Wholesaling in FL with and without a RE License

52 Replies

Hi BP!

I'm new to the world of REI and have some questions in regards to wholesaling with and without a RE license in the state of FL.

So I've been reading A LOT on this topic and the more I read the more questions I have. 

Is it illegal to practice wholesaling without a license in the state of FL? When does it become illegal? 

I read it becomes illegal when you start to market the property publicly like on craigslist without a license since you don't actually own the property, right?

However, if you have a buyer's list and you're marketing only to them, is it still consider illegal? 

If you do have a RE license, would you need to hang your license with an investor-friendly broker if you're only wholesaling? Would broker fees apply as well? What would be the best approach? 

Hey welcome to the wonderful world of real estate investing. 

First things first: You DO NOT need a license to wholesale or invest in general. If you have a property under contract you can 100% market THE CONTRACT but not the "house" technically. You do have an equitable interest in the property no matter what people try to tell you.

You are going to learn really fast that most Real Estate Agents don't know jack about real estate other than MLS listing so listening to agents (in many cases your competition) about rules when it comes to investing is a terrible idea in most cases.

IF you get your license it will help and hurt you so make sure you know the pro's and con's before spending all that money to get your license. Yes you will need to hang it if you plan on using it and yes you will have to pay the fee's just like an agent does. You will also need to be aware of the rules each broker has because some will be a pain in your *** and have rules about how you can do deals (some not all).

Feel free to ask me any questions you have. I'll do what I can to make sure you don't get bad info.

“Marketing the contract” including an address, etc. does violate FL specific licensing laws, regardless of anyone’s interpretation of “equitable interest”.

You must be licensed to legally wholesale in Florida unless you own the property.

See 475.42 and 475.43 Fl statutes.  There are a lot of people operating illegally not only on Craigslist but on Bigger Pockets. If you are truly not the buyer or the seller you are not the principal in the transaction but rather an unlicensed middleman if you do not have one.

I just saw two unlicensed brokers get cease and desist letters from the state for their illegal "wholesaling".

So my next question would be how to find a broker who will allow me to hang my license if my intentions are ONLY to wholesale? 

I have no problem going for the license but I want to have a clear understanding if there are brokers out there in FL that will allow me to hang my license and practice wholesaling as long as I pay the broker's fees. This is where I'm having trouble finding this information. 

Originally posted by @Skylar Simpson :

Hey welcome to the wonderful world of real estate investing. 

First things first: You DO NOT need a license to wholesale or invest in general. If you have a property under contract you can 100% market THE CONTRACT but not the "house" technically. You do have an equitable interest in the property no matter what people try to tell you.

You are going to learn really fast that most Real Estate Agents don't know jack about real estate other than MLS listing so listening to agents (in many cases your competition) about rules when it comes to investing is a terrible idea in most cases.

IF you get your license it will help and hurt you so make sure you know the pro's and con's before spending all that money to get your license. Yes you will need to hang it if you plan on using it and yes you will have to pay the fee's just like an agent does. You will also need to be aware of the rules each broker has because some will be a pain in your *** and have rules about how you can do deals (some not all).

Feel free to ask me any questions you have. I'll do what I can to make sure you don't get bad info.

Guru's teach equitable interest and in some states maybe but in Oregon that does not fly.. I suggest you talk to your real estate licensing agency like I did here is the response I got from the state of Oregon.

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Best regards,

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

And I just had lunch yesterday with one of the investigators this unlicensed wholesaling in Oregon is going to become a target.. 

you simply cannot bring two people together for expectation of monetary gain without being licensed..  you certainly can close on the house and then resell.. the state of Oregon is also going after brokers who let wholesalers list properties they don't own and try to double close them.. we went through a few of those files yesterday as well. and I was pointing out how it all worked to the investigator. 

There are going to be some very sad cases of wholesalers in this state who have drunk the GURU equitable ineterst I am only selling a contract cool aid..

But again in FLA  just check with your state regulator they will answer you then decide what you want to do.

@Wayne Brooks   its illegal In Oregon as well.. and our state is starting to reach out and find these folks and hammer them.  

Agents are being put on notice to file complaints when they see unlicensed individuals acting as agents.

Our state is totally OK with a real investor IE buy it own it THEN resell it.. trying to sell something you don't own is only allowed by licensed agents.. other wise why even have a real estate license industry at all.  see above from my state regulator I got tired of is this legal or not I shot over a marketing piece from a local wholesaler and this is the response I got.  I knew it was not right but I wanted confirmation.. from the agency. 

If you have a contractual or equity interest you can market and sell without a license.

Having s buyer’s list doesn’t change that.

I’m not a lawyer, and am not providing legal advice!
Evin

Originally posted by @Evin Lederman :

If you have a contractual or equity interest you can market and sell without a license.

Having s buyer’s list doesn’t change that.

I’m not a lawyer, and am not providing legal advice!
Evin

this simply is not true in some states.. one would want to check their state in Oregon this is not true and I believe in FLA this is not true.

Thank you for the feedback, Jay.  What does the law specifically say that contradicts that?  

The law allows you to market and sell your own house, or a house you have a partial interest in.  Under the law, an ownership and a contractual interest have similar rights.  

Again, I’m not a lawyer and not presenting legal advice.  

Originally posted by @Evin Lederman :

Thank you for the feedback, Jay.  What does the law specifically say that contradicts that?  

The law allows you to market and sell your own house, or a house you have a partial interest in.  Under the law, an ownership and a contractual interest have similar rights.  

Again, I’m not a lawyer and not presenting legal advice.  

 its state specific

here is a response I got from our state when I sent them some marketing materials that a local wholesaler was doing and I was inquiring about can this be done with out a license

"

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Best regards,

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. 

In addition I had lunch with an investigator yesterday who wanted to have an interview and we went into this whole equitable interest theory and again in OUR state they do not recognize EM deposits on contracts as equitable interest.. ONLY being in title.. Like buying redemption rights puts you into title.. taking title sub too puts you into title.. BUYing the friggin property before you remarket it puts you into title those are true equitable interest according to our regulator.. what you do in your state I have no clue.. 

Thank you, Jay.  The email you are providing is much better because it is more specific and makes the conversation more productive.  Nevertheless, without seeing the marketing materials, this conversation is limited; they may have been acting like a realtor and saying "I know of a property that is for sale and I can get you a good deal for a small fee".  The facts of the marketing and the contract terms matter.

They are right, an “EM” earnest money deposit is not an equitable interest. But the contract that goes with it is enforceable in court, so ‘should’ be. 

My apologies for using the wrong term earlier, I should have said "equitable" interest instead of "equity" interest.

My advice is to find a good lawyer that will represent you at a few closings, so you can get your paperwork tight and locally appropriate, and ask her that question.

Evin

Uh just to be clear, one should not be soliciting or getting legal advice on BP.  Wholesaling is absolutely not illegal in Florida. The question however may be how one defines the particular activity in question.  Putting a property under contract and then "selling" an assignment is not a Chapter 475 Brokerage activity.  It is possible that the activities of a "wholesaler" could run afoul of Chapter 475 but just by virtue of doing it, one is not in violation of Florida law.  The aforementioned is for informational purposes only and is not intended as legal advice.  I'm not going to call out those here who not given accurate information but the key to violating Chapter 475 generally is that you have to be performing the service "for another".  That is not wholesaling.  

@Vania Cortez marketing can be Craigslist or can be calling someone on the phone. Simply asking someone if they want to buy the property is marketing. Wholesalers will claim there are "legal" ways to do wholesaling, but what they really mean is how to not get caught. Like for example if I was going 100 miles per hour on an empty road, I would never get a speeding ticket, but that doesn't mean it is legal. By marketing to private buyers lists, wholesalers avoid detection, but that doesn't make it legal. 

I have never heard anyone complain about wholesalers except for real estate agents. Funny how that works..

Originally posted by @Andrey Y. :

I have never heard anyone complain about wholesalers except for real estate agents. Funny how that works..

 Or doctors that practice medicine without a license.     Lol

Originally posted by @Andrey Y. :

I have never heard anyone complain about wholesalers except for real estate agents. Funny how that works..

 Or my fav

Those that fly for years and years with a out of date students.nt pilot license and no current medical 

Originally posted by @Jay Hinrichs :
Originally posted by @Evin Lederman:

If you have a contractual or equity interest you can market and sell without a license.

Having s buyer’s list doesn’t change that.

I’m not a lawyer, and am not providing legal advice!
Evin

this simply is not true in some states.. one would want to check their state in Oregon this is not true and I believe in FLA this is not true.

 Yes, if someone really wants to know if it is legal, the best bet would seem to be contacting the relevant office for their State.  With these discussion perpetually cropping up, it would be great if someone actually contacts the state to get the word directly from the horses mouth.  Then, let us all know what the state told you.

Originally posted by @Eric James :
Originally posted by @Jay Hinrichs:
Originally posted by @Evin Lederman:

If you have a contractual or equity interest you can market and sell without a license.

Having s buyer’s list doesn’t change that.

I’m not a lawyer, and am not providing legal advice!
Evin

this simply is not true in some states.. one would want to check their state in Oregon this is not true and I believe in FLA this is not true.

 Yes, if someone really wants to know if it is legal, the best bet would seem to be contacting the relevant office for their State.  With these discussion perpetually cropping up, it would be great if someone actually contacts the state to get the word directly from the horses mouth.  Then, let us all know what the state told you.

Eric here was what my state had to say when I sent them a marketing piece that was sent to me by an unlicensed wholesaler. 

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Hello Jay,

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

@Eric Jacobs That is just not true.  Originally, brokerage violations were indeed activities done "for another" and that is what the verbiage in the beginning of 475 refers to, but those laws were changed long ago.  If you read further in chapter 475, to 475.43 you'll see.

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.

Seems like this was written specifically for wholesaling.

While I understand what you are saying I think the ambiguity here comes down to the narrow definition of wholesaling. For a presumption to be imposed, there has to be an absence of substantial consideration.  If someone is for example creating an artifice to get around what they are essentially doing as brokering, that would be a violation of law.  Wholesaling or perhaps more clearly put, putting a property under contract and then selling an assignment is perfectly legal.  We may be disagreeing over different things. There are a lot of "wholesalers" out there.  Some are clearly violating the law, some are clearly not and some are somewhere in the middle.  

I'm not an attorney so don't take this as legal advice.

I'm in South Florida and I just wholesaled a property last Friday. You are marketing an assignable contract on a property so you aren't necessarily breaking any laws. You are the principal and have equitable interest in a property.  I, along with many other investors I know personally, have done a ton of wholesale deals with and without a RE License. 

If you have a RE License, it is best you hang it with an investor friendly brokerage. Be sure to use one that doesn't require a bunch of fees just for being there and such (I know a couple) also let them know what you are doing because they are responsible for you. They don't get anything from your individual wholesaling activities. They do, however, get a piece of the action if you list a property and that depends on your broker's pay structure.

In my humble opinion, you should always look for ways to make something work. Not the opposite. Go get em!

@Eric Jacobs @Marco Petit Yes, I know wholesaling is done every day, but the revised statute seems pretty clear and unambiguous....

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.

You'll note never does does it make an exemption for "equitable interest" and "substantial consideration" doesn't refer to an EM deposit but for having acquired actual title to the property.

I have no dog in this hunt, I just see the misrepresentations of the statute made by wholesalers all the time.

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