Attention Wholesalers: Beware!!!

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Exactly my point @Doug Pretorius . 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.

Originally posted by @Doug Pretorius :

@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. 

This is an interesting conversation that seems to occur every few months on this website. One of the reasons there is no concurrence on the legality of "wholesaling" is because wholesaling is a category of many different types of real estate transactions that occur without licensed agents. Some people here are referring to assigning contracts as wholesaling. Whereas others are doing these complicated double closing, alphabet soup transactions... I've seem many variations come over my desk, as a lawyer writing contracts for some of these deals. AS they say, the devil is in the details. There are ways to do it legally, and certain acts that are legal violations.

I disagree with @Jason Palmer that license laws are there to protect the industry. Theyre there to protect the public. And even with those laws there are still unethical agents and brokers.

Right now, the biggest victims are the poor people who are looking for ways to "get rich quick on real estate." They give their meager savings to these real estate "gurus" who claim to be able to teach them ways around the laws, ways to do deals without needing a license. These people have so little money that they cannot even afford a license or to take classes at a real estate training school. They pay these shysters and subscribe to their database services to send out thousands of letters to potential home sellers.  90% of these people who call me, the techniques they are being taught are fraud.

There are legal ways to wholesale. But each step in your process must not break any laws. If you dont know what youre doing, you could be breaking numerous laws. And those people who have gone through the time and money to do it right, the brokers and agents, who are losing deals because someone is skirting the law are extremely likely to report that illegal activity. In California, loss of one deal could be loss of $60,000. Obviously, if anyone knew they were losing that much money they would try to put a stop to it.

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.

Unless a licensee is a seller's agent, and thus has fiduciary obligations to the seller, one is not required to act in the best interest of the seller. One can broker and be representing oneself as a principal--in the case of wholesaling, the licensee who is a buyer is a principal (a party) and may act in his own interest. However, as a licensee one will still have certain obligations to the seller, per the state's laws. They won't interfere with acting in one's own interest.

Originally posted by @Doug Pretorius :

@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.

You need to look at the whole chapter. 475.01(a) defines "broker" and 475.011(2) defines the exemptions. Note the wording in the exemption: 

Any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property;

The explicit definition says "real property". It used to just say "property", which included "real property" (the physical house, etc.) and "personal property" (the contract) as detailed in my prior post. OH changed this characteristic in the definition about 2010, just like FL. 

So, yes, being licensed is different in that you can sell, market, lease, exchange, etc., for others... including in 475.01(a) the phrase "or any interest in or concerning the same". Emphasis in bold is mine. 

http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0400-0499/0475/Sections/0475.01.html

www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0400-0499/0475/Sections/0475.011.html

@Marcus Brown ,

"Regardless if you're licensed or not, you're still doing and acting the same exact way that someone who's unlicensed is."

What the people who are saying that mean is to get your license and then market the property itself. Because you're licensed you are allowed to market and sell a 3 bedroom/2 bath home on behalf of someone else (it requires a license).  There is no equitable interest for an agent. They are simply marketing the house itself (which requires about $400 in classes and a test in most places here in the U.S, plus you must follow marketing guidelines such as phone numbers, fair housing logos, brokerage listed etc). 

The way many are calling "wholesaling" on this topic is to get a contract to actually buy the property. They then try and get someone else to take over their responsibility to actually purchase the property. One contract says "I am going to try and sell your house to someone else" the other one says "I am going to be buying your house" (Because the contract has to have them as "buyer" to be equitable interest). 

So I would disagree that they are doing the same thing. One has a contract to market and find a buyer, the other has a contract to purchase. 

@David Stewart I see, but so does that mean that by having a license and acting on your own interest that you're free to assign deals that you never had the intent of closing on? Is just having a license good enough to allow you to market a contract that you have and assign it to an end buyer?

@Marcus Brown

"I see, but so does that mean that by having a license and acting on your own interest that you're free to assign deals that you never had the intent of closing on?"

No, it is saying, if you have no intention of closing on it, there is no reason to get it under contract with you as the buyer. You should just get it under contract to sell for them and go find them a buyer. If you are licensed there is zero value in telling someone you are buying it yourself when you don't plan on it. Just tell them you are going out to find them a buyer.

I don't understand the purpose any licensed agent would get under contract to purchase and then assign it off unless they originally intended on buying it themself.

@Marcus Brown ,

Commission rates are not set in stone. I know my state is very specific on that. Each brokerage must determine what the rates will be. There is nothing that says you can not have a 20K commission to sell their property. I have sold Mobile homes for 25% commission. I know there are plenty of land guys that charge alot to sell raw land. 

So as an agent just tell them you are going to list their house for 50K and there is a 20K commission (instead of telling them you are buying it for 30K and then trying to find someone else to pay 50K for it. Difference is you can actually market the property to anyone you want. You are not left trying to just send it to cash buyers. You could publish it on the web if you wanted, End result, you sold a property and charged a commission. 

Originally posted by @Mike Cumbie :

@Marcus Brown ,

Commission rates are not set in stone. I know my state is very specific on that. Each brokerage must determine what the rates will be. There is nothing that says you can not have a 20K commission to sell their property. I have sold Mobile homes for 25% commission. I know there are plenty of land guys that charge alot to sell raw land. 

So as an agent just tell them you are going to list their house for 50K and there is a 20K commission (instead of telling them you are buying it for 30K and then trying to find someone else to pay 50K for it. Difference is you can actually market the property to anyone you want. You are not left trying to just send it to cash buyers. You could publish it on the web if you wanted, End result, you sold a property and charged a commission. 

It's good that you put into words what many seasoned REI know already. I think there are a lot of "wholesalers" that miss this point, that a licensed broker's commissions can effectively match what a "wholesaler" would make but with a process of clear understanding (listing agreement) and transparency. The broker is a fiduciary for the seller and is also motivated by the listing agreement (and if negotiated property a higher commission). Small parcel land brokers routinely have 10% commission in markets I play, and I can easily see where hard to market standalone mobile homes would fetch a commission pemium.

Originally posted by @Marcus Brown :

@David Stewart I see, but so does that mean that by having a license and acting on your own interest that you're free to assign deals that you never had the intent of closing on? Is just having a license good enough to allow you to market a contract that you have and assign it to an end buyer?

 Yes. You may do so. Assigning contracts is not illegal--it is explicitly legal, and an assignment of a real estate contract is an interest in real estate. The law (we're talking about Florida law here) does not prohibit assignment; it prohibits brokering without a license--and brokering is, in one of the aspects of the law, marketing a property for sale. Per Florida Statutes: "A person may not operate as a broker or sales associate without being the holder of a valid and current active license therefor. Any person who violates this paragraph commits a felony of the third degree...."

Now, here's an ambiguity. Florida Statutes also says "Exemptions.—This part does not apply to: ... (2) Any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property." The interesting thing here is the statute defines "real property" thus: "(i) 'Real property' or 'real estate' means any interest or estate in land... including any assignment, leasehold, subleasehold, or mineral right...."

It seems to me that as an assignment is an interest in real property, as defined in Florida law, an individual selling his/her own assignment, which is real property, would be exempt from the law prohibiting brokering without a license. I'm missing some subtle distinction here, maybe. But if an assignment is an interest, that clause would seem to exempt from the charge of brokering without a license anyone assigning their own contract.

Is it that there is no assignment until the assignment contract is created?

Anyone who can identify an error here, please do so.

@Chris Martin  OK, so agents who assign their contract are also breaking the law. You can't wholesale in Florida. Period. Regardless of whether you are licensed or not. All this advice then for wholesalers to get licensed in Florida is a sick joke to get people to pay to become agents and then still get fined or thrown in jail for breaking the law.

You can't have it both ways. Either it's illegal for EVERYONE to market and assign their own interest in a contract. Or it's not. Being licensed to sell someone else's property doesn't suddenly make it legal for you to sell your own interest. Unless this is 100% pure collusion between the state and brokers.

Originally posted by @Doug Pretorius :

@Chris Martin  OK, so agents who assign their contract are also breaking the law. You can't wholesale in Florida. Period. Regardless of whether you are licensed or not. All this advice then for wholesalers to get licensed in Florida is a sick joke to get people to pay to become agents and then still get fined or thrown in jail for breaking the law.

You can't have it both ways. Either it's illegal for EVERYONE to market and assign their own interest in a contract. Or it's not. Being licensed to sell someone else's property doesn't suddenly make it legal for you to sell your own interest. Unless this is 100% pure collusion between the state and brokers.

 My EXACT point Doug! 

Originally posted by @Chris Martin :

It's good that you put into words what many seasoned REI know already. I think there are a lot of "wholesalers" that miss this point, that a licensed broker's commissions can effectively match what a "wholesaler" would make but with a process of clear understanding (listing agreement) and transparency. The broker is a fiduciary for the seller and is also motivated by the listing agreement (and if negotiated property a higher commission). Small parcel land brokers routinely have 10% commission in markets I play, and I can easily see where hard to market standalone mobile homes would fetch a commission pemium.

Fiduciary status is not automatic. In Florida law, the default position of a real estate sales associate or broker, even a listing brokerage and agent, is "Transaction Broker." That is the legal presumption, and obtains unless a specific relationship of either single agent for seller, single agent for buyer, or "no brokerage" relationship is established explicity (with a signed agreement). Only the single agent relationships are fiduciary relationships. All come with certain obligations, but only single agents have additional fiduciary obligations. So in Florida, as an agent I'm not a fiduciary for the seller unless I explicitly make myself thus. And if I were wholesaling the seller's property, I would not do so.

Originally posted by @Doug Pretorius :

@Chris Martin OK, so agents who assign their contract are also breaking the law. You can't wholesale in Florida. Period. Regardless of whether you are licensed or not. All this advice then for wholesalers to get licensed in Florida is a sick joke to get people to pay to become agents and then still get fined or thrown in jail for breaking the law.

You can't have it both ways. Either it's illegal for EVERYONE to market and assign their own interest in a contract. Or it's not. Being licensed to sell someone else's property doesn't suddenly make it legal for you to sell your own interest. Unless this is 100% pure collusion between the state and brokers.

?  Can you please read the definition? 

(a) “Broker” means a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor, appraises, auctions, sells, exchanges, buys, rents, or offers, attempts or agrees to appraise, auction, or negotiate the sale, exchange, purchase, or rental of business enterprises or business opportunities or any real property or any interest in or concerning the same,... 

EXPLICITLY, brokers can, for another (meaning another "owner" by deeded rights), and for compensation, sell "any real property or any interest in". A contract represents an 'interest in'. 

By definition, a "wholesaler" could go to a broker and say to broker "hey, I've got this property under contract. Can you sell the contract (the 'interest in') for me?" Broker would just transact the sale. I suspect in practice this doesn't happen frequently. Just a guess. FL brokers can comment. 

So, agents who sell their or other's interest (contracts)… not sure where statutorily they are doing anything buy complying with Florida statue. I would expect there would be a lot of transparency (and probably scrutiny) with broker interest in the deal, but I'm not seeing where, statutorily, an agent is breaking the law. 

Originally posted by @David Stewart :
Originally posted by @Chris Martin:

It's good that you put into words what many seasoned REI know already. I think there are a lot of "wholesalers" that miss this point, that a licensed broker's commissions can effectively match what a "wholesaler" would make but with a process of clear understanding (listing agreement) and transparency. The broker is a fiduciary for the seller and is also motivated by the listing agreement (and if negotiated property a higher commission). Small parcel land brokers routinely have 10% commission in markets I play, and I can easily see where hard to market standalone mobile homes would fetch a commission pemium.

Fiduciary status is not automatic. In Florida law, the default position of a real estate sales associate or broker, even a listing brokerage and agent, is "Transaction Broker." That is the legal presumption, and obtains unless a specific relationship of either single agent for seller, single agent for buyer, or "no brokerage" relationship is established explicity (with a signed agreement). Only the single agent relationships are fiduciary relationships. All come with certain obligations, but only single agents have additional fiduciary obligations. So in Florida, as an agent I'm not a fiduciary for the seller unless I explicitly make myself thus. And if I were wholesaling the seller's property, I would not do so.

 Agreed. My point was to contrast the role of a broker as 'for' the seller or (hate to put it this way) 'against' the seller. 

GEEZUS--nothing like turning things upside down. The assignment clause exists for a reason and it is NOT there to allow unlicensed people to broker real estate. The reason unlicensed people get in trouble is because they are bringing an end buyer and making a fee. An agent MAY assign contracts and bring an end buyer-just as taking a listing and bringing an end buyer. I make all my contracts assignable so I can choose which entity I want to take title in. I COULD charge a fee and represent others as well. The key fact that these unlicensed brokers are bringing a buyer and seller together for a fee means they are BROKERING real estate. One of the posters in this thread almost appears to be trolling rather than adding value with all their gibberish about agents breaking laws by assigning, etc. BTW--assignment fees MUST go through the broker as required by law. Again, I am referring to FL law, the state where the OP is located. 

@Chris Martin We all know brokers can sell interests in real estate "for another", that's the definition of brokering. But you are saying that the owner of that interest can not sell their own interest. If a broker can sell their own interest just because they're a broker, that is totally insane.

That is the definition of favoring one group of private citizens over another. Wholesalers should get the ACLU involved in challenging that legislation.

@John Thedford Get real John. You're saying that assignment law exists for YOU personally to have the right to assign contracts you are a party to however you like, just because you have a license. While anyone who's a party to a contract who isn't licensed, can't assign their own interest!

You keep telling us that it is illegal for the owner of a real estate interest to advertise or assign their own interest. And yet you are also telling us that you put in every contract that you can assign your own interest wherever you like.

In other words, you are using your license as a shield to allow you to break the law that you are using to bash @Jason Palmer and every other wholesaler here.

@Thomas Franklin ................FYI, I was informed by Bigger Pockets that they have an issue with me calling you stupid.  Although, they seem to have no problem with you calling me lazy.

For the record, I'd like to say that this is a forum where investors are exchanging thoughts and ideas.  You should always keep an open mind when asked a question.  Don't assume that you are being attacked.  Some questions are simply that, a question.  

There are plenty of new investor/wholesalers that are looking for advice and guidance.  This can be a scary time for them.  Often times they are too afraid to ask a burning question.   It can be intimidating for them especially when someone with years of experience brings down the hammer or tries to make them feel foolish for asking the question.

Luckily I am not new to investing and I don't shy away from bullies.  

We all should be positive and try to be helpful.  We all are in this together!

If the brokers are on BP, then they are at least somewhat adept in investing. My brokers and agents are all heavily invested with investing and it benefits them greatly. I get buy a wholesale to flip, my broker lists it when it's done. Bam. One of my brokers specializes in short sales. It's a big circle, we all help each other. I don't see why anyone would be upset. Most wholesales aren't good for the MLS anyways, typically I have found them to need a lot of work and would never meet FHA requirements.

Now I’m not a pro in wholesaling as I’m just now venturing into it and don’t have the credibility here on BP as many like to see but wanted to jump into this thread because it really is interesting..In MY UNDERSTANDING brokers don’t realize that we offer different services. They mostly specialize in navigating their clients through all aspects of home buying and selling. Rarely do you come across an agent who understands the investing side. Haven’t in my area at least(central nebraska). As wholesalers, we focus on the numbers and what works best as an investment. A good wholesaler at least. Whether it be us buying it,or assigning/double closing. We offer fast service for those who NEED to sell fast and their house cannot sit in the market for 6 months. The problem is the gurus who claim it to be easy also. It’s those people who give wholesalers a bad name. Wholesaling is not easy. Takes a lot of dedication and hard work. You don’t see a broker tracking down for 5 hours the owner of the vacant house with overgrown grass. I have taken real estate classes for licensing-Brokerage, principles and practices, and finance. But don’t find it as profitable to be an agent/broker or even spend the time getting licensed for its benefits as an investor. And as to it only being broke people who get into wholesaling…As of now, I have a full-time job that pays me well and live comfortably. I’m just wanting to get more out of life and seems wholesaling is the way to get started in real estate investing. Just because we don’t have a license doesn’t mean we don’t intend to operate ethically. I agree that you cannot market for a property as a cash buyer if you don’t have the cash in hand.. But you can let them know that you have availability of funds that allow you to close fast..This where you fully disclose what your operation is about and how they can benefit from your service. If they don’t want to work with you, fine move on. If they’re looking for optimal sales price, then sell the home yourself or list with a broker. And If your state allows it and you’re assigning the contract, make sure you have the end buyer ready to close. If it’s a good deal, they’re buying. There’s always going be those people trying to take advantage of others no matter what field of business you’re in. Agents/Brokers included. In my opinon, we both bring certain value, and there’s room for both of us to operate in harmony. idk why all the hostility. 

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