How do you Marketing wholesale deals?

[Jose Castillo]

When you go to seller appointments and take photo's, how do you present them to your buyers list? What are your buyers expecting from you? Are they buying just based off your photos? Do you bring out all your buyers to one appointment or would that be overwhelming?

[Braden Smith]

I tell all the wholesalers that I deal with that all I need from them is the address, the number of beds and baths, and the approximate square footage, as well as any info on known repairs needed. I don't care what they say the ARV is and I don't care what they say the repair costs are. I'm going to do my due diligence and determine my numbers, and the best use for the property whether that be as a rental, a flip, etc. Photos are ok, but they really aren't needed because if I run my numbers and think the property is worth pursuing I am going to want to see it in person. Photos could intentionally leave things out or be used deceptively.

When I have a property to wholesale, I always try and consolidate showings. This makes it easier for me and creates a sense of scarcity with potential buyers that can lead to offers.

Legally speaking you cannot publicly market a property for sale that you do not own without a real estate license. If so, you are practicing real estate without a license and subject to all penalties and/or fines that goes along with that in your state. 

How investors can legally and ethically engage in wholesaling:

These guidelines are designed to protect all of us from scrutiny, investigation and possibly worse. Recently there has been a great deal of noise being made in a number of forums and spheres of influence regarding the legality of wholesaling in Louisiana and the Louisiana Real Estate Commission (LREC) now has their sights set on wholesaling and wholesalers.

How investors can legally and ethically engage in wholesaling transactions.

1. Always act as a principal. That means you are the buyer, seller or the person with a written, executed assignment of the purchase and sales agreement.

2. If you own the house, you can market the house. If you don't own the house, you cannot advertise or market the house. In most states it's clear - real estate can only be advertised for sale with the knowledge and consent of the owner of the real estate by either the owner or a licensed agent. If you have a contract to buy a house, you can market that contract or assign or sell that contract. Understand that there is a difference between marketing and selling a contract versus marketing and selling a house.

3. Trying to get paid for referring someone else to buy a house from a wholesaler is illegal.

4. Advertising that you have a house for sale that you do not actually own is illegal.

5. Making an offer on a house that is contingent upon your finding someone to buy it from you is illegal.

6. Contracts to buy real estate that are short and simple are preferred. Contracts to buy or sell real estate that contain a number of loopholes, contingencies, options, or other escape hatches are heavily frowned upon.

7. A fundamental component of being a successful real estate wholesaler is understanding the laws governing the conduct of real estate agents and the laws that govern your conduct as an unlicensed individual.

Do your homework. Take an afternoon to sit down and read your state's laws. After you read your state's laws, engage an attorney licensed in the state in which you are doing business and have them review your transactional paperwork. Are you compliant? Just because you think it is easy to understand or good language doesn't mean it passes compliance.

Wholesaling is very much alive and can be a viable investing strategy. But like anything in investing, you need to do your homework, know the laws in your state and know what you can and cannot do. This list should point you in the right direction.

At minimum, use it as a discussion starting point with your attorney. Protect yourself, protect your business, protect your money.

I am in Louisiana. Here is the Louisiana law: http://www.lrec.state.la.us/pages/license-law-upda...

§1459. Real estate activity; unlicensed person

A.(1) In addition to any other civil remedy or civil penalty provided for in this Chapter, the commission may issue a subpoena to any person or persons who the commission has probable cause to believe has engaged in real estate activity without a currently valid license.

(2) Subpoenas issued by the commission shall comply with the notice requirements of R.S. 49:955. These subpoenas shall be served upon the unlicensed individual personally or by any type of mailing requiring a return receipt and shall include a statement of the manner in which the unlicensed person shall be required to respond to the commission.

B. The commission may impose a civil penalty of no more than five thousand dollars upon any unlicensed person who, after a hearing or informal resolution in accordance with all provisions of this Chapter and the Administrative Procedure Act, is found to have engaged in real estate activity without the benefit of a currently valid license having been issued by the commission pursuant to the provisions of this Chapter. In addition, the commission may assess costs and attorney fees against the unlicensed person found to have been engaged in real estate activity without a current license.

C. The fact that any person engages in or performs or offers to engage in or perform any of the practices, acts, or operations set forth in R.S. 37:1431(7) is prima facie evidence that such person is engaged in the illegal practice of real estate.

D. No person engaged in real estate activity without a currently valid license shall have the right to receive any compensation for services so rendered. In addition to any other penalties imposed under R.S. 37:1455 and 1458, the commission may require that any person engaged in real estate activity without a license return any fees collected for engaging in real estate activity.

Acts 2003, No. 713, §1; Amended by Acts 2006, No. 343, §1

Picture you are in front of a judge....

He asks, "Did you buy this property?"

Your answer, "Not yet judge".

He then asks, "Who located the Buyer".

You respond, "Me".

The judge then asks, "Do you plan on buying this property and then reselling to the new buyer?"

You say, "Not exactly judge, I am going to assign my interest for a fee."

He then says, "Oh, so you are earning income from the activity of bringing a buyer and a seller together...in other words, you are brokering the deal."

If it looks, smells, sounds, and acts like a duck...