All Forum Posts by: Andrew Hodgson

@Mark Enoch so what ended up being the reason? If I had to guess, I'd say it was due to the sale or refinance of an asset in the eREIT that year.

@Tyler Kinkade By the way, I said that the auction starts at 7:00 am in my last post. That's a mistake, Thurston starts at 9am. Sorry about that. 

Yeah, profit margins are narrow with everyone watching the same auction properties. Off-market finds are the way to go. The good news is 2019 is looking to be a fairly stable year for home prices and mortgage rates, so flipping remains a strong option.

@Tom Gimer Thank you for your measured response, I appreciate your willingness to take the time to engage on the issues with me on this in pursuit of an answer. I appreciate you. I don't know if anyone is still reading this, but I hope that it helps someone-- even if it is only to help them fall asleep from boredom.

I want to start by looking at your rejection of wholesaling and brokering being two different subjects. You say, "Wholesaling, ... (a non-licensee putting a property under contract and then assigning that interest for a fee), is the definition of unlicensed brokerage in FL." How could that possibly be true? The distinction between wholesaler and broker is created by the very definition of broker in FL 475.01, where the very first requirement is acting "for another."  "'Broker' means a person who, for another, and..." And, not or, meaning everything that follows in the statute is moot without "for another". This "for another" requirement establishes a legal distinction between brokering and wholesaling. It's not my assertion or suggestion, it is right there in the definition.

Remember, a wholesaler is party to the contract as the buyer. Being party to an executed legal contract is precisely what grants the wholesaler (as the buyer) interest. That interest is rightfully theirs to assign, if the contract allows for assignment. Brokers, by contrast, are limited to acting only as facilitators of the transaction, rendering that service on behalf of their clients, i.e. "for another." Brokers of a transaction are not party to the real estate contract itself.

Assignment is not brokering. The assignment of one's interest is an action the assignor must choose for themselves, as evidenced by the need to execute a separate assignment document with the assignee to transfer the interest. A broker cannot do that. If the broker signed that assignment document, it would be completely useless as it accomplishes nothing. Assignment is fundamental to contract law in our country. It would be massively important precedent if indeed Florida is restricting wholesaling, because it would actually be restricting assignment. That's why I care so much about this. So far, all the evidence that has been presented shows only restrictions on unlicensed brokering, and that's it.

Lastly, I can agree with your view that, "nobody is advertising the paper..." etc. The majority of wholesale transactions happening in real life may well be just as you say. However, yours is a description of how people are doing it wrong. I am trying to explain how it is supposed to be done correctly. I am not advocating for unlicensed brokering nor would I ever defend those who do. I am advocating that wholesalers learn how to wholesale properly.

@Tom Gimer What did I ignore? The statute does not address wholesaling, it addresses unlicensed brokering. You could say that my initial evaluation was brief, fine, but it was not inaccurate nor did I ignore aspects of the statute when I wrote my conclusion. 

My entire last response to you unpacked exactly how the statute is not relevant to wholesaling. It's cracking down on unlicensed brokering, not wholesaling. That seems to be a key area of misunderstanding here, the distinction between proper wholesaling and unlicensed brokering. The only thing that statute does is establish a burden of proof that someone practicing unlicensed brokering would not be able meet. Any wholesaler acting properly would be able to meet that burden of proof easily. That is why my initial evaluation spoke of equitable interest being the key, which I still stand behind.

You also claim to disagree with my analysis; please provide yours.

@Tom Gimer In response to your "LOL"... keep reading the statute beyond only the first section that you quoted. The statute is not divided, it's all one long statute, meaning the second part of the statute directly relates to the first part. The first section you quoted asserts that the burden of proof would be on the wholesaler to show that they were not acting or attempting to act as a broker (which again requires doing deals for another and for compensation, i.e. as a service). The second part of the statute is in there to declare that all real estate contracts produced to meet this burden of proof that do not show 1) "good faith" and 2) "for a substantial consideration," both of which are standard introductory elements of a correctly drafted real estate contract, are "void and ineffective in all cases, suits, or proceedings had or taken under this chapter." In other words, no DIY contracts allowed.

Therefore, in order to meet the burden of proof created by this statute which is to show that one was not acting or attempting to act as a broker, all a wholesaler would have to do is produce a copy of the correctly drafted and executed real estate contract with his or her name on it as the buyer "and/or assigns" (or with an element that specifically allows for assignment). I stand by my initial evaluation, but again, I am not licensed to practice law in Florida or anywhere else.

@Bill F. I chose my words carefully when I said, "Florida code does not restrict proper wholesaling," I specifically did not say "law". No cases were presented, only statutes. You are right that my opinion is useless, which is why I asked for evidence from those making the claim for us all to evaluate. Nobody cares what I think, but I hope we all care what the answer is to this question. Getting licensed might actually be a good solution here, as you suggest, to avoid having to go to court in the first place. So, thank you for bringing an answer, but why the sarcasm?

Thank you @Naomi Pinger .  See you all then!

@John Thedford and everyone: 

(Disclosure- I am not licensed to practice law in Florida, or anywhere else!)

I read the statutes and the article you posted, and I don't see anything that regulates or restricts wholesaling in Florida. 

The statute FL 475.42 says, "A person may not operate as a broker or sales associate without being the holder of a valid and current active license therefor," Check. OK, well to define "broker" we must backtrack to the legal definition found in FL 475.01 (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," followed by lots of lines describing different types of real estate transactions. So, the two key elements for being considered a real estate broker are doing real estate transactions "for another" and "for a compensation," exactly as we talked about previously in earlier posts.

Next up, the other statute FL 475.43 is not relevant to wholesaling. What this statute does is further reinforce the idea that you 1) cannot market or sell real estate without a license to do so, and 2) cannot market or sell real estate without equitable interest in the property. Being a party to a real estate contract does give you equitable interest in real property, so wholesalers are in the clear, again only if they do not engage in marketing the property, but only the contract itself.

The article you linked is a summary of real estate brokering activities that require a license in Florida, and potential penalties for engaging in said activities without a license; nothing to do with wholesaling contracts in it, so it doesn't help your case. 

The point remains that proper wholesaling is not brokering. Unless there is other evidence that can be provided to show otherwise, Florida code does not restrict proper wholesaling. 

@John Thedford Thank you for the links.

And excellent! We are getting into it now, these details are where we need to focus, so thank you for addressing this idea of advertising properties. You are absolutely correct that if a person advertises another's property for sale with the expectation of compensation then that is considered brokering, and one must have a license to do that. Therefore, a legal wholesale transaction must be only the contract itself for sale, and that is what most investors new to wholesaling are never told. A transaction can change from wholesaling to brokering over something as seemingly small (yet very important!) as whether or not the address of the property was provided by the wholesaler to the end buyer. Yes it seems silly, but that can be the determining factor. Wholesalers: you need to be flipping contracts, not properties.

John, as to your issues with wholesalers deceiving sellers, etc, I am with you all the way. Deception, dishonesty, and even incompetence is grounds for losing one's real estate license, and furthermore should always be considered unacceptable business practice. However, as someone said in an earlier post, licensed real estate brokers do have a legally-enforceable fiduciary relationship with clients. The same cannot be said about two parties in a private contract.  Unless there are government regulations placed on wholesaling, I think it will continue to be up to us to police our community and teach our fellow investors to always do things the right way. The scammy, dishonest, unethical weeds will get weeded out by their own actions. 

I will read the links you posted and respond. Thanks again John.

@Steve Abercrombie it will be interesting to watch the housing markets in the next couple years. Possibly more foreclosures on the horizon from all these houses that sold recently at record-high prices.

@Tom Gimer and everyone: Could you provide a link or reference to this statutory framework in Florida? Reading this conversation has been interesting, at times entertaining, but it won't do us any good unless we get to the bottom of this. Let's find a solution, so that our time and energy is not spent in vain. And @John Thedford, I totally get your passion on this topic. Speaking for myself, in any facet of my life I know I don't want to participate in anything unethical, ever, so I have a lot of interest in actually getting this resolved. I will spare you all the internal struggles of my conscience on the ethics and honesty of wholesaling generally, but that being said, the legality of wholesaling has never been an issue.

If there is indeed a statute in Florida that makes a private real estate contract between two parties illegal or prone to lawsuit, then I want to know; we all deserve to know. The key idea that seems to need clarification in this thread is this idea of "brokering" without a license. I believe that is John's main issue and the source of his claims that wholesalers are scammers. Providing brokerage services without a license is illegal, but a contract between two parties is just that-- between two parties. Brokering, by definition is arranging a deal on behalf of another for a fee, commission, or other reward. Wholesalers are not brokering anything with a third party, nor rendering a service in expectation of reward, but what they are doing is entering into a private contract. The fact that they intend on selling that contract for profit is not only completely legal, it's the fundamentals of contract law. As I see it, the concern that wholesalers are brokering without a license is not relevant. And whether the contract is assignable or not doesn't change that, it remains a contract between two parties. 

A case might be leveled against a wholesaler that the contract terms were knowingly misrepresented or the language was intentionally unclear; or that a licensed broker didn't disclose in writing as part of the contract the material fact that they were a licensed broker. But these scenarios aren't anywhere close to being the same thing as brokering without a license, which again is clearly illegal.

Again, if there is a statute in Florida that says otherwise, then please provide the source because we all need to know. Thanks.