Attention Wholesalers: Beware!!!

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Hi @Cecilio Gandara

Welcome to the forum and feel free to jump in. There is no way to learn on this site without engaging in conversation. I learn every day still.

To just make sure we are using the same point of reference, Wholesaling involves many aspects of real estate. The one most often brought in (and debated) is wholesaler goes to homeowner, gets house under contract with their name as buyer, then sends out information to a list of cash buyers hoping to find someone to pay an assignment fee. If buyer is not found, wholesaler finds some clause in the contract to back out and walk away.

The other more accepted methods are people buy houses at rock bottom prices and sell them to others for a profit and wholesalers go to buy a house at an auction or from a seller and find someone who happens to want it more so they just go ahead and assign it to the other person for a fee.

Not many people have a problem with the second two methods. This discussion is really on the first method. As far as wholesalers providing a different service, I would disagree. There is no scenerio where a licensed individual could not sell a piece of real property where a wholesaler could. Quite the opposite actually. The agent could not only send it to a select group of people, but they could send it to everyone and post the ads on the Department of State doors and nobody would care (as long as the proper information was listed in the ad like broker, brokers number, proper logos etc). Cash buyers found in secret close no faster than cash buyers found in a bar, off the MLS or from a craigslist ad.

If I thought for a second I could get away without paying the $350 in class and testing fees to get licensed plus the $59 every 2 years in CE credits I wouldn't waste my time doing it (and if $400 is somehow a breaker to my business I need to find a new gig), so of course I don't recommend it to anyone else. My biggest concern with wholesaling is people convince new people in the industry that it is a solution and if they happen to be successful, they get a cease and desist order from the state totally destroying any momentum they have. So for me, paying a couple hundred dollars to be able to put a sign in the yard, flyers, newspaper ads, TV ads, craigslist, facebook, Zillow, Trulia, MLS.. It is an easy choice.

So I guess I have never heard a reason to not have a license and the biggest negative is you save $400 and have to put decent size fonts on your advertising. Which is different than, don't get caught advertising a property without a license or you could get in trouble.

Good luck in your business however you decide to go forward!

Originally posted by @Doug Pretorius :

@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 interes

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.

 Doug you keep twisting facts. The holder of a contract is NOT the owner of the property, only the rights in that contract.  My contracts are assignable so that I can choose which entity to put the property in. I am not bringing an end buyer. However, if I want to bring an end buyer I can do so because I am a licensee. As far as what is legal, the state decides that. I can choose to comply or get in trouble:)  475.42 and 475.43 are very clear. I don't make the rules, I just do my best to follow them. Now we have your "using your license as a shield" comment. Get REAL!  IF you think I am breaking laws, just let me know. I will give you the link to report me!

Originally posted by @Doug Pretorius :

@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.

Hmmm. How to explain. 

You: "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."
Me: "Mostly true, selling what you own is legal. Realize, though, that some things are regulated..." I quote NC state law that supports your view. I also state OH and FL that don't and hence your statement isn't accurate.
You: "...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."

In NC, if I want to build my own house to rent out, I can't, legally. That's insane too, right? By law I MUST be a general contractor, even though I will OWN the building. A licensed general contractor on the other hand, "who undertakes to superintend or manage, on his own behalf or for any person, firm, or corporation" (bold emphasis mine) can build his own. In your words: "That is the definition of favoring one group of private citizens over another. Wholesalers should get the ACLU involved in challenging that legislation." Well, what about anyone building rental houses? The law favors licensed contractors. Will the ACLU get involved and put and end to that favoritism? 

People have general contractor's licenses and can build for themselves and others. People have law licenses and can practice for themselves and for others. I'm not licensed so I can't practice law, per state law. Insane, right? But for some reason, you think real estate licenses apply differently... it's just interesting to me to see your view in context of this discussion. 

In a nutshell, I play the game by the defined rules. A LOT of people (like people in default) didn't like the rules (banking, real estate, equity skimming, etc.) in 2008-2010 and that's when many states changed their laws. Some people on here say that realtors and real estate brokers initiated the changes when in reality the mass foreclosures in states like OH and FL caused regulators to rethink their outdated laws. 

In NC, it is against state law for Tesla to sell cars. Is that insane? Or using your words "totally insane"? That's the NC state law

This is my last post here.

Disclaimer: I am not a legislator or elected official and don't make laws that I abide by.

@Chris Martin The lawyer analogy is a good one. You do not need to be a lawyer to represent yourself. You only need to be a lawyer to "represent others". Same with real estate. You can sell your own interest without a license. You can sell "for others" with a license.

The Florida statutes also make it clear that "real property" does not only mean the title. It means any interest created by a lease, purchase contract or option.

So until the NAR successfully lobbies the state to make it illegal to sell your own interest in real property. Wholesalers can continue to buy and sell their own interests.

The real issue is how much whining from @John Thedford  do they want to deal with, LOL!

@Chris Martin The funny thing is that the credit crisis wasn't caused by banks or investors or wholesalers or realtors. It was caused by the government. The government insisted that banks lend to people that had no business owning property so that prices would keep going up and the tax gravy train would continue. Eventually the house of cards collapsed and nearly took the global economy with it.

Originally posted by @Doug Pretorius :

@Matthew Olszak Maybe you're new but it's common practice among agents to start by lying that they have a buyer, then take the listing at a price they know the house won't sell for to milk it for buyer and seller leads, all the while telling the seller a sob story about how "the market has turned" or "things are just slow right now" and they need to lower the price. Over and over again until either they do eventually come down to the price the agent should have listed for in the first place, or the listing expires, all while the agent has sold other houses and generated more listings off of that one.

That's a pretty bold accusation you're making. Can you provide any proof or empirical evidence to support these statements? 

How does that saying go.. snitches end up in ditches. lol

How bout everyone mind their own damn business. Let people make a buck and everyone else do them. I cant believe the people on BP are reporting other investors. Thats a shame. This is a place of learning and developing for all RE investors not just agents and brokers. We are all here to grow and expand. Period. To each their own.

Originally posted by @Todd Burton :
Originally posted by @Doug Pretorius:

@Matthew Olszak Maybe you're new but it's common practice among agents to start by lying that they have a buyer, then take the listing at a price they know the house won't sell for to milk it for buyer and seller leads, all the while telling the seller a sob story about how "the market has turned" or "things are just slow right now" and they need to lower the price. Over and over again until either they do eventually come down to the price the agent should have listed for in the first place, or the listing expires, all while the agent has sold other houses and generated more listings off of that one.

That's a pretty bold accusation you're making. Can you provide any proof or empirical evidence to support these statements? 

 He is trolling. Ignore!

Originally posted by @Todd Burton :
Originally posted by @Doug Pretorius:

@Matthew Olszak Maybe you're new but it's common practice among agents to start by lying that they have a buyer, then take the listing at a price they know the house won't sell for to milk it for buyer and seller leads, all the while telling the seller a sob story about how "the market has turned" or "things are just slow right now" and they need to lower the price. Over and over again until either they do eventually come down to the price the agent should have listed for in the first place, or the listing expires, all while the agent has sold other houses and generated more listings off of that one.

That's a pretty bold accusation you're making. Can you provide any proof or empirical evidence to support these statements? 

@Todd in response to your comment "That's a pretty bold accusation you're making. Can you provide any proof or empirical evidence to support these statements?"

Here's what actually happened:

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. :-)

Still waiting on an answer to my question from a few hundred posts ago...

Do the non-wholesalers 100% of the time offer 100% of what they're willing to pay to a seller?

On a related note, at least here in Ohio, the marketing issue really comes down to publicly advertising.  My guess is that the same is true in FL.

Great thread. This is exactly why I got licensed.

If you're unsure about your state's wholesaling laws and really want to flip properties without a license then learn how to leverage OPM (other people's money), close THEN resell when you have legal instead of equitable title. You can negotiate the terms with the private lender so you pay them any accrued interest when you resell the property (if you're strapped for cash). If you have a great deal then it shouldn't take that long to resell. Just make ABSOLUTELY SURE you follow laws regarding soliciting for private money. There are many resources and threads here on BP that discuss the topic of private money but always check with an attorney first.

You can also use an equity partner - 50% of something is better than 100% of nothing. Here in Florida partners in a real estate partnership are exempt from licensure if selling property owned by the partnership provided the partner receives a share of the profits in proportion to their interest in the partnership. For example, a 40% partner may receive 40% of the profits of the business. A real estate license is required if the 40% partner received more than 40% of the profits.

Just my 2 cents. =)

Originally posted by @David Rubio :

Great thread. This is exactly why I got licensed.

If you're unsure about your state's wholesaling laws and really want to flip properties without a license then learn how to leverage OPM (other people's money), close THEN resell when you have legal instead of equitable title. You can negotiate the terms with the private lender so you pay them any accrued interest when you resell the property (if you're strapped for cash). If you have a great deal then it shouldn't take that long to resell. Just make ABSOLUTELY SURE you follow laws regarding soliciting for private money. There are many resources and threads here on BP that discuss the topic of private money but always check with an attorney first.

You can also use an equity partner - 50% of something is better than 100% of nothing. Here in Florida partners in a real estate partnership are exempt from licensure if selling property owned by the partnership provided the partner receives a share of the profits in proportion to their interest in the partnership. For example, a 40% partner may receive 40% of the profits of the business. A real estate license is required if the 40% partner received more than 40% of the profits.

Just my 2 cents. =)

Even 1% ownership allows you to market the property. The OP appears to be marketing property, not the contract. I got a call from DBPR today. They watch BP for illegal brokering. They mentioned this thread to me. Other ideas are to buy a non-refundable option. You CAN market those. However, if the contract stipulates the EMD is refundable--BROKERING! They also state the EMD must be substantial (clarify that please DBPR).

Originally posted by @Maugno M. :

How does that saying go.. snitches end up in ditches. lol

How bout everyone mind their own damn business. Let people make a buck and everyone else do them. I cant believe the people on BP are reporting other investors. Thats a shame. This is a place of learning and developing for all RE investors not just agents and brokers. We are all here to grow and expand. Period. To each their own.

 Does that go for everything?    Should I "mind my own damn business" if I see someone running a ponzi scheme...or stealing credit cards.   What about if I see a hit and run or other crime.   

The law is not just something you turn on an off.   And as a citizen your responsibilities dont just turn on and off either.   Shame on you for turning a blind eye to wrongdoing.    If you want to argue it is legal or the law should be changed to make it legal then fine, but you didnt do that.   You are advocating that people turn a blind eye to something that is illegal, that is wrong, regardless of it is wholesaling or anything more serious.

Originally posted by @Todd Burton :

That's a pretty bold accusation you're making. Can you provide any proof or empirical evidence to support these statements? 

 You need look no further than right here on biggerpockets. Lying to sellers is regularly recommended as a good way to get leads as an agent. Here are a couple examples:

https://www.biggerpockets.com/forums/311/topics/322484-cold-calling In this thread 2 agents recommend telling potential sellers that you have people interested in the area, even though you don't.

https://www.biggerpockets.com/forums/311/topics/442419-are-open-houses-worth-it In this thread a Realtor admits that doing open houses is primarily to appear to the seller to be working and to generate other leads and exposure for his business.

https://www.biggerpockets.com/forums/21/topics/248195-agents-how-do-you-not-waste-your-time-with-an-unrealistic-seller In this thread some advocate taking an overpriced listing and relying on the market and life to force the seller to drop their price. Others recommend taking the overpriced listing and charging the seller for marketing. A few actually recommend not taking the listing.

https://www.biggerpockets.com/forums/621/topics/408029-case-study-how-to-steal-an-overpriced-high-dom-property In this interesting thread Wes describes how listings agents who lie to sellers about the price can create a buying opportunity for you.

Originally posted by @John Thedford :

IF this is "legal" why are cease and desist letters being issued? Here are a few "ex" wholesalers:
https://www.myfloridalicense.com/sto/unlicensedact...

https://www.myfloridalicense.com/sto/unlicensedact...

Just so you know, a cease & desist is just a "im going to sue you" threat.. doesnt mean the guy trying to sue you is right, and in many cases hes wrong otherwise if he was so sure he would win the case he would've already sue you... got some cease & desist in other fields, most were just to intimidate me and a simple "go F yourself" solved the problem. in other cases where I was wrong, I simply stopped. 

Originally posted by @Zion Bar :
Originally posted by @John Thedford:

IF this is "legal" why are cease and desist letters being issued? Here are a few "ex" wholesalers:
https://www.myfloridalicense.com/sto/unlicensedact...

https://www.myfloridalicense.com/sto/unlicensedact...

Just so you know, a cease & desist is just a "im going to sue you" threat.. doesnt mean the guy trying to sue you is right, and in many cases hes wrong otherwise if he was so sure he would win the case he would've already sue you... got some cease & desist in other fields, most were just to intimidate me and a simple "go F yourself" solved the problem. in other cases where I was wrong, I simply stopped. 

 These are from state regulators who have the power to submit to the prosecutor to file charges if they desire. Entirely different than getting one from an attorney.

Originally posted by @Maugno M. :

@John Nachtigall Yup that goes for EVERYTHING. Mind your own business.

 No, I will not.   I will report any law breaking I see

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