Tom Krol and Vincent Polisi

[Matthew Fragassi]

Can anyone offer actual insight into this whole mess with Tom Krol and Vincent Polisi? Ive spoken with Tom before and he seems like a decent guy. I just want to be sure that before I move forward I'm not doing anything illegal, as Polisi says Krol promotes. I've also seen Polisi claim that this very site and podcast (Bigger Pockets podcast) promotes illegal activity and has guests on the podcast do the same (although the only one he would mention was Krol). Thanks.

[Greg Rogers]

I am a licensed practicing attorney. I also have had a real estate license in Georgia in the past. Let me first say the standard things lawyers say :).......that my comments only apply to Georgia where I practice.  Also I must also add that in no way should my comments be construed to be giving anyone legal advice either in Georgia or any other state, and I highly recommend you speak with a knowledgeable real estate attorney in your jurisdiction to evaluate the legality and ethics of real estate wholesaling.  I do not know, nor do I have any relationship with Mr. Krol or Mr. Polisi.

I have examined the licensing laws of Georgia as it applies to this subject.  I believe that real estate wholesaling is cutting it as close to the line of practicing real estate brokering without a license as you can possibly get without one.  In fact, I could easily see the Georgia legislature making a one word change to the statute to include "wholesaling" to change the face of this business model for anyone in this state (which is usually followed by other states).  

For that reason, I suggest everyone is this business do so with great integrity and transparency with buyers and sellers alike.  Here is the dilemna:  I have heard both sides of the debate.  Polisi's comments that one should explain up front that you may seek to "assign" the deal to cash investor's you represent is valid.  Under no circumstance should you shop a deal until to you have a contract to purchase the property and have secured an equitable interest.   Here is where it gets sticky.

 While normally,  earnest money is not considered essential consideration in enforcing a valid real estate contract (highly technical legal discussion here), in wholesaling, we are talking an intent, not to actually purchase, but obtain equitable interest.  I don't know that the courts would see earnest money in the same way in a wholesaling transaction as it does in a tradition purchase deal. I would want to stay clearly on the side of giving something to the seller for obtaining my equitable interest. At least it makes a modest showing of giving the seller something for tying up his property.  I could see this as being an area of major litigation.  If the courts ruled against you on this issue, you would then be working as a broker and violate the licensing law.  

Also, it is paramount that your communication and contract with the seller explain your intentions. If I were wholesaler, I would go so far as to give them their market options pro's and con's, and even explain their right of bankruptcy to freeze their assets, both pro's and con's. But if you venture into those waters you now risk running afoul of the unauthorized practice of law, so perhaps that is best left at "you need to consult with an attorney on that issue."

As for the inducements I often see, such as "We buy houses for cash", I would put a disclaimer on there stating that "we" reserve the right to assign a deal or sell the property upon purchase to other cash investors.  Again, the idea is transparency to the seller.  

So in Georgia, can wholesaling be done legally, it is my opinion that it can be, but you need to travel cautiously.  You are one word away from OCGA Sec.43-40-1 being amended to have everyone in this state scrambling to the Barney Fletcher Real Estate school. 

To use a favorite lawyer saying, "pigs get fed. Hogs get slaughtered."  I can assure you have seen this play out in  practices areas of our firm.  If you allow this strategy to turn into the wild west of real estate speculation with people out their making more money "teaching" others on how to get rich than actually wholesaling real estate with ethics and integrity, I promise you your state will take notice.  And it won't take too many people complaining to get the state's attention.  Think of the licensing dollars the state stands to make by making that one simple amendment in the name of protecting the consuming public.

My advice to all of those in this area......don't make the mistake of so many of my colleagues in the practice of law. Police yourself with ethics and integrity, and you will enjoy this investment area for years to come. I would even venture to say creating a trade organization promoting the virtues of ethics and integrity in the wholesaling profession would be a capital idea. Show the lawmakers that you work together to promote the improvement of the profession for all, and not just getting rich.  But.....  keep cranking out students with wild dreams of wealth AT ALL COST, and you will kill it for everyone.

Again, no skin in the game on either side.  Just a one lawyer's opinion in Georgia.  Happy investing and well wishes to you all!

Greg Rogers

Rogers, Hofrichter and Karrh, LLC

PS. You might wonder why I am own this site.  I am intrigued by the opportunities of wholesaling.  But I do have concerns after examining this debate that wholesaling may look like several of my practice areas completely gutted by lawyers swooping in for the money grab and leaving town in a burning pile of rubble. While I don't proclaim to know all the ins an outs of wholesaling, I do know something about how to build a multimillion dollar 25 year law practice. And I can tell you what I learned.........take care of the client first (in this case the seller), and everything else will take care of itself.