PA passed a law that To wholesale, you need a wholesale license (cost $500.) In Philadlephia, you need to be a licensed realtor to be a wholesaler...
Pro: With restrictions leads to lower competition overall.
Con: You are obligated to disclaim your role as a realtor and wholesaler. And you need to disclaim the estimated value of the property.
Conclusion/Question: is it worth getting into? Should I just do virtual wholesaling elsewhere? How much does this change the wholesaling industry?
Not looking for ONE answer. Just wanted to strike a conversation and learn from there.
PA isn't the first state to do this and there are many others considering it.
This trend will continue.
If you plan on actively being in real estate for years to come, getting your license can only benefit you.
How do I handle disclosures?
"Mr. Seller, I am a licensed real estate agent and not someone who took a weekend bootcamp that just wants to tie up your property without any earnest money and steal your equity. During our appointment we'll discuss a few options to consider, including selling it quickly and in as-is condition, a traditional listing, or maybe something different. How does that sound to you?"
For wholesalers who operate ethically and disclose their role in the transaction up front I do not see a downside to this, other than the minimal additional fee a license will cost. It will only weed out the chaff and make our industry better.
@Lena Oeun I saw something like this get passed in Philly but did not see it be applied to the rest of the state. Do you have information on
I agree with @Joe Norman . All these youtube trained wholesalers have been destroying the industry. I'm glad the laws are being passed, but I have yet to see them enforced.
I must have five or so wholesalers contact me each day. One out of twenty is good at what they do. One out of a hundred is good enough to make a decent living.
My advice, @Lena Oeun , would be to become an agent, join a real estate brokerage, and invest and wholesale on the side. As the wholesale industry changes, you'll be in a position to take advantage of it.
@David Haynes you might be being a tad tough on the little guy, we all have to start somewhere. The key is filtering out the wholesalers that only rely on the basics from one single YouTube video of some BS guru selling a +10k educational package and don’t continue their craft or act with ethics. That being said you’re 100% right that it’s over saturated by those who don’t know how to conduct properly and make it tougher for legit wholesalers.
@Lena Oeun so you don’t have to be a realtor to be a wholesaler but if you have a RE license you can wholesale. (Also there is a difference between a REALTOR and a licensed sales agent, common misconception) There is a specific wholesale license you need to get if you are not a licensed agent, and you need insurance along side a few other. In all reality, this one license shouldn’t be a hold up for someone who is driven and will be successful anyway. One deal at only a 5k fee will make up that initial barrier of entry and then some.
@David Haynes hey David! Thanks for your advice. I am a full time agent right now actually. I just wanted sure if I wanted to wholesale in Philly (where I practiced) or virtually elsewhere. Appreciate your advice.
@Jimmy O'Connor you are 100% right. The fees doesn’t matter especially if you’re going to make it back (that’s if you’re driven enough to go through with it.)
I sell real estate in philadlephia, and frankly I’m still new at it. Still doing my due diligence at this time.
I appreciate your advice.
I do not see how a license will stop anyone from wholesaling, especially with no enforcement. That being said we are fully licensed and insured as wholesalers in Philadelphia. It really made little to no difference in how we operate.
I have a follow up question to the group. How many wholesalers use transactional funding? If you do, does transaction funding negate the need for a license. In transactional funding, you are buying the property and then selling the property. The fact that the buy and sell happen on the same day, does that negate the fact it is a purchase and sell?
@Irfan Raza agreed i haven’t seen any change in Phila since the passage of the law. Most of the deals we lend on have a wholesale fee on it. No one seems to know what the licensing requires of any party in a transaction. 🤷🏻♂️
@Louis Jeffries I have done double closes (close and immediately resell) in the city. The reason why people avoid it over here is due to the high amount of transfer tax incurred, 4.28% of contract price on each side + closing costs on the front side. Say if I look to make a 10k fee on a property that I buy for 100k and look to sell for 110k where I am paying 1/2 transfer on each side, I am already eating 2.14k from the front and 2.35k on the back end and add in another ~1k in title closing expenses and probably a 1k fund fee if funding is outsourced, I've already eaten ~6.5k of my fee. 3.5k fees don't really pay the bills or cover marketing expenses. You avoid a lot of this via assignment. From my limited belief, the law technically covers double closes this but as @Irfan Raza stated there has been no REAL enforcement, if anything it is just causing doubt in newcomers in the market which ironically was the starting motivation of this thread.
You won't need to purchase the license because you're a Real Estate Agent, however you do have to disclose that you're an agent. For those who are not a Real Estate agent would have to purchase the Wholesale License which is a $200 fee. Before they allow you to purchase a Wholesale License you first need to show proof of a $1,000,000.00 insurance policy, get a commercial activity license (which is free) at the license and permits building and then they will allow you to purchase the Wholesale License. The Commercial Activity and Wholesale License can be obtained at the same visit as long as you have proof of the insurance policy. Hope this was helpful, I recently went to the License and Permits building myself which is how I found out you needed a commercial activity license as well. You can also confirm this information at the link below.