BP Is A "HOTSPOT" Of Illegal Activities

Wholesaling
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BP Is A "HOTSPOT" Of Illegal Activities

John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 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:

https://www.myfloridalicense.com/sto/unlicensedact...

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.

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Larry Turowski
Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
9y

Disclosure:  I am not a wholesaler.

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.

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  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y
    Originally posted by @Larry Turowski:
    Originally posted by @John Thedford:

    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.

    The decision to hire an agent is made by sellers. There are some discount brokerages that charge a flat fee of $500 to list in the MLS. The seller gets no help from an agent for that fee. Market forces dictate fees as in any other business. If someone is happy paying that, and they get market value for their home, good for them. If someone wants to use the discount flat fee MLS listing services, good for them. Sellers are free to do as they wish, including FSBO. Last but not least, if there is a 6% commission and another agent brings a buyer, the commission is split. I have one listing where the listing agent is taking 2% and the buyer agent gets 6%. I used AN AGENT to list the property. Their service is actually worth more than 2% to me. They are doing ME a favor. I have no problem paying for any service. If I don't like the cost, I can always get other offers. The MLS does offer the most exposure for selling properties. Unlicensed brokers cannot even get close to the exposure the MLS offers. Our companies listings propagate to over 800 websites. I talked to a seller yesterday that wants to list with me. He was a home builder and fully understands how things work. Informed seller...wanting maximum exposure for highest price? He wins. His other option: discount brokerage OR FSBO. Several BP posters have referred to agents and the MLS as a "cartel". The fact is, anyone can get a license and join the "cartel" if they desire.

    0Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    @Larry Turowski

    Fun conversation and thank you for keeping it light, because in the end it is all really just discussions. We aren't going to change the world, just help each other prosper through it :) 

    I will say the MLS is a market tool and anyone can have access to that same exact tool. The requirements are to attend a 75 hour course, pass a test and pay for access. It is no different than a agreeing to terms of a dating website (meet the requirements and pay a fee). The MLS is a database and tools used to access a DataBase owned by a private entity and has access controlled by a private entity. They also pay for access to other tools we get (Authentisign, Realist for all tax data, all neatly wrapped up in a package for us). Someone has to pay for development of that and patches/improvement.

    I cannot enter the car auction site all of the dealers use because I do not have a license to sell motor vehicles. I do not have access to the law review online because I am not a member of the lawyers board and I cannot go to the HP technician site and look up patches and things the techs use because I am not certified by them. Each of those costs money for upkeep and maintenance. Wholesalers choose not to have access to it and that's fine, but they are subscription services. You can be a registered agent and have zero access to the MLS. They are separate items.

    The other piece is that the Board and the State make it very clear that commissions are negotiable. If I could get away with still covering my bills and making a profit for 1% you can bet your bottom dollar I would undercut every agent out there. I do have clients who I know the amount of work and expectations and they get volume discounts.

    2Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @John Thedford:
    Originally posted by @Larry Turowski:
    Originally posted by @John Thedford:

    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.

    The decision to hire an agent is made by sellers. There are some discount brokerages that charge a flat fee of $500 to list in the MLS. The seller gets no help from an agent for that fee. Market forces dictate fees as in any other business. If someone is happy paying that, and they get market value for their home, good for them. If someone wants to use the discount flat fee MLS listing services, good for them. Sellers are free to do as they wish, including FSBO. Last but not least, if there is a 6% commission and another agent brings a buyer, the commission is split. I have one listing where the listing agent is taking 2% and the buyer agent gets 6%. I used AN AGENT to list the property. Their service is actually worth more than 2% to me. They are doing ME a favor. I have no problem paying for any service. If I don't like the cost, I can always get other offers. The MLS does offer the most exposure for selling properties. Unlicensed brokers cannot even get close to the exposure the MLS offers. Our companies listings propagate to over 800 websites. I talked to a seller yesterday that wants to list with me. He was a home builder and fully understands how things work. Informed seller...wanting maximum exposure for highest price? He wins. His other option: discount brokerage OR FSBO. Several BP posters have referred to agents and the MLS as a "cartel". The fact is, anyone can get a license and join the "cartel" if they desire.

    John, you seem like you are the vigilante driving 55 MPH in the left lane because THE HIGHWAY IS A HOTBED OF ILLEGAL ACTIVITY.  The law is the law.  No arguments there.  However, you bring up ethics--on a far from universally agreed upon issue.

    1Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Mike Cumbie Kudos to you, too, for your thoughtful responses.

    0Reply
  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @Larry Turowski

    Actually, it was the state investigator that stated BP AND CL are hotbeds of illegal activity. 

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    9y

    This thread is the perfect example of what drove me away from posting on this forum. It's just a post disguised as a way to "help" people, by bringing them down. Followed by a pointless debate that will change zero views. 

    Normally when this type of focus is attached to any type of "moral" issue, its just a distraction from the true problem causing you to be so unhappy. If you weren't policing wholesalers, you'd have a lot of time with your thoughts... scary I know. All the best. 

    3Reply
  • Roman M.
    Investor · Miami Beach, FL · Member since 2016 · 486 posts · 216 votes
    9y

    I don't see how BP is the "hotbed" for illegal activities.  

    If DBPR wants to crack down on wholesaling they should just visit any REIA.

    1Reply
  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @Tim G.

    Actually, I did post two ways to "wholesale" legally. DBPR made the statement about BP as well as CL being "hotbeds of illegal activity". In my spare time, I sell machine guns, silencers, and an occasional grenade launcher or anti-tank gun:) They don't allow these in CA! SCARY--I KNOW!

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    9y

    I think @John Thedford will back me up on this.  He says one of two legal ways to "wholesale" is to get a real estate license.  

    I suspect he means, as an agent, you can list it.  To get a property as an agent, under contract and then assign that contract is as likely to get in in trouble with or without a license. (perhaps for different reasons)

    Edited for clarity.  I see from Johns post below the Net listings are legal in FL. so my comment isn't valid in FL.

    1Reply
  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @Ned Carey

    Get licensed...or close and then resell. No license need to buy all you want and then resell.

    Net listings are legal in FL, so an agent may play the assignment game and pocket all they can. I personally don't care for that. 

    1Reply
  • Sean Kremer
    Real Estate Investor · Milford, NE · Member since 2011 · 201 posts · 140 votes
    9y

    I have no idea why a person won't just go get his license if they have no intention of ever buying a piece of property??? You will probably make way more money, have access to the MLS. I thought about becoming a realtor just to get to the MLS.....but realized that I 'bend' way too many rules to get deals done to actually hold onto the license.

           If you are balking at spending $300 to get a license to sell real estate, then in my opinion, you have no reason to dive further into this business and almost certainly won't succeed. This business takes lots of money........just not necessarily your own. 

        The wholesalers that try to deal with me around here are so scared of putting some skin in the game that I just ignore them unless a real gem shows up, but since I do this full time, I usually find the deals first and have no need to have amateurs wasting my time.

         I'm not a big fan of a lot of useless rules.......that's why I buy the properties myself, then sell them.  That keeps me in the big bosses chair......I've grown quite fond of that chair..:)

      Just my opinion...

    1Reply
  • Nathan Waters
    Rental Property Investor · St Joseph, MI · Member since 2015 · 302 posts · 106 votes
    9y

    Wholesalers provide a completely different service than realtors. Often finding homes that realtors would not have their sites on. Jay Walking is illegal too, but I'm not going to go onto a forum for pedestrians and complain about what an abomination these criminals are. 

    0Reply
  • Scott Schechtel
    Hillsboro, OR · Member since 2017 · 7 posts · 1 vote
    9y

    I see this post title is a pretty involved conversation about Florida and I don't mean to jump in and stir things up but I believe it is a state by state basis. As a wholesaler in my state of Oregon, I recently learned from a real estate attorney that by definition wholesaling is in fact illegal here. The law is vague but the language includes wording like this: "any un-licensed brokering or involvement with selling or marketing real property is illegal". The gray area is why is it such a popular entry point for newbies in real estate and if it's illegal, one would think it is necessary to police every wholesale transaction? For myself, I am now deciding to spend the $300 to get my RE license, knowing I can sleep after doing a wholesale deal.

    My $.02

    Scott

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  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y
    Originally posted by @Scott Schechtel:

    I see this post title is a pretty involved conversation about Florida and I don't mean to jump in and stir things up but I believe it is a state by state basis. As a wholesaler in my state of Oregon, I recently learned from a real estate attorney that by definition wholesaling is in fact illegal here. The law is vague but the language includes wording like this: "any un-licensed brokering or involvement with selling or marketing real property is illegal". The gray area is why is it such a popular entry point for newbies in real estate and if it's illegal, one would think it is necessary to police every wholesale transaction? For myself, I am now deciding to spend the $300 to get my RE license, knowing I can sleep after doing a wholesale deal.

    My $.02

    Scott

     Correct-state by state basis. Oregon just changed their statute and you might expect this to happen in other states due to the number of FRAUDS AND SCAMMERS harming the public. They walk in, sign contracts with no intention of closing, and then use their favorite BS escape clause to walk (subject to partners approval, etc). Florida has now tightened the statute and going after many that claim "wholesaler" as their profession. There are two legal ways to "wholesale"
    1. purchase-then advertise and resell

    2. be licensed

    Those are the only two ways to stay legal in FL.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    9y

    Though I have done some wholesaling back in the days (and only on deals where they were out of my area or if I had too many of my own already) I have no dog in this fight. I started one of the most popular threads on this site, "The Truth About Wholesaling" and it was not a wholesaler bash, it was about how to do it legally and ethically (and was well before these states like FL started making new laws regarding wholesaling).

    That said, I have just one question for @John Thedford and anyone else supporting the fight: It appears that the biggest argument about wholesaling in FL is that wholesalers should close and then resell (which I fully agree with in any state and add the fact that they should have the full intent and ability to close regardless if they find a cash buyer or not) or they should get licensed otherwise they are "stealing the sellers equity". My question or argument to that is this - what is the end result difference if a non licensed person buys from a seller at 80% of the current market value or if a licensed person does the same? In either way, they are, as it has been stated, "stealing equity".

    Let's face it, sellers sell for many different reasons and flippers who buy and close must buy below market value to make money. Many of us rehhabbers are more savvy and more knowledgeable than a seller but to say that we al steal equity is not a true or fair statement. Some seller may not want the public or the neighbors to know they are selling, some may be embarrassed by the condition and not wantbthe property on the MLS with an agent, some may have just lost a loved one or just got a work transfer out of state and need to sell yesterday. These are just some of thousands of reasons why a seller may sell for less than the current market value. Ease of transaction, convenience, speed, privacy, etc all may factor in.

    So in closing, while I agree that a vast majority of wholesalers do it wrong (and perhaps illegally), there are some who do it right and while FL may be "cracking down" I don't see a legit argument for licensed vs unlicensed when it comes to the "stealing equity" argument.

    Podcast Guest on Show #130
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  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y
    Originally posted by @Will Barnard:

    Though I have done some wholesaling back in the days (and only on deals where they were out of my area or if I had too many of my own already) I have no dog in this fight. I started one of the most popular threads on this site, "The Truth About Wholesaling" and it was not a wholesaler bash, it was about how to do it legally and ethically (and was well before these states like FL started making new laws regarding wholesaling).

    That said, I have just one question for @John Thedford and anyone else supporting the fight: It appears that the biggest argument about wholesaling in FL is that wholesalers should close and then resell (which I fully agree with in any state and add the fact that they should have the full intent and ability to close regardless if they find a cash buyer or not) or they should get licensed otherwise they are "stealing the sellers equity". My question or argument to that is this - what is the end result difference if a non licensed person buys from a seller at 80% of the current market value or if a licensed person does the same? In either way, they are, as it has been stated, "stealing equity".

    Let's face it, sellers sell for many different reasons and flippers who buy and close must buy below market value to make money. Many of us rehhabbers are more savvy and more knowledgeable than a seller but to say that we al steal equity is not a true or fair statement. Some seller may not want the public or the neighbors to know they are selling, some may be embarrassed by the condition and not wantbthe property on the MLS with an agent, some may have just lost a loved one or just got a work transfer out of state and need to sell yesterday. These are just some of thousands of reasons why a seller may sell for less than the current market value. Ease of transaction, convenience, speed, privacy, etc all may factor in.

    So in closing, while I agree that a vast majority of wholesalers do it wrong (and perhaps illegally), there are some who do it right and while FL may be "cracking down" I don't see a legit argument for licensed vs unlicensed when it comes to the "stealing equity" argument.

     Thanks Will. We certainly agree on CLOSING. That is the BIG problem. I have met quite a few victims of "buyers" that never intended to close or had the ability. If they could not assign, they walked. This creates big problems for sellers, and also makes them have a distrust of buyers in general. I mentioned this in a thread I post some time back stating "10K Assignment Fee I turned down" or something along that line.

    As far as stealing equity: as an agent, I consider my first duty to be to the seller. I DO have the ability to offer to list at one price OR purchase at another price. Here is a house I offered to list for $158K or buy for 120K. He chose the 120, quick close, NO BS, no people going through the house, etc. I love having the ability to give sellers options...and them being fully informed. No blind commissions or fees, etc. Personally I am not in favor of agents assigning contracts because the seller has NO idea what they are generally losing.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    9y

    So to my question and your point, the licensing is not really the issue of stealing equity, rather the disclosure to the seller that you can pay one lower cash price or they can list at a higher price. So if I am answering my own question, you would be ok with non licensed wholesalers in FL going to a seller a saying "I am willing to pay you $100k cash for your house and close in 10 days or you can list with a licensed agent for probably around $130k. Which do you prefer?" 

    Also @John Thedford I would respectfully request that you change the title of your thread post here. This thread could become very popular as it already started to and the Google engine will find your title and potentially mislead viewers who don't actually read this entire thread that BP is some sort of illegal foregrounds for investors. I have a love and respect for BP and would not want such misconceptions promulgating around the internet. You don't have to, it is just my request and desire personally.

    Podcast Guest on Show #130
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  • John Thedford
    OP
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y
    Originally posted by @Will Barnard:

    So to my question and your point, the licensing is not really the issue of stealing equity, rather the disclosure to the seller that you can pay one lower cash price or they can list at a higher price. So if I am answering my own question, you would be ok with non licensed wholesalers in FL going to a seller a saying "I am willing to pay you $100k cash for your house and close in 10 days or you can list with a licensed agent for probably around $130k. Which do you prefer?" 

     If they are CLOSING and not operating illegally...sure! Sounds ethical, transparent, and legal. I think the term "flipper" might be a more descriptive term of buyers that close and then resell. I just ran into a deal where the "buyers" allegedly dragged several people through the property, all the while representing them as "inspectors", etc. The "buyers" also were playing the assignment game and by appearance, never had any intention of closing. This is why I often use the term FRAUDS AND SCAMMERS.

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