Wholesalers and license

16 Replies

I'm a new wholesaler in Virginia, I've done excessive research and I'm almost 110% positive you don't need a license to simply do a seller/buyer contract and then assign it to my investor. just wanna make sure I'm correct before I do anything wrong.

just check with your department of real estate there.. lay out your plan and how your going to operate and ask them if a license is required.. that's the best way.. everything else is just on line opinions...

Maybe check with some of the local investors.  Focus on the more experienced ones.  

@Justin Blankenship there are two issues here ethical and legal. I respect @Jay Hinrichs and others here on BP tremendously but disagree on the subject of legality.

I firmly believe by statute some form of wholesaling is legal in all 50 states.  However in some states there are those who would like to stop or limit the practice.  This includes bureaucrats that try to enforce laws that don't exist.  (there are several threads on Ohio about this for example) My guess is you are safe in VA. However we are all 1 liberal judge away from the practice being deemed illegal.

I believe if this went up to the US Supreme Court, anti wholesaling laws would not hold water for a second.  That said you nor I are not going to take it that far. We have to abide by advocates, bureaucrats, and legislators at a local level.  Make sure that even if you are within the law you run your business in an ethical and fair way. 

Now this leads me to the ethical issue. Many who are against wholesaling in this forum feel it is unethical. If you are misleading someone who has a short time frame to act and you are not able to perform on the contract you are acting unethically and could do major financial harm to someone who was counting on you. you are also asking for legal troubles.

@Justin Blankenship , If you want to receive a commission fee, legally you will be required to hold a license.  I am not sure about getting paid through assigning the contract.  I would be concerned with being sued for practicing real estate without a license.  Consult a real estate lawyer and/or a broker.  

I agree with @Ned Carey , there are many potential ethical issues with wholesaling and the rep of the industry being full of "bottom feeders".

@Ned Carey you seem to be quite knowledgeable and I appreciate everyone's input. my question is this. how are so many other people doing it then? and would it possibly be a Va law if there is a law stating I need a license. cause in all reality I'm buying a house but deciding not to and assigning the contract to someone else for a fee. Wouldn't it only be considered a practice if I'm doing it a few times a month etc. Either way. if I have to get a license possibly what kind would it be and how much?

@Justin Blankenship

how are so many other people doing it then?

Lots of people bread the speed limit and never get caught. That doesn't make speeding legal though.

To complicate things, I believe having a license increases your legal risk if you are wholesaling as you describe. I can't speak specifically about Virginia, but  most states do not allow a "Net Listing".  A net listing is where the owner sets a price they will accept, and the agent gets whatever they can get over that price as a commission.  Assigning a contract for a significant fee,  could be construed as a net listing.  Agents are required to be fair and honest with the public. Would that require you disclose you believe the property is worth more than you are paying and intend on reselling quickly?

Most states word their laws something like: You cannot provide brokerage services for another unless you are licensed. Brokerage service is in part defined as putting together a buyer and seller. 

That is the heart of why some say wholesaling is illegal.  However those people are ignoring the part where it says "For Another" 

This is a complex issue and there has been much written about it here on BP.

PS: I am sure you can Google and find Va real estate brokerage laws online.

@Justin Blankenship

"How are so many people doing it then"? VERY unfortunately, there are many that believe it is OK to mislead sellers and use BS clauses (LIES) to get out of contracts. This could not only get them sued for FRAUD BY INDUCEMENT (we have a local here that is being sued for that at this time), but as @Ned Carey also stated, can cause severe financial harm to a seller. Your other questions should be to the state. In Florida, they passed a statute making it illegal to use contracts to circumvent licensing law and the contracts, by statute, are unenforceable. This is Fl chapter 475.43.

I personally have met several victims of these "wholesalers".  This is why I am against the practice in general. One last note: there is a BIG difference between people that purchase the property and then resell it. Some of these operators call themselves "wholesalers" but I personally like the term "flipper". I DO get it: calling oneself a "wholesaler" implies some sort of value under market to the buyer. Reality: this is often not the case.  Your state laws will be different than those in FL, so you need to learn what is legal and permissible in your state. As to honesty and morality, nobody can dictate that but your inner self. 

Contracts are assignable unless they have verbiage in them that state otherwise. 

The Legal issue with wholesaling revolves around 3 things: 

  1. Intent to buy
  2. Ability to buy 
  3. Negotiating on someone else's  behalf

Your intent should always be to actually close and then resell but there are situations where an assignment is the most logical decision for the buyer; for example, let's say you tie up a property but another more promising investment comes along and you have a limited amount of capital, in that case an assignment would make sense...I've seen these things play out in court so I'm speaking from the perspective of someone who has actually seen a "Wholesale case" litigated. 

If you don't have the funds JV with a cash buyer, a hedge fund, reach out to a transactional lender, learn how to take title using subject to strategies, use an option contract. There's a ton of ways to make money from real estate without ending up in a brick room with "Big bubba" and a bunch of other real criminals or paying ridiculous fines. 

Also...If you tie an agent or broker to the transaction you can avoid legal trouble there's 2 ways to do this:

  1. Get a license 
  2. Hire a licensed agent or broker as an acquisitions manager 

Both are good ideas especially if you plan on establishing business in multiple markets. 

Oh I forgot 1 thing..you could also become an attorney and actually learn real estate law;)

Contact a re attorney.  A real estate broker and a RE lawyer are both needed for what you plan to do.

“Almost 110% positive” lol
I don’t know if you were trying to be hilarious or not but that was awesome

@Justin Blankenship

--__-- Bro take it from a wholesaler. Your fine. You just need to get a good mentor who will make you aware of how to carry out wholesaling properly. To be honest lol. Many dont know what they are doing.  Thats why not many can call themselves "Savy Investors" Take it from one. In a nutshell, this is be the process I'll recommend you getting a Straightforward good mentor. Nonetheless, if you dont know the process here it is.

You find the seller, (They're motivated of course" and you get the property under contract (hopefully at a great price and rate) ( Typically distressed property ARV x .7 - Repairs - Fee= MOA ((Max Allowable Offer)) ) As soon as you get that seller signature bro. Take that contract ASAP to the Title company or if your a Closing Attorney type of guy then to them. Have them start running title. typically anywhere from 72-96 hours. (3-4 days). Immediately start marketing for your buyer. You want cash now? Demand a "nonrefundable" Earnest money deposit of at least a grand. Tha way even if your buyer backs out and wastes your time you get something out of it. If your double closing. Get your buyer to sign that second P&S agreement or if you're assigning it, have em sign that. Lastly...take that contract as well to the closing agent or attorney. Then pick up your check once titles clear. BOOM not all heroes wear capes. There so much more as well you can get into fix and flipping once you stack your cash ( or if your smart you'll learn how to use OPM "Other peoples money" Grant Cardone on youtube teaches that pretty well. But yeah you can get into that and no longer have to take 10-20k assignment fees. You get later get into Buy and holding Id recommend against using SFR'S for that. Find some Multi-family (5 units or more)

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@Justin Blankenship I've been wholesaling in Hampton Roads for about 2 years now and never ran into any legal problems

that's good to hear, could any of you all possibly point me in the right direction to obtain a good seller buyer and both a assignment contract as well as a title company out here? Thanks

Originally posted by @Christopher Charles :

@Justin Blankenship

--__-- Bro take it from a wholesaler. Your fine. You just need to get a good mentor who will make you aware of how to carry out wholesaling properly. To be honest lol. Many dont know what they are doing.  Thats why not many can call themselves "Savy Investors" Take it from one. In a nutshell, this is be the process I'll recommend you getting a Straightforward good mentor. Nonetheless, if you dont know the process here it is.

You find the seller, (They're motivated of course" and you get the property under contract (hopefully at a great price and rate) ( Typically distressed property ARV x .7 - Repairs - Fee= MOA ((Max Allowable Offer)) ) As soon as you get that seller signature bro. Take that contract ASAP to the Title company or if your a Closing Attorney type of guy then to them. Have them start running title. typically anywhere from 72-96 hours. (3-4 days). Immediately start marketing for your buyer. You want cash now? Demand a "nonrefundable" Earnest money deposit of at least a grand. Tha way even if your buyer backs out and wastes your time you get something out of it. If your double closing. Get your buyer to sign that second P&S agreement or if you're assigning it, have em sign that. Lastly...take that contract as well to the closing agent or attorney. Then pick up your check once titles clear. BOOM not all heroes wear capes. There so much more as well you can get into fix and flipping once you stack your cash ( or if your smart you'll learn how to use OPM "Other peoples money" Grant Cardone on youtube teaches that pretty well. But yeah you can get into that and no longer have to take 10-20k assignment fees. You get later get into Buy and holding Id recommend against using SFR'S for that. Find some Multi-family (5 units or more)

Not to be a wet blanket but you might find other discussions of FL law on this site interesting.

@Justin Blankenship If I were you I would ask @Don Cuffy or @Shawn Bowen to Mentor you through a couple wholesale deals since they are close to the area that you are interested in and have been successful.  It will cost you part of the deal but 50% of something is better than 100% of nothing. 

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