Real Estate Broker 路 Naples, FL 路 Member since 2013 路 9k+ posts 路 6k+ votes
Just got a call from DBPR. That is the Department of Business and Professional Regulation in Florida. They regulate licensed and unlicensed activities. Their call was in relation to an unlicensed broker complaint I filed. The complaint has been deemed "legally sufficient" and is being turned over to their attorneys. Generally speaking, a first offense will result in a cease and desist unless the violation was flagrant, etc.
HOW DO YOU "WHOLESALE" LEGALLY IN FLORIDA? There are ONLY TWO WAYS. The gurus teaching this tactic, as well as many people on BP promoting "wholesaling" are NOT familiar with FL laws.
You have TWO WAYS to operate LEGALLY... 1. purchase the property and then resell. I personally prefer to call this "flipping" 2. be licensed!
Any other method of operation, specifically using contracts to broker as a means to circumvent license law is NOT legal. This man was using contracts and advertising properties he did now own:
As to DBPR stating BP is a "hotspot" of illegal activities, I would not be surprised if they didn't occasionally peruse the site looking for people operating illegally.
The relevant statute is 475.43 for those wishing to learn more.
The national association of realtors is a cartel in some respects. And it does what cartels do, lobbying to for licensing laws to limit competition--for the "benefit of consumers," of course.
I take your word for it, @John Thedford, that it is illegal to wholesale without a license in Florida. But let's not pretend that this is the moral high ground. It is just a legal fact. There are plenty of shady realtors.
I'm not really sure if this is Uber vs. Taxi driver. Even Uber requires you to have background checks, not carry weapons, drug & alcohol policy, etc. Wholesaling is a total free-for-all. This is really closer to Taxi Driver vs. strange guy who pulls up to the curb at the club at 2 AM, asking girls if they need a ride home, and oh by the way can they front him a fiver for some gas?
JD--I always get a chuckle out of your humor...!~!~!
I'm not really sure if this is Uber vs. Taxi driver. Even Uber requires you to have background checks, not carry weapons, drug & alcohol policy, etc. Wholesaling is a total free-for-all. This is really closer to Taxi Driver vs. strange guy who pulls up to the curb at the club at 2 AM, asking girls if they need a ride home, and oh by the way can they front him a fiver for some gas?
JD--I always get a chuckle out of your humor...!~!~!
Wholesalers give you a lot of material to work with 馃榿
I'm not really sure if this is Uber vs. Taxi driver. Even Uber requires you to have background checks, not carry weapons, drug & alcohol policy, etc. Wholesaling is a total free-for-all. This is really closer to Taxi Driver vs. strange guy who pulls up to the curb at the club at 2 AM, asking girls if they need a ride home, and oh by the way can they front him a fiver for some gas?
JD--I always get a chuckle out of your humor...!~!~!
Wholesalers give you a lot of material to work with 馃榿
Yes sir. Rumor has it I won't be invited to the BP unlicensed brokers Christmas party this year:) SAD TO SAY...scroll back up and check out the FRAUD claiming he is licensed. I don't make this stuff up:) He removed his post on the other thread where he encouraged me to report him. I had already beat him to the punch so to speak:)
I got no skin in this game, I'm not a wholesaler. I just call it how I see it, licensure laws are not there to protect anyone but the ingrained institutions who paid to have them passed.
Hotel regs prevent competition with airbnb, taxi regs with uber, ...
Got that one backwards - - we've had Hotels and Lodging business model from time immemorial while all the STRs are a new business model which adversely effects residential zoned home owners.
The Newest player on the field will be the one disturbing the playground. New is not always progress or better.
I know real estate brokers who flip property on a monthly basis, AND ARE NOT brokering the property. They are acting as "Investors" (and disclose such in the contract), BUT never take title. They "ASSIGN" the contract to buyers and make the spread. So Basically, they are violating the law because they are clearly NOT DOING the transaction as a Broker but as an investor; in this case the burden of proof that they are not acting as broker CREATES even more liability exposure to them because they are licensed. (IMO).
@Account Closed this is NO WAY about lining pockets. It cost me about $100 to get licensed and another $79 every other year. NAR is not required. It's about tracking who is brokering deals. It's about being able to have he consumers look us up to see if we have a license. We have to pass back ground checks and cannot have certain violations on our record or we can't get a license. Mess up once trying to rip off a consumer and our license is gone. How does this at all compare to wholesaling? It's a free for all? Literally 0$ barrier to entry. No back ground checks. No nothing. But that's not even my point.
I wanted to know why they don't get licensed? And I also wanted to know how they are netting the seller more money by marketing it to fewer people. That's all I'm looking for.
I have met many victims of the unlicensed frauds. They are not accountable...and don't want to be. They are a public nuisance as Bill Gulley states. I see you are a CPA. License required? Testing?
I see two separate debates here. One, is wholesaling legal without a license and two, what value does a wholesaler add?
For debate one, I am a wholesaler and if the law says you have to be licensed, just get the license. There are lots of dumb laws we have to follow every day and this is just one more. Personally I don't see how a license makes someone a better wholesaler. And licensed or no, you are still advertising a house you don't own without representing the homeowner. True, licensees have to be background checked, etc. But as many have pointed out, in all licensed professions, you still find shady people, cheating others both legally and illegally, license notwithstanding.
As for debate two, if you want to know why sellers sell to wholesalers instead of on the MLS, ask some sellers. They all know they could list with an agent. That's how most of them bought their house. I am sure they get agent postcards talking about how much the house down the street sold for. I know I do. Fact is lots of people call the agent first and don't like what they hear, so then they call us.
One time I had a house under contract when the seller said his friends told him he should not sell to me because all investors are crooks. I said ok, if you want to cancel the contract, put it in writing and I will cancel the contract. My end buyer wanted to go to court but I said no; We can always buy someone else's house but a homeowner has to do what he feels is best with his one major asset. Turns out, the guy just wanted more money. Plus his mom was a hoarder, and none of his friends who advised him not to sell to me would come help him clean out the house to get it ready for sale.
I fully admit there are some good Wholesalers. They are the ones who have all intents to close on a house they put under contact. If they assign fine, if they buy it themselves fine. The unethical ones use things like "Partner clause" (When no such partner exists or it is just an excuse to get out). "POF letters generated online" to convince a seller they could buy the place. Make sellers believe an "inspector" is coming when in reality it is someone they are trying to get to purchase the house (and if not another "inspector" will be coming tomorrow. Those things are deceptive anyway you cut it.
Letting an owner believe that they will be purchasing their house in 30 days, when in reality they couldn't get a Walmart gift card without a cosigner is a deceptive practice. Now Wholesalers with companies with 800K in the bank running around putting things under contract for 60K and assigning, fine, they will buy it in 30 days themselves if they have to. Getting part ownership of someone else's property for no money (and no ability to get the money) purely hoping they can convince someone else to buy it is deceptive.
What can the poor no money having person do to get started? Get a license and broker deals (which is what most really want to do but want to save the $300). So yes there are some good, Rock star Wholesalers out there. But if you are broke (Not you of course, just a general statement) and can't buy someone else's house, the honest thing to do is sell their house for them and that requires a 75 hour course and a $50 test.
@Mike Cumbie Good response. I think I can agree with just about all of that.
But I've got a question. In your scenario is it okay for a broke wholesaler to put a house under contract, assign it to an actual buyer and get their fee from the buyer--while being completely up front with the seller that that is what they are doing?
I'm by no means the foremost expert, just throwing out my thoughts for conversation and discussion sake. :)
The problem with that is it is required for a person selling Real Estate to disclose who they work for. This came about because people would represent a seller and then work against the buyer, while the buyer felt they were working for them (well, it's common for a foundation to cave in a bit like that, all those for sale signs in the neighborhood are because it is such a hot area everyone is trying too cash in). A seller or buyer who believes the "real estate professional" in front of them knows more than them and trusts them, will give away details. Which if used by the other side can work against their best interest. So the state required that we disclose who we worked for (Think about a prosecuting attorney being able to go in and make the person in the interrogation cell believe they are defending them).
So before I even take someone in a house I disclose to them that "I am working for them and not the owner, if I can get it to you for $50 I'll do that". If it is one of our listings I say "I am letting you know I work for the seller, I will treat you fairly, however my loyalty lies in their interest". That is a NY state requirement (and many other ones as well). So the buyer or seller knows who you work for. When one finds a seller and does not yet have a buyer, who does the "agency relationship" go with? Especially if you are trying to get the seller as low as possible? I would say the future buyer. Because the wholesaler in that case is not working in the sellers best interest (By showing it to 100 people on a list vs 40,000 in advertising will fetch a lower price) and they should disclose that.
So I guess the simple answer would be, as long as the seller does not believe that the wholesaler is working in their best interest, then yes they made an informed choice. Again just my 2 cents not meant to be legal anything or recommended practices.
@Mike Cumbie Good response. I think I can agree with just about all of that.
But I've got a question. In your scenario is it okay for a broke wholesaler to put a house under contract, assign it to an actual buyer and get their fee from the buyer--while being completely up front with the seller that that is what they are doing?
If a seller was completely aware this was the case, I suppose I would say "stupid is as stupid does". You certainly can't completely protect the stupid from themselves. That said, I have met few owners of real estate that are that completely stupid. Even the ignorant somehow understand the basic mechanics of buying and selling a house. But yeah, if a wholesaler said to a seller "I've got no ability to buy your house myself, but I know people, and I might be able to get one of them to buy the house, and my take will be the difference between what we agreed on here and what I get them to buy it for", that's fairly transparent. Myself, I doubt it happens that way even 5% of the time.
Even at that, however, there are other considerations. With a licensed broker, it is clear up front how much the seller is paying for the broker to sell that house to someone else. If a broker does things that are underhanded and shady - even if not technically illegal - the states that I know of have ethics proceedings that can get the person barred from working in the industry, fined, or even sent to jail if the actions were serious enough to warrant a criminal investigation. Contracts contain state-directed language to make it clear what the buyer and seller are committing to, what conditions allow one side to walk on the transaction, what warrants the loss of earnest money or other action. Wholesalers essentially bypass all of this, and there's hardly any argument that makes sense for not being licensed. I have closed on deals, with title work, in less than 2 weeks. Maybe a wholesaler that gets all of the hard stuff and costs out of the way, allowing the seller to just plunk down a check and close tomorrow, might be of value, but how many wholesalers are paying for title work and full inspections? The way I see it, most wholesaling is just a way of someone inserting themselves into a transaction to skim some profit, at little to no cost to themselves, while providing little to no value. Certainly many realtors provide little to no value, and that is why some alternatives have cropped up over time (online auctions, FSBO, fixed or cut-rate brokerages, etc), but one thing realtors have that wholesalers do not (by and large) is skin in the game: licensing costs, office space cost, background checks, state ethics and laws applicable to realtors, etc.
The thing that amazes me is real estate is one of the few serious investment vehicles that we would even have this discussion. Imagine a guy knocking on your door with a bundle of stock certificates in his arm, or your neighbor convincing you to assign ownership of his bank CDs to you because you just know you can find a buyer for them.
PS: If I had my way there wouldn't be a "wholesaling" forum on BP. At best, wholesaling is a job, at worst a scam, but in neither way is it real estate "investing". It would belong with a group that might include property management, tradespeople, realtors, general contracting, etc.
@Larry Turowski , your last comment brings up a very good point. "While being completely honest with the seller."
That is the part that so many wholesalers don't do, which is what gives them a bad name.
Yeah, many sellers are going to think you're trying to pull one over on them and walk. Be honest.
Another thing that's not kosher is when a wholesaler gets a property under contract with the seller for a nominal fee, then flips it to a cash buyer for a HUGE profit. That's taking advantage of the uneducated seller, not a savvy deal on the wholesaler's part.
"I got the property under contract for $50k, then turned it around to the cash buyer for $85k. He's going to do $10k in repairs, and then list it for $150k."
This is stealing. You are stealing the seller's equity and taking advantage of someone with lesser knowledge.
To be clear, I'm not saying Larry is taking advantage. I'm not accusing him of anything. This is just an example.
I'm by no means the foremost expert, just throwing out my thoughts for conversation and discussion sake. :)
The problem with that is it is required for a person selling Real Estate to disclose who they work for. This came about because people would represent a seller and then work against the buyer, while the buyer felt they were working for them (well, it's common for a foundation to cave in a bit like that, all those for sale signs in the neighborhood are because it is such a hot area everyone is trying too cash in). A seller or buyer who believes the "real estate professional" in front of them knows more than them and trusts them, will give away details. Which if used by the other side can work against their best interest. So the state required that we disclose who we worked for (Think about a prosecuting attorney being able to go in and make the person in the interrogation cell believe they are defending them).
So before I even take someone in a house I disclose to them that "I am working for them and not the owner, if I can get it to you for $50 I'll do that". If it is one of our listings I say "I am letting you know I work for the seller, I will treat you fairly, however my loyalty lies in their interest". That is a NY state requirement (and many other ones as well). So the buyer or seller knows who you work for. When one finds a seller and does not yet have a buyer, who does the "agency relationship" go with? Especially if you are trying to get the seller as low as possible? I would say the future buyer. Because the wholesaler in that case is not working in the sellers best interest (By showing it to 100 people on a list vs 40,000 in advertising will fetch a lower price) and they should disclose that.
So I guess the simple answer would be, as long as the seller does not believe that the wholesaler is working in their best interest, then yes they made an informed choice. Again just my 2 cents not meant to be legal anything or recommended practices.
Mike, I'm sorry, I meant to say a broke wholesaler who becomes a realtor. I agreed with what you said, I was just trying to understand if it is okay, or permissible to the board of realtors to operate as a wholesaler, putting a house under contract rather than just brokering, and especially taking the fee from the buyer.
@JD Martin It seems you are concerned with the seller being "ripped off." Are you also against any investor buying a private deal at below market? Would it be okay for an investor who took ownership to buy at $70K when he would have bought it at $75K, but not for a wholesaler to buy at $70K and assign it to someone else for $75K?
And what about the buyer? I just accepted an offer on a house that was $7K over what I was expecting and would have accepted.
@JD Martin It seems you are concerned with the seller being "ripped off." Are you also against any investor buying a private deal at below market? Would it be okay for an investor who took ownership to buy at $70K when he would have bought it at $75K, but not for a wholesaler to buy at $70K and assign it to someone else for $75K?
And what about the buyer? I just accepted an offer on a house that was $7K over what I was expecting and would have accepted.
I can tell you one way I would be more "ok" with wholesaling - if the wholesaler signed a contract with the seller and placed the purchase funds into escrow, to be released to the seller (upon actually closing on the contract) or to the wholesaler (upon successfully assigning/closing the contract with a buyer). I'm also "ok" with whatever above-board transaction a buyer & seller work out between themselves. With a listed house, the seller always has representation of the realtor and agency - if anything, it's the buyer that's at greater risk.
If the system worked this way, I would also be OK with no realtors at all, just buyers and sellers. Unfortunately, buying, selling and finding houses is usually complicated enough that most people feel the need for professional assistance. If we're just going to allow a free-for-all, it will not be long before trust in the system will endanger the whole idea of real estate as an investment.
My concern is not really the buyer or seller being ripped off - it's in the integrity of the system and the opportunities for recourse that allow the system to flourish. And I've yet to hear a really strong case for why someone should be able to circumvent a basic set of rules that provide the structure for the market in the first place. I have heard of licensed brokers/agents who might wholesale a property, but not the other way around. No one wants to say it, but people who want to wholesale without any kind of licensing either can't get licensed - a scary thought, since you almost need nothing more than a pulse - or don't have a pot to piss in and thus see unlicensed employment as their ticket to easy street. There's a billion posts on here about "I have nothing and I wanna be an investor, I wanna wholesale" but almost no posts on here about "I have nothing and I want to save my pennies and eventually put down some money on a piece of property, what should I do?".
"I was just trying to understand if it is okay, or permissible to the board of realtors to operate as a wholesaler, putting a house under contract rather than just brokering, and especially taking the fee from the buyer."
I guess I would ask for what purpose? The board has made it clear that all commissions are negotiable between the agent and seller/buyer. For instance I can't say "Standard commission is 3%". I can say "I charge 3% for my services". I can also say "I charge $5,000 to be paid when the house sells". I have sold $8,000 mobile homes and had a $2,000 per side commission.
So I guess I do not see the benefit of getting part ownership trying to sell it for 45K and take a 5K fee without advertising it as opposed to selling it on the open market to retail and cash buyers for 45K (and hopefully a bidding war) and taking a commission of 5K. If a cash buyer will pay 45K it will generally gather more on the open market just as quick. Plus if you don't find a buyer you never set a closing date, you are covered if they use someone you brought in and you can have signs in the front yard and ads in the paper.
If a seller is that desperate and it is in their best interest to take a low offer fast, at least you can get them more and still get your piece (whatever that piece is agreed to be). Represent them for 5K as opposed to getting them lower in price and getting 5K from the buyer. So I guess I don't see the benefit of wholesaling as an agent.
I freely admit I could be missing something as I see the question often, but with commissions being negotiable there seems ways to get to the same result selling within the current structure.
"I was just trying to understand if it is okay, or permissible to the board of realtors to operate as a wholesaler, putting a house under contract rather than just brokering, and especially taking the fee from the buyer."
I guess I would ask for what purpose? The board has made it clear that all commissions are negotiable between the agent and seller/buyer. For instance I can't say "Standard commission is 3%". I can say "I charge 3% for my services". I can also say "I charge $5,000 to be paid when the house sells". I have sold $8,000 mobile homes and had a $2,000 per side commission.
So I guess I do not see the benefit of getting part ownership trying to sell it for 45K and take a 5K fee without advertising it as opposed to selling it on the open market to retail and cash buyers for 45K (and hopefully a bidding war) and taking a commission of 5K. If a cash buyer will pay 45K it will generally gather more on the open market just as quick. Plus if you don't find a buyer you never set a closing date, you are covered if they use someone you brought in and you can have signs in the front yard and ads in the paper.
If a seller is that desperate and it is in their best interest to take a low offer fast, at least you can get them more and still get your piece (whatever that piece is agreed to be). Represent them for 5K as opposed to getting them lower in price and getting 5K from the buyer. So I guess I don't see the benefit of wholesaling as an agent.
I freely admit I could be missing something as I see the question often, but with commissions being negotiable there seems ways to get to the same result selling within the current structure.
A couple of comments...
1) Some realtors say you should get your realtors license to wholesale, but then say a realtor shouldn't wholesale. Or in your case, say you don't see the benefit of wholesaling.
2) Some sellers want their house sold, not listed. A good wholesaler (and I know a couple) can provide that.
3) We can just as easily flip the argument to unethical realtors who tie up property for longer than unethical wholesalers would. Take your scenario. A second, unethical reatlor could come in and say, "The previous guy said you could get $45K? I can get you $50K-$55K, easy with my sure-fire marketing system." And they tie up the listing for 6 months. (In fact I know of people that have wanted to sell their property to a private buyer fast but couldn't because it was listed and they'd have to pay commission and that killed the deal.) The buyer gets worn out and eventually accepts $45K--or maybe even less because they've let the listing go stale. And that second realtor has just poached a commission check.
I have met many victims of the unlicensed frauds. They are not accountable...and don't want to be. They are a public nuisance as Bill Gulley states. I see you are a CPA. License required? Testing?
Weak argument. There are many accountants who are not CPAs. There are many wholesalers who know markets better than agents.
For me the argument isn't whether you're licensed or not, it's whether you deceive the seller or not
Did the wholesaler say to the seller - "hey I have a huge buyers list, I could sell this to an investor in a week for $XX." And the seller be ok with it?
Or did they say "I WILL BUY your house for $XX" try to market it without having any intention of buying it
@John Thedford. It's not just a licensed vs unlicensed issue. Look at the facts and stop spitting your annoying broken record posts.
I don't have a problem getting licensed but I wholesale because I am in the transaction for myself. I am not there to represent the seller or the buyer. I represent me. And when I got licensed, I disclosed that I was licensed and had the seller initial a line in the sales contract that acknowledged I was a primary in the transaction and not representing anyone but me. I want to get paid based on my negotiating skills to buy low and sell high.
If my seller wants to consult an agent, attorney, accountant or Miss Cleo, I am cool with that. I encourage it. If they ask me my advice on something related to the transaction, I remind them that I am looking out for my own best interest and they should consult the relevant professional that is looking out for theirs. I had a seller get an agent after we signed the sales contract. Agent did not do anything but take 6% of his money. I wasn't mad. If that is what the seller wanted to do, cool with me. I still got paid my fee and did not have to share it with anyone but Uncle Sam.
The worst part about licensed agents "wholesaling" is lack of transparency. If the market typically dictates a 5-7% commission, and an agent takes a cut of 15% without the owner being aware, is that ethical? I personally would like to see disclaimer laws changed in this state to protect sellers. If a seller is informed and is willing to give away a property for pennies on the dollar (I bought one where the seller stated "it is worth 30K and I will sell it to you for 15K"), that is an informed seller making a decision on facts. However, all these "wholesalers" using contracts, many ripping off equity, is not a public service. As far as my original post, apparently the State of Florida is well aware of what is going on with CL and BP. Do they closely monitor the site? I have no idea. After seeing some frauds and cons making assertions that they are licensees, when in fact they are not, this further bolsters my disdain for many of these operators. If they are going to lie about that, what else are they willing to lie about? Anything for a buck!
The worst part about licensed agents "wholesaling" is lack of transparency. If the market typically dictates a 5-7% commission, and an agent takes a cut of 15% without the owner being aware, is that ethical? I personally would like to see disclaimer laws changed in this state to protect sellers. If a seller is informed and is willing to give away a property for pennies on the dollar (I bought one where the seller stated "it is worth 30K and I will sell it to you for 15K"), that is an informed seller making a decision on facts. However, all these "wholesalers" using contracts, many ripping off equity, is not a public service. As far as my original post, apparently the State of Florida is well aware of what is going on with CL and BP. Do they closely monitor the site? I have no idea. After seeing some frauds and cons making assertions that they are licensees, when in fact they are not, this further bolsters my disdain for many of these operators. If they are going to lie about that, what else are they willing to lie about? Anything for a buck!
Is it ethical for agents to take a 5% to 7% cut? Is that fair? Market rate? You know you have a stranglehold on the MLS and leverage that to squeeze 6% out of nearly EVERY home sale in the country. Think about that. I have a $160K home and you take about $10K out of that. Maybe I owed $140K, so you take half my equity.
