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
- Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes8y
@Michael Gansberg We all know that selling what you own is legal. There's no question at all in any state that you can advertise and sell what you own. In the case of wholesaling, that is the interest you have as a principal in a contract.
The reason the legality keeps coming up is because Realtors are spreading lies to try to eliminate what they view as competition. Pure and simple.
Realtors do the same thing with every For Sale By Owner. They spout all kinds of made up statistics to try to convince FSBOs that somehow saving the commission actually costs them money. But far worse than that, the Realtor Association itself runs ads threatening sellers with death, rape and robbery if they don't list their house with a Realtor.
It's all Realtor lies. That's all it is. Every thread on this forum that questions the legality starts off the same way: "I was told by a Realtor that wholesaling is illegal, is that true?" Add to that the fact that most of the moderators are Realtors who hate wholesalers. LOL!
- Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes8y
@Jay Hinrichs I love how you keep posting that same letter over and over again as if it's proof of something LOL!
Investigating complaints is their job. They do the same thing in every state and province in North America. It means absolutely nothing unless that investigation reveals something.
I was investigated because a Realtor complained after I made a lease option offer on one of her listings. The second they found out I was a principal party to a purchase contract, not some schmuck pretending to be a broker, the case was dropped.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes8y
Originally posted by @Doug P.:
@Michael Gansberg We all know that selling what you own is legal. There's no question at all in any state that you can advertise and sell what you own. In the case of wholesaling, that is the interest you have as a principal in a contract.
The reason the legality keeps coming up is because Realtors are spreading lies to try to eliminate what they view as competition. Pure and simple.
Realtors do the same thing with every For Sale By Owner. They spout all kinds of made up statistics to try to convince FSBOs that somehow saving the commission actually costs them money. But far worse than that, the Realtor Association itself runs ads threatening sellers with death, rape and robbery if they don't list their house with a Realtor.
It's all Realtor lies. That's all it is. Every thread on this forum that questions the legality starts off the same way: "I was told by a Realtor that wholesaling is illegal, is that true?" Add to that the fact that most of the moderators are Realtors who hate wholesalers. LOL!
Buyers and sellers are principals. Middle-men are not but simply acting in an agency capacity. I ALWAYS make my contracts assignable, and this gives me options as to how I take title. Unlicensed brokers, making contracts assignable to sell the property, are just that: operating AS A BROKER. Some states are more lax, TX being a good example. FL has clamped down due to the number of VICTIMS of these FRAUDS AND SCAMMERS. The word victim is a quote from the state, not my doing. i just received a letter last week stating a citation was issued against an unlicensed broker that assured me his actions are legal. The state doesn't agree with the unlicensed broker. If these guys want to play their games, go where it is legal. Florida regulators stated most of the "victims" of these scams are the elderly and non-English speaking population. I have met several, and helped some retain their property due to the illegal actions of the unlicensed brokers. Call it what it is, and leave the word "who;esalers" to those that are licensed or those that purchase and resell. Laws don't lie! Those citing statutes are simply citing state laws. And forget the "they want to protect their monopoly" BS. Darn near anyone can get licensed if they desire. The unlicensed brokers prefer not to so they can play their games without oversight.
- 8yMike CumbieBusiness MemberREALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
I don't know of a single mod on the site that "Hates Wholesalers". I know I personally work with several wholesalers and have a great working relationship with them. I call them and treat them like clients when something that fits their criteria comes around. Maybe a nice below the radar auction, estate that they want to sell with contents. I have said more times than I can count how I have zero problems with buying low and selling high and zero problems with contract assigning. You however tend to see the one individual piece of wholesaling I do not agree with (Notice I never said Hate or even judge the practitioner) and continue to twist it and turn it and throw out a ton of generalizations, name calling and the like.
You wrap that one tactic and attach it to all wholesalers. In reality there are plenty of wholesalers that buy houses or intend to buy houses and resell them or their contracts. It is going out and dealing, people do it with cars, houses, comic books, gold etc. Lumping them into the same group as the ones with a 510 credit score, $4.32 in their bank account who have never bought or sold a house and couldn't define escrow, is doing more bad for wholesalers than anything I could ever write.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
Originally posted by @Doug P.:
@Jay Hinrichs I love how you keep posting that same letter over and over again as if it's proof of something LOL!
Investigating complaints is their job. They do the same thing in every state and province in North America. It means absolutely nothing unless that investigation reveals something.
I was investigated because a Realtor complained after I made a lease option offer on one of her li stings. The second they found out I was a principal party to a purchase contract, not some schmuck pretending to be a broker, the case was dropped.
You missed the point here. All these wholesalers are spouting what their attorney tells them, like it is definitive proof of legality. Ask the same question to five attorneys and get five different answers. It is only an opinion until it has been adjudicated. The simple solution to determine legality is to contact the the local jurisdiction and ask what is required by law. In your example you were following the law, so nothing to worry about. So I don't understand who needs to "beware" besides those breaking the law. Maybe the lesson learned is if you are breaking the law, don't brag about it on public internet forums.
- Member since 2018 · 8 posts · 8 votes8y
There's obviously a lot of tension when it comes to this topic but no one has suggested a way to do wholesaling the "right" way.
I see people saying that all you have to do is become an agent. How does that help? If you're assigning a contract with no intent on closing and you're still disclose that you're the agent, aren't you still wholesaling "illegally" because you had no intent on closing?
I get that advertising a property you don't own is not right and that assigning a contract on a property you had no intent on closing on in the first place is frowned upon, but what does having a license change any of that? What does being a broker change? You're still assigning a contract on a property you had no intent on closing on.
So my question to you all is, how can wholesalers do it the right way? What can and can't they do when it comes to assigning a contract on a property? Thank you all so much for everything! - Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes8y
Originally posted by @Jay Hinrichs:
Originally posted by @Account Closed:
Originally posted by @Doug P.:
@Account Closed I take it the $50k to fund the LLC is used for paying the seller any equity you agree to, closing costs, and repairs. Good system!
Right. And I would think a similar set up would work in your neck of the woods.
You mentioned that realtors that promise too much to get the listing are a problem. I see that happen too. While wholesalers tend to offer way below the value, realtors can for instance get the listing by exaggerating what the value of the property is - they list high at $200,000 - they get the listing and after the house doesn't sell their solution is to reduce the price to say $190,000.
When you do the math, since listing fees in my markets run about 6% (or $12,000 for a $200,000 listing) - and the agent gives their cuts to their broker, the other agent and the other agent's broker - so by 4 people - the agent winds up with $3,000
The house doesn't sell so the agent cuts the price to $190,000 - a four way split of 6% on $190,000 is $2,850 or about $150 hit to the agent - so, buy dropping the price the agent loses only $150
However, the Seller has taken a $10,000 hit. That is enough money for me to take you and everybody else on the thread to the Four Seasons Resort here for a very nice night out. That is a lot of money to the seller.
I got a call last thursday from a potential seller that went off market. The agent had the property at $399,900. No offers. I looked at comps (sold within the last 90 days) and all three comps put her place at about $340,00. Doesn't the agent realize that the buyer has to have an appraisal and the appraiser is going to use "Solds", and not use wishful thinking? Why deceive the seller? It gives false hope.
Rather than argue with the seller who was convinced her property is worth $399,900 (I could hear the disappointment in her voice) I sent her to a wholesaler. :-)
Mike while I agree the practice of buying a listing by telling the owner a price way to high and hope they lower it goes on for sure.
but many times to most times its the seller setting the too high price while the agent tells them OK we will try it.
My wife runs into this often and with her best client ME she tells me Jay your too high on price.. I say try it for 2 weeks and lets see.
so a lot of that goes on
@Jay Here is the difference, you are a sophisticated investor and you understand the market and process. I would expect you to have an opinion of where to price a property. I wouldn't expect you to be emotional about the house.
Most people are selling their own home and get emotional about it. The average home seller only knows what their neighbor down the street sold for. The fact that the house down the street is 460 sq ft bigger, was built 10 years later, has a better view and was remodeled, goes beyond the ability of the seller to compensate for and they expect the same price until someone with experience shows them why that isn't realistic.
There are over 48,000 real estate agents in Arizona alone, and 85% of them are not making a living selling real estate. Inventory is very low. The agents want the listing really badly. Every state has the same problem. One can't expect every agent to have quality training or good sales skills, but the common fall back is to over promise to get the listing or over price from lack of experience. Either way, it sets a false expectation for the seller. I am told 35% of the listings in Arizona never sell. (That info comes from one of the top agencies in the valley). That is the agent's fault in my opinion, and with a lack of inventory, it's mind blowing that 35% don't sell.
- Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes8y
@John Thedford The laws are very clear who is a broker and who is a principal. You just don't like the fact that it's legal for a principal to buy or sell without paying you a commission. That's all it is.
It's sad that you feel it's necessary to call a little sweet old granny a "fraud" and "scammer" because she wants to sell her interest in the home she raised her family in on her own without the "help" of a Realtor.
All of the 'public outcry' is Realtors complaining about people they view as competition, whether it's an investor, an FSBO, an FRBO, or a wholesaler. If they don't list with a Realtor they are a target. Unfortunately the laws don't stop Realtors from bullying, threatening, insulting and spreading lies about them.
Around here Realtors skulk around at night defacing FSBO signs. They knock on their door and tell them: "There's a rapist in this area targeting private sellers. You better list with me if you want to be safe." And heaven forbid you have a real estate investment business, you are guaranteed to be investigated for brokering without a license.
Fortunately, as the government as already stated in their legislation: It is 100% legal to buy and sell your own interest.
Of course Realtors like yourself KNOW that it's legal to buy and sell your own interest in property. But you guys hope your scare tactics will work and you'll get a principal to list with you.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Account Closed:
Originally posted by @Jay Hinrichs:
Originally posted by @Account Closed:
Originally posted by @Doug P.:
@Account Closed I take it the $50k to fund the LLC is used for paying the seller any equity you agree to, closing costs, and repairs. Good system!
Right. And I would think a similar set up would work in your neck of the woods.
You mentioned that realtors that promise too much to get the listing are a problem. I see that happen too. While wholesalers tend to offer way below the value, realtors can for instance get the listing by exaggerating what the value of the property is - they list high at $200,000 - they get the listing and after the house doesn't sell their solution is to reduce the price to say $190,000.
When you do the math, since listing fees in my markets run about 6% (or $12,000 for a $200,000 listing) - and the agent gives their cuts to their broker, the other agent and the other agent's broker - so by 4 people - the agent winds up with $3,000
The house doesn't sell so the agent cuts the price to $190,000 - a four way split of 6% on $190,000 is $2,850 or about $150 hit to the agent - so, buy dropping the price the agent loses only $150
However, the Seller has taken a $10,000 hit. That is enough money for me to take you and everybody else on the thread to the Four Seasons Resort here for a very nice night out. That is a lot of money to the seller.
I got a call last thursday from a potential seller that went off market. The agent had the property at $399,900. No offers. I looked at comps (sold within the last 90 days) and all three comps put her place at about $340,00. Doesn't the agent realize that the buyer has to have an appraisal and the appraiser is going to use "Solds", and not use wishful thinking? Why deceive the seller? It gives false hope.
Rather than argue with the seller who was convinced her property is worth $399,900 (I could hear the disappointment in her voice) I sent her to a wholesaler. :-)
Mike while I agree the practice of buying a listing by telling the owner a price way to high and hope they lower it goes on for sure.
but many times to most times its the seller setting the too high price while the agent tells them OK we will try it.
My wife runs into this often and with her best client ME she tells me Jay your too high on price.. I say try it for 2 weeks and lets see.
so a lot of that goes on
@Jay Here is the difference, you are a sophisticated investor and you understand the market and process. I would expect you to have an opinion of where to price a property. I wouldn't expect you to be emotional about the house.
Most people are selling their own home and get emotional about it. The average home seller only knows what their neighbor down the street sold for. The fact that the house down the street is 460 sq ft bigger, was built 10 years later, has a better view and was remodeled, goes beyond the ability of the seller to compensate for and they expect the same price until someone with experience shows them why that isn't realistic.
There are over 48,000 real estate agents in Arizona alone, and 85% of them are not making a living selling real estate. Inventory is very low. The agents want the listing really badly. Every state has the same problem. One can't expect every agent to have quality training or good sales skills, but the common fall back is to over promise to get the listing or over price from lack of experience. Either way, it sets a false expectation for the seller. I am told 35% of the listings in Arizona never sell. (That info comes from one of the top agencies in the valley). That is the agent's fault in my opinion, and with a lack of inventory, it's mind blowing that 35% don't sell.
I understand it cuts both ways.. right ? sellers are not realistic agents want listings .. right now in our market a pro listing agent who knows what there doing is going to make 500k or better a year … listings are simply money in the bank.
- Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes8y
@Marcus Brown Just read the legislation in your state, it's usually pretty clear. The right way to wholesale is to be a principal party. Plain and simple. Is your name on the line that says: "Buyer"? Then you are a principal to that contract and are not acting as an unlicensed broker. You then have the full legal right to close on that contract or assign your interest to someone else.
The wrong way to do it would be to call a seller up and says something like: "I'll find a buyer for your house if you pay me 6%." when you're not licensed to broker for others.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Doug P.:
@John Thedford The laws are very clear who is a broker and who is a principal. You just don't like the fact that it's legal for a principal to buy or sell without paying you a commission. That's all it is.
It's sad that you feel it's necessary to call a little sweet old granny a "fraud" and "scammer" because she wants to sell her interest in the home she raised her family in on her own without the "help" of a Realtor.
All of the 'public outcry' is Realtors complaining about people they view as competition, whether it's an investor, an FSBO, an FRBO, or a wholesaler. If they don't list with a Realtor they are a target. Unfortunately the laws don't stop Realtors from bullying, threatening, insulting and spreading lies about them.
Around here Realtors skulk around at night defacing FSBO signs. They knock on their door and tell them: "There's a rapist in this area targeting private sellers. You better list with me if you want to be safe." And heaven forbid you have a real estate investment business, you are guaranteed to be investigated for brokering without a license.
Fortunately, as the government as already stated in their legislation: It is 100% legal to buy and sell your own interest.
Of course Realtors like yourself KNOW that it's legal to buy and sell your own interest in property. But you guys hope your scare tactics will work and you'll get a principal to list with you.
Frankly Doug to think that an wholesaler is my competition again gives me a full blown belly laugh.. they all chase me.. public records indicate that we are a strong buyer in 14 states who do you think these guys call.... those guys need me I don't need them LOL
- Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes8y
Still waiting on an answer to this question that I post in each one of these threads:
For those that decry wholesalers "stealing equity" from sellers, do you 100% of the time offer the exact highest dollar amount that you're willing to pay for a house that you buy off-market? - Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes8y
Originally posted by @Joe Splitrock:
Originally posted by @Doug P.:
@Jay Hinrichs I love how you keep posting that same letter over and over again as if it's proof of something LOL!
Investigating complaints is their job. They do the same thing in every state and province in North America. It means absolutely nothing unless that investigation reveals something.
I was investigated because a Realtor complained after I made a lease option offer on one of her li stings. The second they found out I was a principal party to a purchase contract, not some schmuck pretending to be a broker, the case was dropped.
You missed the point here. All these wholesalers are spouting what their attorney tells them, like it is definitive proof of legality. Ask the same question to five attorneys and get five different answers. It is only an opinion until it has been adjudicated. The simple solution to determine legality is to contact the the local jurisdiction and ask what is required by law. In your example you were following the law, so nothing to worry about. So I don't understand who needs to "beware" besides those breaking the law. Maybe the lesson learned is if you are breaking the law, don't brag about it on public internet forums.
@Joe Your comment: "The simple solution to determine legality is to contact the the local jurisdiction and ask what is required by law. In your example you were following the law, so nothing to worry about."
Again, that is only their opinion.
The fact that "It is only an opinion until it has been adjudicated." (your words, which I agree with) applies to each and every case. Any good attorney will tell you that it is "case dependent" and every case is different. The difference can be as simple as "I THOUGHT he told me ...". Ask the attorney if he will "Defend" that assessment in court (that it is legal).
It isn't really resolved until a "finder of fact" ( a judge) makes a determination and then it can still be appealed. The judge and attorneys look at the testimony, paperwork, interrogatories, depositions, exhibits, written arguments, motions, existing law, case law, and on and on. Why does it take two years and $50,000 out of your pocket to adjudicate? Attorneys like to get paid, otherwise you are on your own.
And I highly doubt any state, county or city employee would say it's "legal". They would say "call an attorney for an opinion.
The real question in my mind isn't if it is "legal" to wholesale but more of "what happens if someone *says* it is illegal, starts a suit and we have to go through the dance for two years". I don't want to be caught up in that. It just isn't worth it. The process is the punishment. I don't wholesale and I don't buy from wholesalers because I don't know what the wholesaler told the seller and I don't know what the seller THINKS he was told.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
Originally posted by @Doug P.:
@John Thedford The laws are very clear who is a broker and who is a principal. You just don't like the fact that it's legal for a principal to buy or sell without paying you a commission. That's all it is.
It's sad that you feel it's necessary to call a little sweet old granny a "fraud" and "scammer" because she wants to sell her interest in the home she raised her family in on her own without the "help" of a Realtor.
All of the 'public outcry' is Realtors complaining about people they view as competition, whether it's an investor, an FSBO, an FRBO, or a wholesaler. If they don't list with a Realtor they are a target. Unfortunately the laws don't stop Realtors from bullying, threatening, insulting and spreading lies about them.
Around here Realtors skulk around at night defacing FSBO signs. They knock on their door and tell them: "There's a rapist in this area targeting private sellers. You better list with me if you want to be safe." And heaven forbid you have a real estate investment business, you are guaranteed to be investigated for brokering without a license.
Fortunately, as the government as already stated in their legislation: It is 100% legal to buy and sell your own interest.
Of course Realtors like yourself KNOW that it's legal to buy and sell your own interest in property. But you guys hope your scare tactics will work and you'll get a principal to list with you.
What the hell is going on in Ontario? You say realtors are out at night defacing FSBO signs and threatening people? That is messed up. I always thought Canadians were nice. I can say with certainty that what is happening in Ontario is not happening in every city across the USA. I have heard of wholesalers stomping down other wholesalers signs, but half the time the signs were placed illegally anyways.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes8y
Those cease and desist letters aren't issued for the fun of it:)
I filed on one unlicensed broker in Feb 2017 and just received a letter from the state saying a citation was issued and i may be called as a witness. Keep on promoting your anti-agent rants if that makes you feel better but the fact is saying something doesn't make it true.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
Originally posted by @Account Closed:
Originally posted by @Joe Splitrock:
Originally posted by @Doug P.:
@Jay Hinrichs I love how you keep posting that same letter over and over again as if it's proof of something LOL!
Investigating complaints is their job. They do the same thing in every state and province in North America. It means absolutely nothing unless that investigation reveals something.
I was investigated because a Realtor complained after I made a lease option offer on one of her li stings. The second they found out I was a principal party to a purchase contract, not some schmuck pretending to be a broker, the case was dropped.
You missed the point here. All these wholesalers are spouting what their attorney tells them, like it is definitive proof of legality. Ask the same question to five attorneys and get five different answers. It is only an opinion until it has been adjudicated. The simple solution to determine legality is to contact the the local jurisdiction and ask what is required by law. In your example you were following the law, so nothing to worry about. So I don't understand who needs to "beware" besides those breaking the law. Maybe the lesson learned is if you are breaking the law, don't brag about it on public internet forums.
@Joe Your comment: "The simple solution to determine legality is to contact the the local jurisdiction and ask what is required by law. In your example you were following the law, so nothing to worry about."
Again, that is only their opinion.
The fact that "It is only an opinion until it has been adjudicated." (your words, which I agree with) applies to each and every case. Any good attorney will tell you that it is "case dependent" and every case is different. The difference can be as simple as "I THOUGHT he told me ...". Ask the attorney if he will "Defend" that assessment in court (that it is legal).
It isn't really resolved until a "finder of fact" ( a judge) makes a determination and then it can still be appealed. The judge and attorneys look at the testimony, paperwork, interrogatories, depositions, exhibits, written arguments, motions, existing law, case law, and on and on. Why does it take two years and $50,000 out of your pocket to adjudicate? Attorneys like to get paid, otherwise you are on your own.
And I highly doubt any state, county or city employee would say it's "legal". They would say "call an attorney for an opinion.
The real question in my mind isn't if it is "legal" to wholesale but more of "what happens if someone *says* it is illegal, starts a suit and we have to go through the dance for two years". I don't want to be caught up in that. It just isn't worth it. The process is the punishment. I don't wholesale and I don't buy from wholesalers because I don't know what the wholesaler told the seller and I don't know what the seller THINKS he was told.
Of course if you called the local office tasked with enforcing real estate laws, they would tell you what you need to do to comply. Their job is enforcing the rules, so the only way you are getting in trouble is if THEY see a problem with what you are doing. It is no different than code enforcement. I call the office tasked with enforcement to get clarification. I get responses in e-mail, so if there is a question later, I can reference the direction I was given.
I agree with your point that attorneys like to get paid, so it can result in a drawn out process. That is all the more reason to question what an attorney says. Follow the incentive. Attorneys profit from legal troubles, so if their advice lands you in hot water, it is more billable hours. By comparison a government employee is a clock puncher. They want to keep you in compliance with the law, so they don't have to work harder.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes8y
Originally posted by @Doug P.:
@Michael Gansberg We all know that selling what you own is legal. There's no question at all in any state that you can advertise and sell what you own. In the case of wholesaling, that is the interest you have as a principal in a contract.
Mostly true, selling what you own is legal. Realize, though, that some things are regulated. Can I sell my (legally obtained) machine gun? Can I sell my gun collection? Can someone sell their legally obtained opioid prescription? Can someone sell their legally obtained SNAP vouchers? Can a car enthusiast sell his cars? (Hint, after 5, you are a de facto dealer in some states). I own a company and own its stock, so can I sell my equity as a securities sale? Can I sell my soybean futures contract?
I would say, contrary to your post, that there would be a question in most (or all) states if I could advertise and sell the above list even though the items would be owned as personal property. In NC, a contract (e.g. a "wholesale" real estate contract) is personal property. My soybeans futures contract is a contract and it also is personal property. Both these contracts involve regulated transactions (transfer of real estate is regulated and transfer of securities is regulated). And, fortunately for me, in NC both of these contracts would involve exempt transactions. My state law doesn't distinguish between "real" and "personal" property in the :
(7) Any individual owner who personally leases or sells the owner's own property.
The above is from . Note the law doesn't say "real property". The states of OH and FL have changed ("tweeked") their definitions in recent history and the changes revolve around the sale of "interest" in regulated industries ... as has the IRS 1031 exchange rule (via Trump's tax changes) that eliminated personal property from being 1031 exchange eligible. My point is that in some states there are questions (counter to your claim) as to a person's ability to sell what you own when that personal property (contract) you are selling involves transfer of regulated securities/commodities/real property owned by others.
My 2 cents. Carry on.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes8y
Originally posted by @Joe Splitrock:
Originally posted by @Doug P.:
@John Thedford The laws are very clear who is a broker and who is a principal. You just don't like the fact that it's legal for a principal to buy or sell without paying you a commission. That's all it is.
It's sad that you feel it's necessary to call a little sweet old granny a "fraud" and "scammer" because she wants to sell her interest in the home she raised her family in on her own without the "help" of a Realtor.
All of the 'public outcry' is Realtors complaining about people they view as competition, whether it's an investor, an FSBO, an FRBO, or a wholesaler. If they don't list with a Realtor they are a target. Unfortunately the laws don't stop Realtors from bullying, threatening, insulting and spreading lies about them.
Around here Realtors skulk around at night defacing FSBO signs. They knock on their door and tell them: "There's a rapist in this area targeting private sellers. You better list with me if you want to be safe." And heaven forbid you have a real estate investment business, you are guaranteed to be investigated for brokering without a license.
Fortunately, as the government as already stated in their legislation: It is 100% legal to buy and sell your own interest.
Of course Realtors like yourself KNOW that it's legal to buy and sell your own interest in property. But you guys hope your scare tactics will work and you'll get a principal to list with you.
What the hell is going on in Ontario? You say realtors are out at night defacing FSBO signs and threatening people? That is messed up. I always thought Canadians were nice. I can say with certainty that what is happening in Ontario is not happening in every city across the USA. I have heard of wholesalers stomping down other wholesalers signs, but half the time the signs were placed illegally anyways.
LOL. That cracked me up, for real. I know almost nothing about the RE market in Canada but in every place I'm familiar with in the USA realtors couldn't care less about FSBO signs. There's more buyers than there are sellers in all the areas I'm familiar with and any realtor worth 5 cents can pay his mortgage easily these days.
I'm no realtor fan-boy - I've had plenty of bad ones myself, mostly because I didn't really know what to look for in a realtor - but the smart money, for anyone who wanted to wholesale, would be to be a licensed realtor and to buy & assign contracts outright. This way if you run into a seller that needs their money now, and it's a heck of a deal, you just buy it outright (lots of realtors around here make offers directly to the seller if they want the house for their own portfolio, including my realtor who is part owner of his company) and either keep it as part of your fleet or assign it, and if it's not a heck of a deal you throw it up on the MLS rather than being forced into trying to pawn off some crap on an unknowing investor.
Skyline Properties - Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes8y
Originally posted by @Ben Leybovich:
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.
I completely agree. Thanks for commenting Ben.
- Member since 2018 · 8 posts · 8 votes8y
@Patrick Soukup But having a license still doesn't mean that you have any intent on purchasing the property. Also, when you're wholesaling you're representing yourself and doing it out of your own best interest, so how is having a license going to allow you to be brokering anything if you're still representing yourself and none of the other parties? You will probably not even be reporting your assignments to your broker and will literally be doing it all out of self-interest. So I'm not sure I understand when people say that just having the license will cure all of these problems.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes8y
Originally posted by @Marcus Brown:
@Patrick Soukup But having a license still doesn't mean that you have any intent on purchasing the property. Also, when you're wholesaling you're representing yourself and doing it out of your own best interest, so how is having a license going to allow you to be brokering anything if you're still representing yourself and none of the other parties? You will probably not even be reporting your assignments to your broker and will literally be doing it all out of self-interest. So I'm not sure I understand when people say that just having the license will cure all of these problems.
You are correct - having a license certainly does not mean the person will not do anything unethical, i.e. enter into a contract they cannot themselves close. The difference is in the ability of redress. If someone is licensed, they can have their license revoked. They are also required to carry insurance, which could then be sued for redress. The unlicensed guy with no ability to perform under the contract probably has no assets or other means from which you could be made partially/completely whole in a situation where you had to sue to force contract compliance. It's kind of like saying "Why bother making everyone have car insurance when both the insured and uninsured guy can ram into me?" Well, the guy who has insurance has someone else on the hook for his misdeeds. The guy without insurance just walks off into the sunset. In fact, in my state I pay a pretty good premium for carrying uninsured motorist insurance, where *I* have to pay to cover other's misdeeds.
Skyline Properties - Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes8y
@Marcus Brown depending on your state, being able to market a property and negotiate a sales price requires to be licensed. This is exactly what you're doing as a wholesaler, marketing property owned by another. You do NOT need to be licensed to market and sell your own personally owned property, but that is not what wholesalers are doing, they are marketing the property under contract. They have no deeded rights to the property and therefore to clear up any grey area, it would be better to be licensed. This way, they can market the property under contract (which is what they are doing - I.e "Purchase Price" "Reno Cost" "ARV"), rather than "market the contract" POTENTIALLY illegally depending on your state.
Just because you are licensed doesn't mean you're better, but it means you've gone through the steps through the state to be licensed to market and negotiate property owned by others.
- Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes8y
@JD Martin If these characters interpretation of 475.43 is to be believed then it would be illegal to assign your interest in a contract in the state of Florida regardless of whether you are licensed or not. Being licensed doesn't change anything unless they are acting as the owner's agent. If they are acting as a principal in the transaction and assigning their interest accordingly, and they are correct that it is illegal for a principal to assign its interest, then they are breaking the law even though they're licensed.
- Member since 2018 · 8 posts · 8 votes8y
Exactly my point @Doug P.. Regardless if you're licensed or not, you're still doing and acting the same exact way that someone who's unlicensed is. Getting a license does not mean that all of a sudden wholesaling for you is legal and you get a pass. Everybody would get their license if that was the case. Any Joe Blow can get a license. I just feel like a lot of the people who talk down on wholesalers, even the ones doing it the right way, are just a bunch of hypocrites. You all have probably done, will probably do, and if given the opportunity to would do the exact same thing and assign deals if it meant you made money. Most of us are investors and we're looking for deals. If that wasn't the case, BP wouldn't exist.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes8y
Originally posted by @Doug P.:
@JD Martin If these characters interpretation of 475.43 is to be believed then it would be illegal to assign your interest in a contract in the state of Florida regardless of whether you are licensed or not. Being licensed doesn't change anything unless they are acting as the owner's agent. If they are acting as a principal in the transaction and assigning their interest accordingly, and they are correct that it is illegal for a principal to assign its interest, then they are breaking the law even though they're licensed.
I don't know anything about FL law so I can't speak to that, but personally I don't see why it would be a problem for a buyer to assign that contract to someone else so long as the seller ends up whole at the end. If it is a problem, the easy solution would be for there to be someplace for the seller to sign off that s/he agrees to the assign and releases the current buyer.
I think there's a way to make the thing work for everyone. Probably what needs to happen is that some reputable wholesalers need to push for some modicum of regulation that protects sellers from the shady people who have no ability to close. Perhaps the way to solve that is to require wholesalers to carry insurance. Or to have them put some money in escrow. Or to prohibit contingencies on a non-licensed contract. Or have some severe criminal penalties. Or maybe a mix of it all - I don't know what the right approach is, but I believe sellers should be able to have some confidence that a contract entered into in good faith is going to be executed. A good percentage of wholesalers cannot offer that.
Skyline Properties
