of the most exasperating things about BP and public forums is the layperson spouting off unqualified interpretations of law or legal principles based on what they have heard or believe. There is a reason Attorneys go to law school, why some professions require more formal legal training, such as Accountants, CPAs, Insurance Agents, Real Estate Brokers, Settlement Agents, Trust Officers, Securities Brokers, Investigators, Regulators and Law Enforcement Officers. No one really tops that list like an Attorney admitted to the Bar being responsible for the advice they give.

The best advice I can give is for folks to stop assuming they know, or can study on their own in depth an seek the opinion of an attorney. I'm not an attorney, but having taught business law from text, being trained in each aspect mentioned above professionally, especially in regulatory matters, I just try to give an opinion based on experience as well as my training......but I'm not an attorney, so find one! :)

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Sekelle O.

Real Estate Investor · Irmo, SC · Member since 2012 · 106 posts · 90 votes

9y

Originally posted by :

@Bill Gulley

... I just try to give an opinion based on experience as well as my training......but I'm not an attorney, so find one! :)

Can't argue with that. :)

0 Reply

Rod Desinord

Real Estate Agent · Pompano Beach, FL · Member since 2015 · 249 posts · 73 votes

9y

When in doubt consult an attorney. Not worth getting arrested for some b.s

1 Reply

Kurt Charles

OP

Winter Park, FL · Member since 2016 · 40 posts · 26 votes

9y

@Bill Gulley . Thanks a lot for such a plethora of good information.

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Kurt Charles

OP

Winter Park, FL · Member since 2016 · 40 posts · 26 votes

9y

@Sekelle O. I think the main issue is that many people are wholesaling without an RE license everyday, and many cannot fulfill their promise to the seller, leaving them stranded and wasting their time, etc when they could have found true buyers elsewhere. This is a big problem should an unlicensed broker be reported to law makers.

Should one ever get litigated, can they prove in a court of law that they had 'real true intent' or 'financial ability' to purchase the property in the first place, may be an issue. This is where I believe making a reasonable EMD comes into play, an EMD that can offset any potential litigation for practicing illegal wholesaling. An EMD that is agreed upon by both seller and unlicensed wholesaler. But in any case, a judge may still want proof of ability to have been able to purchase the property. I am not a lawyer and have no real life cases as an example. These are my 'opinions' from my own research.

It's a fine line and everyone needs to know what they are doing and how they are doing it, because there are too many different opinions, which leaves one to do their own thorough research and come to conclusions that make sense to them and that they feel comfortable with. All risk is on each individual.

Personally, I like to do things by the law, that is the only way to ever truly get wealthy in the USA, in my opinion without repercussions. Besides, by getting the RE license, I will get fully educated on all laws regarding RE in FL and I will have WAY more options in every direction to MAKE MORE MONEY than just being an unlicensed wholesaler.

Thanks for your contributions.

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Marty True

Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes

9y

Not sure if this was mentioned as I didn't read every post in the 4 pages... but there IS another way to wholesale legally, without a license, however it isn't going to be in line with what most wholesalers are doing because it does involve having some money.

By using a transactional lender and actually closing on a deal, you can then legally turn the property around immediately - whether in a same-day double closing or a 1-3 day back-to-back closing. So if you score a property at a "wholesale" price (say $100k), worth $150k, then you turn right around and sell it to another investor for $110k - then that is a legal wholesale deal.

While I agree with most of what is said about wholesaling being done illegally, without a license. I don't agree with those that say a wholesaler is "bad" for trying to get a property for a deep discount and "realtors try to get the highest price for the seller". Well, investors are not realtors and even a buy-and-hold investor is always trying to buy low. Heck, even a retail buyer is going to try and get the lowest price possible. Honestly, the realtors are only trying to "get the highest price possible" because it means their commission will be higher. Let's not paint a picture that most realtors are just wanting to make the seller as much money as possible - there is a juicy commission tied to "highest possible price". And that's okay...

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John Thedford

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

9y

@Marty True

You are correct about transaction funding. However, you don't understand about being an agent, fiduciary duty, etc. Unlicensed brokers only represent themselves and will take very dime they can chisel out of the deal. Licensed agents taking a listing have a duty to disclose, skill, care, and diligence, etc. One of the top ten reasons agents get sued is misrepresentation of value. Unlicensed brokers have no duty to other than themselves, can make all the misrepresentations they want or need, and have no accountability. It has nothing to do with "getting the highest price" to increase their commission. When a seller calls wanting to list their house they want to know "what it is worth". This is where an agent is BOUND to give honest advice, showing skill, care, and diligence, etc. Agents can be sued, fined, and have their licenses either suspended or revoked. Unlicensed agents have NO accountability. I have seen LOTS of people victimized by them with no little to no recourse. Add to that the many ones operating illegally, and there is NO comparison.

An investor can be an agent. An agent can be an investor. As long as their motives are clear, and the customer is NOT misled, then I am OK with that. Anyone misleading people....agent, investor...unlicensed broker...they are all bad for the industry. What many people don't understand is that getting a good deal does NOT require trickery, deceit, dishonesty....etc.

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Marty True

Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes

9y

@John Thedford

Yes, I agree about people getting into REI and using trickery and deceit to "make money without spending any". And I agree that realtors provide a myriad of services and bring a wealth of knowledge to the transaction - not discounting their skill or purpose. My comment was strictly in contrast to other comments I read that "wholesalers try to get the seller to go as low as they can while realtors try to get the seller the highest they can..."

There are many situations where off-market wholesale deals are created out of thin air simply because an investor may know someone that has a "real estate problem" and creating win-win solutions helps everyone. So in those cases, the "wholesaler" isn't taking advantage of the seller like some posts read.

I'm not a wholesaler myself but I do think that if done legally, there's nothing wrong with buying at a wholesale price and selling at wholesale-plus or retail. This doesn't mean that anyone was taken advantage of.

I know you're a huge advocate of "get a license" and I don't disagree, if you're going to be performing any actions that fall under the licensing requirements. Just my 2 cents of how wholesaling can be done legally, without one.

3 Reply

James Barnhart

Rental Property Investor · Ocala, FL · Member since 2016 · 226 posts · 140 votes

9y

Interesting.... Well, there sure are a LOT of people wholesaling. And, many comments on BP say that it's a good way for newbies to get into the RE investing business.

Now, i am wondering if doing a lease/option with a property owner, and then as the leasee, doing a lease option with a prospective renter is legal. (a sandwich lease).

Do you need to have a RE license to do that?

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John Thedford

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

9y

@James Barnhart

Lots of those unlicensed brokers will find a PROFITABLE line of work in a few months:)
Sandwich leases may be legal but there can be pitfalls...best talk to a good attorney.
My advice: just buy and hold! Fewer potential problems and if done correctly that property will pay you till the day you sell or pass.

0 Reply

Marty True

Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes

9y

Hey @James Barnhart - yeah the "wholesaling is illegal" conversation has been beat to death on here. Unfortunately, as many posts also state, it is the gurus that are creating much of the mess. The latest "courses" and "webinars" are luring people into REI with bad information on wholesaling and teaching people how to basically break the law.

Sandwich leases are legal as long as the paperwork is done properly and with the advice of your real estate attorney. They can be done improperly, just like any other strategy, but done the right way, you do not have to be licensed.

Disclaimer: I am not an attorney and my opinions are not legal advice.

1 Reply

Ned CareyPro Member

Moderator

Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

9y

@James Barnhart one of your posts above seems to indicate that without an Appropriate EMD a contract may not be valid. I have never found an attorney that could answer this question. Is an EMD even necessary to form a contract?

Why is the promise of a seller to sell at a given price and terms valid consideration yet the promise to buy at a given price and terms not just as valid consideration in return? In all my laypersons study of contract law and consideration, an "earnest money deposit" has never been mentioned. Even within the context of agent licensing classes.

From Nolo Press Website

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Kevin Scott

Flipper / Buyer · Tacoma, WA · Member since 2013 · 160 posts · 80 votes

9y

Here's the thing. There is a misunderstanding of 475.43 stated above. (This of course is an opinion but most states have similar verbage including Washington State which I've given this same response) It does not forbid assigning contracts. Sure the intent should be to close and its probably best to just close first and resell (wholesale) at a discount if that's what you want to do instead of selling full retail. But there is nothing in that law that says you can't assign. It actually gives rules to abide by if you want to assign your contract.

"however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved."

The however gives you right to assign. Similar to Washington. Contracts become unconditional at the point where conditions have been met. To avoid any confusion just make the contracts unconditional from the beginning. This shows full intent to close. If you don't close just forfeit your earnest money.

Sure intending just to assign your contract is should be considered brokering but anyone can get a loan these days for a property that is under contract at the right price so having the means to close is easy to prove. Its the intent. The law hasn't gone so far as to punish someone that thought they could close by not allowing them to assign their contract if everything goes bad (that hurts the seller and buyer) or for that matter it still allows someone who decides to sell their contract for a better price on occasion that they have a strong network.

The main thing is that people that wholesale (this is what they should call themselves vs wholesalers) should always have this as an option. They should buy intending to close but if they have a quick option so to sell their c

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RE wholesaling in Florida is highly illegal?

RE wholesaling in Florida is highly illegal?

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