Attention Wholesalers: Beware!!!
Wholesaler · Jacksonville, FL · Member since 2016 · 42 posts · 120 votes
Attention Wholesalers: Beware!!!
Most Popular Reply
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y@Jay Hinrichs you know we agree more than we disagree but I just have to jump in.
Not all wholesalers lie to their buyers
Many real estate agents lie about how much they can get sellers. Just to get the listing.
Many real estate agents leave desperate sellers hanging just as some wholesalers do.
Most deals I have wholesaled were deals most agents wouldn't do or couldn't do.
PS Is that the Heros Home logo? keep me updated on the 501 (c) (3) status
200 Replies
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Jason,,, out of sheer curiosity and try to put this is it legal and not legal to rest or do you need a real estate license or don't you.
one one of your posts on marketplace you describe the home etc. and at the bottom you have a disclosure that you are a principal in the transaction and you have an assignable contract.. so obviously you don't own the asset.. is that the verbiage that the state or your attorney says is the only thing needed to keep you in good graces with the state.. ?
- Wholesaler · Jacksonville, FL · Member since 2016 · 42 posts · 120 votes8y
Again Jay, everything I do has been checked and checked again through my attorney. I am NOT here to discuss with anyone the legalities. Just giving a fair warning to other wholesalers. Nothing more, nothing less.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yJason Palmer just FYI that I’ve heard people asking different attornies this and getting different answers. If that’s the case you are probably in a legal grey area and this may cause you some issues.
- Raleigh, NC · Member since 2011 · 721 posts · 343 votes8y
That's one of the many reasons why I have my Brokers license.
- Member since 2018 · 509 posts · 211 votes8y
Haven't seen Mr Thedford for awhile.
- Real Estate Broker · Provo, UT · Member since 2013 · 689 posts · 511 votes8y
I'm really not trying to start a "it's good" or "it's bad" fight - so here's my take on wholesaling:
yes, Many brokers get bent about wholesalers making money on a deal (but not all). Some of us have other crap to do than worry about somebody else making a buck.
Wholesaling is a pretty big grey area for most states, and most divisions don't really know how to deal with it. I would venture to say that most RE divisions don't even know how the logistics of a wholesale deal go down - which is probably why they kind of freak out sometimes.
My state is looking at it right now and we have no clue how it's going to shake out - but we are confident there will be new legislation that will effect wholesalers in the near future that applies to those with and without RE licenses.
As a general rule, unless you have a RE license, it is illegal for you to advertise a property for sale that you do not own or are not a principle of. You may be able to advertise the contract that is for sale, but you should really stay away from advertising the property until some of these rules are determined.
Wholesaling is somewhat of a wild-wild-west thing - kind of is, and kind of is not a RE transaction. What is a little scary is that new regulations are usually enforced following a big slap to somebody who was doing whatever the regulations now apply to. I'm treading pretty lightly on it right now until UT comes up with our rules - and I would recommend everybody else do the same until your state comes up with the rules.
Wholesaling is hard. Effing hard. Harder than most people can understand, especially novice people. There are a lot of great wholesalers out there, but there's also lots of really crappy ones that give the industry a really bad rep. There's lotsa money to be made, and many of those who are new to this business get sold on the idea that they can get a quick and easy shot in the arm by wholesaling a few deals - but they just don't realize the difficulty level and the liability they have.
- Wholesaler · Jacksonville, FL · Member since 2016 · 42 posts · 120 votes8y
Let's call it what it is. Most licensing laws are only in existence because big players in an industry get together and
bribelobby their politicians to help suppress their competition through the use of the government's monopoly on force. No real estate investor puts a gun to someone's head and forces them to sign an agreement - seller or buyer. It's nothing more than consenting adults engaging in commerce. - 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Jason Palmer:
Let's call it what it is. Most licensing laws are only in existence because big players in an industry get together and
bribelobby their politicians to help suppress their competition through the use of the government's monopoly on force. No real estate investor puts a gun to someone's head and forces them to sign an agreement - seller or buyer. It's nothing more than consenting adults engaging in commerce.NO they just lie to them that they are a cash buyer when they are not.. or they lie to them about the true value but other than that your right no gun to their head.
I funded at least 250 wholesale deals in Orlando a few years back but the out fit that did it was licensed ( Altura ) you may have heard of them.. and I only suspect they were because there was so much money being made they did not want to run afoul of the law..
Anyway.. sounds like if your having a run in with the state because of a complaint filed there is something there good luck with it.
so why don't you just get your license and call it a day.. like Altura did. ? again more curious than anything.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jason Palmer PS I have not sold real estate in 15 years.. I just keep my CA license active so I can legally lend money in that state.. So I am not one of those brokers worried about losing commissions to unlicensed people.
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes8y
@Jay Hinrichs you know we agree more than we disagree but I just have to jump in.
Not all wholesalers lie to their buyers
Many real estate agents lie about how much they can get sellers. Just to get the listing.
Many real estate agents leave desperate sellers hanging just as some wholesalers do.
Most deals I have wholesaled were deals most agents wouldn't do or couldn't do.
PS Is that the Heros Home logo? keep me updated on the 501 (c) (3) status
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes8y
We have a local attorney that stated "wholesaling is legal" until I educated him on 475.43. Now he says it isn't!
Brokering is A BAR SALE
Advertising
Buying
Auctioning
Renting
Selling
Appraising
Leasing
Exchanging
FOR ANOTHER...so bringing an end buyer IS a brokerage activity according to DBPR.The public NEEDS to be protected from this group! it has nothing to do with money. I have run into countless victims of some of these FRAUDS AND SCAMMERS that believed their house was sold (when it wasn't). WHY suggest hiding if actions are legal? Take it to the supreme court! BTW I am not brokering RE either. I do go out of my way to protect the public, and have never asked nor received any form of business for my actions. I do just fine as an investor holding multiple SFR for income;
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes8y@Jason Palmer if you're doing everything legal, you have nothing to worry about. Brokers spend a lot of time and money to become licensed to do what they do. Of course they'll be upset if they feel as though you are circumventing licensing laws to make money in their field. It's the same as taxi drivers getting upset about uber drivers taking money out of their families' mouths without having to go through the same licensing as they do. If it's not something that you can handle, getting licensed is an option for you.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes8y
IF this is "legal" why are cease and desist letters being issued? Here are a few "ex" wholesalers:
https://www.myfloridalicense.com/sto/unlicensedact... - 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Jason D.:
@Jason Palmer if you're doing everything legal, you have nothing to worry about. Brokers spend a lot of time and money to become licensed to do what they do. Of course they'll be upset if they feel as though you are circumventing licensing laws to make money in their field. It's the same as taxi drivers getting upset about uber drivers taking money out of their families' mouths without having to go through the same licensing as they do. If it's not something that you can handle, getting licensed is an option for you.when i was in Paris last year the uber drivers are incognito they cant put signs on their cars or anything lest the cab drivers attack them physically key their cars throw rocks through their windows..
just like the hotel industry protecting its turf against airBNB... but if a wholesaler in Florida who is doing exactly what a real estate agent does and then gets a cease and desist for that activity then i think that's pretty clear.. All i know in FLA is when i was operating my funding business for the largest turn key player in the state at the time they bought 90% of their deals through this huge wholesale operation called ALTURA and those guys were all licensed brokers.. And i suspect that was for a reason ...
And of course Oregon is starting to crack down on illegal brokerage as well... with fines and cease and desist letters going out. but it wont stop all the new folks coming in.. that do not realize its not legal the way guru's teach it.. just like so many flippers in Oregon do not realize you need a developers license and insurance to flip houses.. now the CCB contractors board is all over this one they drive around and see work on a house they will follow up next thing you know you get a fine.. I know I got two last year 6k worth.. even though i had the license .. but it needs to be in the name of each LLC that actually owns the asset and since i have over 10 of them I did not think i needed one for each LLC but i was wrong and i got hammered for it.. now i am in compliance.
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes8y@Jay Hinrichs I think your final statement is the overall point in this. If you want to do business, either follow the rules or risk the consequences. Licenses and rules are there for a reason, usually to protect the public. If you get defrauded by a real estate broker, there are actions that you can take against the broker and they can face serious consequences. There is little accountability and no oversight when it comes to wholesaling.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Ned Carey:
@Jay Hinrichs you know we agree more than we disagree but I just have to jump in.
Not all wholesalers lie to their buyers
Many real estate agents lie about how much they can get sellers. Just to get the listing.
Many real estate agents leave desperate sellers hanging just as some wholesalers do.
Most deals I have wholesaled were deals most agents wouldn't do or couldn't do.
PS Is that the Heros Home logo? keep me updated on the 501 (c) (3) status
WE are TOTALLY in agreement there are horrid real estate agents and over the 4 decades that i have been working this and owning 3 brokerages and having 200 plus agents work under my licenses I get it.. You can always tell a veteran from a beginner agent we deal with them all the time on our new construction . And it tends to go in cycles in a down market many quite and only the long haul veterans plow through as you need referral business to really make it in the industry.. when things are hot like right now you have a whole bevy of new agents coming on that are rookies and just finding their way.. but they are licensed and they do have consequences if they foul up. I learned the buy a listing in my late teens ( i started selling RE at 18) and realized I did not want to be in the home selling business because of exactly what you talk about agents telling clients their home will sell for more.. or the reverse agents without enough fortitude to tell the seller we are not taking that listing its 50k over priced.. in the wholesale realm i suppose when a seller wants too much wholesalers just say pass and move on.. but your right there is always some agent that will list an over priced property hoping the seller will lower as time goes and that does happen more times than not.. but that led me into selling land only and controlling my deals and learning about development and into money lending which i far prefer over dealing with transnational real estate being sold to the public.
- Flipper/Rehabber · Boise, ID · Member since 2018 · 18 posts · 11 votes8y@Jason Palmer agreed! What were are doing as wholesalers is perfectly legal if you do go in with the intent to buy the property yourself and be upfront with the seller. In my market other wholesalers are removIng ads, Signs and reporting other wholesalers lol
- Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes8yFlorida has elderly and immigrants, two populations that need protection with their largest and sometimes only asset. I posted a year or so ago when a “friend/neighbor” wholesaled his barely English speaking neighbors’ dilapidated trailer house and made 16k on the 60k deal. The wholesaler’s brother is a realtor, which is probably why he/they were contacted. But no 6% mls listing happened. Somehow it was a sign out front with the wholesaling brothers phone number on it. Should there be laws regulating how this particular sale should have gone? 6% on mls or private sale with over 25% commission?
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes8y
Originally posted by @Jason Palmer:
Be careful when discussing or posting wholesale deals on Bigger Pockets' forums. Myself and several other wholesalers in my area have gotten complained on to the Florida DBPR and after looking into it we determined that ALL of the complaints came from upset brokers who saw our posts in Bigger Pockets. Everything I do is legal and checked by my attorney, but some people have nothing better to do than make trouble for you. I am in no way trying to start a discussion about the legalities of wholesaling. The point is that even if you are doing everything legally, a complaint to the licensing board can cost you unnecessary legal fees and time. Proceed with caution in this and any other forum when discussing or posting your deals. Wishing you all much success!
So the obvious question would be, in your market, what did the Department of Real Estate conclude? Did they determine that wholesaling is legal or do they require a license?
Most of the states require licensing of anyone that is involved in bringing a buyer and seller together to purchase or sell real estate when the person is being paid a fee, commission, etc. for the service. (It doesn't matter if it was lobbyists, or Santa Claus that pushed the State into regulating the activity, once it's a law, it's a law)
Rather than warning people to be cautious where they discuss their business, it would make more sense to warn everyone to check with the State Department of Real Estate in the state you will be doing business; and find out for certain, whether or not wholesaling is legal.
Here in Oregon, if a person owns a parcel of land in the name of an LLC, and decides to build a spec house on that parcel, even if the person is a licensed GC in Oregon, you are required to have a Developers license too and carry a bond and insurance. You are not allowed to call licensed subs for bids and schedule work, etc. on your job without it. Having been fined by the Contractors Board, I can tell you that very few of the bonding companies, insurance companies, General Contractors, rehabbers, subs, have EVER heard of this law, because most people don't do it. You also have to be a licensed GC to work on your own job if it's going to be sold, but not if you're living in it.
So, thinking you know what the laws are, isn't the same as knowing what they are. In CA all of those things listed above are perfectly legal. Where you are makes all the difference.
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes8y
Forgive me, because I am not the smartest tack in the box, but if having a license cures any grey areas, why are we having this conversation?
Incidentally, the argument I am not marketing property I don't own, I am marketing paper, has been challenged by Ohio, FLA, and others as brokering security without a license...
Again - if getting a license solves the issue, why not and be done with it?
@Jay Hinrichs - I love what you are doing. Is the 501 C 3 in the bag? Need help? I've done it once before.
- Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes8y@Ben Leybovich I am also curious how everyone feels about actually buying the property but re-selling the same way you would as if you assigned a contract. No flip or reno. It could add closing costs but that can be negotiated and potentially taken out of the equity that a seller may have? It would force wholesalers to have a line of credit etc, but avoid getting their license if they do not want to. Personally I see value both in being a licensed realtor (married to one) but also not being one and doing things wholesale (I am not licensed but have bought from wholesalers and have started to consider doing some assignments etc)
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes8y
Originally posted by @Nate Sanow:
@Ben LeybovichI am also curious how everyone feels about actually buying the property but re-selling the same way you would as if you assigned a contract. No flip or reno. It could add closing costs but that can be negotiated and potentially taken out of the equity that a seller may have? It would force wholesalers to have a line of credit etc, but avoid getting their license if they do not want to. Personally I see value both in being a licensed realtor (married to one) but also not being one and doing things wholesale (I am not licensed but have bought from wholesalers and have started to consider doing some assignments etc)
I think you'll find that most of the wholesalers you'd refer to as "the real deal" do that. But, obviously this requires capital, at the very least transactional capital. For this reason, most newbies cannot do it this way - wholesaling is, after all, the best way to get into REI with no money, no credit, and no common sense...lol
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Karen Margrave:
Originally posted by @Jason Palmer:
Be careful when discussing or posting wholesale deals on Bigger Pockets' forums. Myself and several other wholesalers in my area have gotten complained on to the Florida DBPR and after looking into it we determined that ALL of the complaints came from upset brokers who saw our posts in Bigger Pockets. Everything I do is legal and checked by my attorney, but some people have nothing better to do than make trouble for you. I am in no way trying to start a discussion about the legalities of wholesaling. The point is that even if you are doing everything legally, a complaint to the licensing board can cost you unnecessary legal fees and time. Proceed with caution in this and any other forum when discussing or posting your deals. Wishing you all much success!
So the obvious question would be, in your market, what did the Department of Real Estate conclude? Did they determine that wholesaling is legal or do they require a license?
Most of the states require licensing of anyone that is involved in bringing a buyer and seller together to purchase or sell real estate when the person is being paid a fee, commission, etc. for the service. (It doesn't matter if it was lobbyists, or Santa Claus that pushed the State into regulating the activity, once it's a law, it's a law)
Rather than warning people to be cautious where they discuss their business, it would make more sense to warn everyone to check with the State Department of Real Estate in the state you will be doing business; and find out for certain, whether or not wholesaling is legal.
Here in Oregon, if a person owns a parcel of land in the name of an LLC, and decides to build a spec house on that parcel, even if the person is a licensed GC in Oregon, you are required to have a Developers license too and carry a bond and insurance. You are not allowed to call licensed subs for bids and schedule work, etc. on your job without it. Having been fined by the Contractors Board, I can tell you that very few of the bonding companies, insurance companies, General Contractors, rehabbers, subs, have EVER heard of this law, because most people don't do it. You also have to be a licensed GC to work on your own job if it's going to be sold, but not if you're living in it.
So, thinking you know what the laws are, isn't the same as knowing what they are. In CA all of those things listed above are perfectly legal. Where you are makes all the difference.
YUp i got fined twice on this last year LOL bye bye 6k.. I do it again and probably bye bye ability to do any of this less i risk criminal prosecution :) but as more people get fined like i did and more people spread the word like you are.. flippers in Oregon will start coming more into compliance.. and we will see how far the Oregon DRE takes the un licensed brokering that goes on in every market.. they have already said its not legal to advertise in any form or fashion a real property you dont own that is clear..
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matt Pierce:
@Jason Palmer agreed! What were are doing as wholesalers is perfectly legal if you do go in with the intent to buy the property yourself and be upfront with the seller. In my market other wholesalers are removIng ads, Signs and reporting other wholesalers lolwhat generally does not fly is once U go into contract and then start running ads on 123 B st like your the owner..
so if wholesalers are reporting wholesalers who are they reporting them too... and does that indicate their activities are in some way contrary to the law or rules.. ???? throwing away bandit signs has been going on for as long as i can remember.. Not all wholesalers like to play nice with others
- Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes8y
Wholesaling is an EXIT strategy, not an ACQUISITIONS strategy. But many, many broke people are trying to use it as an acquisitions strategy.
If everyone was honest and fulfilled their commitment to homeowners it would not even be an issue. The issue is there are so many gurus out there teaching broke people to become wholesalers, and more and more homeowners are being screwed over by the wholesalers who represent themselves as "cash buyers" when they have no intent or ability to close, they're only intent is to try to wholesale to an end buyer and if they cannot they walk away by using escape clauses that were never intended for that purpose.
I've purchase several properties from homeowners who were extremely desperate after a wholesaler came in and contracted to purchase their home, and they in turn felt the sell was going to happen because the wholesaler promised to close by set date, and then the homeowners turn around and purchase another home to move to, and then the wholesalers are unable to find an end buyer and had no ability to close in the first place, so the homeowner gets stuck with two properties, or two mortgages. That's a problem that needs to be stopped. And if that means all wholesalers have to get licensed, so be it. There needs to be something in place to protect all parties involved.
My 2 Cents which ain't worth a penny!!
