Getting Busted in Ohio for Wholesaling and Praticing RE without a License

[Brian Gibbons]

Read Ch 4735

Get a lawyer

Get licensed and do wholesaling in OH

02 July 2014

http://www.com.ohio.gov/documents/Fall10REdiscipline.pdf

LYNETTE S. MALY, Twinsburg, Ohio, was found by the Commission to have violated Revised
Code 4735.02, unlicensed activity, and was accessed a civil penalty in the amount of $500.00,
when she held herself out as engaged in the business of real estate, while not licensed under
Revised Code Chapter 4735.

SHARI L. MORTER, Stow, Ohio, was found by the Commission to have violated Revised Code
4735.02, unlicensed activity, and was accessed a civil penalty in the amount of $500.00, when
she held herself out as engaged in the business of real estate, while not licensed under Revised
Code Chapter 4735.


MIKE ZUREN, Willoughby, Ohio, was found by the Commission to have violated Revised Code
4735.02, unlicensed activity, and was accessed a civil penalty in the amount of $1,000.00. The
Commission found that Mr. Zuren, when in expectation of collecting a fee, commission or other
valuable consideration, held itself out as engaged in the business of selling real estate in a
publication and offered or attempted to offer, listed or attempted to list 20 real estate properties
in the publication, without first being licensed under Revised Code Chapter 4735.

SHARI L. MORTER, Stow, Ohio, was found by the Commission to have violated Revised Code
4735.02, unlicensed activity, and was accessed a civil penalty in the amount of $500.00, when
she held herself out as engaged in the business of real estate, while not licensed under Revised
Code Chapter 4735.

GARY UNDERHILL, Wooster, Ohio, as the result of an investigation of the formal complaint,
was found by the Commission to have violated Revised Code 4735.02, unlicensed activity, and
was accessed a civil penalty in the amount of $2,500.00. The Commission found that Mr.
Underhill attempted to or assisted in the negotiation of the sale, exchange, purchase, rental or
leasing of real estate on 47 occasions without first being licensed under Revised Code Chapter
4735.


PAM BALINT, Ravenna, Ohio, was found by the Commission to have violated Revised Code 4735.02, unlicensed activity, and was assessed a civil penalty in the amount of $3,500.00. The Commission found that Ms. Balint acted as a real estate broker or real estate salesperson without being licensed under Chapter 4735. Ms. Balint’s conduct included accepting phone calls inquiring about the subject property and directing or assisting in the procuring of a prospective buyer to purchase the subject property. In addition, on five occasions Ms. Balint advertised or held herself out as engaged in the business of selling real estate. She placed signs with her phone number on it in the subject property’s yard. She ran an ad in a newspaper regarding real estate for sale with her phone number and name. She provided a flyer marketing the subject
property with her name and phone number on it. She marketed the property on the phone on two occasions.

EVIE KIDDER, Akron, Ohio, was found by the Commission to have violated Revised Code 4735.02, unlicensed activity, and was assessed a civil penalty in the amount of $21,000.00. The Commission found that she consistently took actions to list, negotiate the sale of, sell a property, and made several requests to collect a commission on the sale of a property. Ms. Kidder acted as a real estate broker or real estate salesperson without being licensed under Chapter 4735.

TONY HOFFMAN, Akron, Ohio, was found by the Commission to have violated Revised Code 4735.02, unlicensed activity, and was assessed a civil penalty in the amount of $21,000.00. The Commission found that he consistently took actions to list, negotiate the sale of, and sell a property and made several requests to collect a commission on the sale of a property. Mr. Hoffman acted as a real estate broker or real estate salesperson without being licensed under Chapter 4735.

DIANE SHELTROWN, Waynesville, Ohio, was found by the Commission to have violated R.C. 4735.02, unlicensed activity, but no penalty was imposed. Ms. Sheltrown, on 2 separate dates, directed and assisted in the procuring of prospects which was calculated to result in the sale of a property and she intended or expected to receive compensation or other valuable consideration for the conduct.

MUNNA AGARWAL, Euclid, Ohio, was found by the Commission to have violated ORC 4735.02, unlicensed activity, and was assessed a civil penalty in the amount of $1,000.00. The Commission found that Mr. Agarwal agreed to negotiate and negotiated a potential purchase of property, agreed to list and listed, agreed to offer and offered a property for sale, advertised and held himself out as engaged in the business of selling real estate, directed and assisted in the procuring of prospects and in the negotiation of a transaction which was calculated to result in the sale of a property and intended or expected to receive compensation or other valuable consideration for the above conduct, while not licensed under Chapter
4735.

ELYHUE E. DUFF, Akron, Ohio, was found by the Commission to have violated ORC 4735.02, unlicensed activity, and was assessed a civil penalty in the amount of $1,000.00. The Commission found that Mr. Duff assisted in the procuring of a prospect and negotiation of a transaction, which was calculated to result in the sale of a property, wrote a sales contract for the parties, and intended or expected to receive compensation or other valuable consideration for the above conduct, while not licensed under Chapter 4735.

[Account Closed]

That is some harsh penalties I guess she was not using option contracts? 

[Brian Gibbons]

If you're in Ohio or California or Florida get license if you're doing wholesaling

whether it's option contracts or sale and purchase agreements that are assigned, get licensed and act as a principal

[Ned Carey]

@Brian Gibbons Do you have any more detail on these cases. based on what you posted you cannot draw any conclusion. The cases in the link seem not to be dealing with wholesaling.I looked up the code in OH and it says just like many other states that doing specified actions "FOR ANOTHER" is the violation. Doing those action for you own benefit would not be acting as a broker without a license as the law is written. Lacking court case precedents to the contrary I don't see any difference in OH other than some bureaucrat being on a rampage to stop wholesaling. 

I believe wholesaling with a license puts you at more risk, not less risk. A wholesale deal could essentially be considered a net listing by a court which would be clearly illegal. Otherwise buying and then reselling for a greater price, would mean not dealing openly and honestly with all parties as required by licensees.

[John Thedford]

Isn't this common? "

TONY HOFFMAN, Akron, Ohio, was found by the Commission to have violated Revised Code 4735.02, unlicensed activity, and was assessed a civil penalty in the amount of $21,000.00. The Commission found that he consistently took actions to list, negotiate the sale of, and sell a property and made several requests to collect a commission on the sale of a property. Mr. Hoffman acted as a real estate broker or real estate salesperson without being licensed under Chapter 4735.

When people use terms such as "commission" they are setting themselves up. When people are advertising other's property for sale I believe they are also setting themselves up. Why not simply get an education, get the license, and operating within the law? That seems like the best solution.

[John Thedford]

Posted by James Wise in another thread:

This would be a reason an agent would not help him.

(Pulled from the Ohio Division of Real Estate's newsletter)

BEWARE: Seminars That Teach Unlicensed Real Estate Activity The Division’s Enforcement section wants all licensees and the general public to be aware of individuals, groups, training seminars, coaching programs or otherwise, which may be providing instructions on how to circumvent real estate license law. (Please see R.C. 4735.01 for a list of activities which require licensure.) Beware of seminars that provide instructions on wholesaling and option purchase contracts. Language included in these schemes include: “tying up the real property,” putting the house in contract until a buyer is found, and placing the home in contract for the purpose of re-selling the property. Despite what is being taught at these seminars, a real estate license is required to engage in these activities. The seminar instructors advise attendees that they can place a property in contract or an option to purchase, at which time the attendee can then market and re-sell the property for a profi t. The instructors also advise attendees how to bring buyers and sellers together through the use of an “assignable contract” for a fee. It is the position of the Division that, pursuant to Ohio law, the aforementioned activities are those for which an Ohio real estate license is required. However, licensure requirements or the potential requirement for a license is not conveyed to attendees of these seminars, presentations or coaching programs. Pursuant to R.C. 4735.052, the Ohio Real Estate Commission may impose a civil penalty up to $1,000.00 a day for unlicensed activity. Each day a violation occurs or continues is a separate violation. For example, under most circumstances, if an individual is involved in unlicensed activity for one month, a civil penalty of $30,000 may be issued. You may ask, “I’m a licensed real estate broker (or salesperson), why are you telling me this?” R.C. 4735.18(A) (34) provides that discipline may be imposed on a licensed real estate broker or salesperson for authorizing or permitting a person to act as an agent in the capacity of a broker or salesperson who was not then licensed as a real estate broker or salesperson. Steer clear of any individual, group, organization or otherwise that is promoting unlicensed activity such as what is mentioned above. Be very careful you are not working with a person engaging in unlicensed activity, and if you witness this activity, feel free to notify the Division.

[Bryan Williamson]

Originally posted by @Ned Carey:

I believe wholesaling with a license puts you at more risk, not less risk.  A wholesale deal could essentially be considered a net listing by a court which would be clearly illegal. Otherwise buying and then reselling for a greater price,  would mean not dealing openly and honestly with all parties as required by licensees.

If you aren't doing thing openly and honestly already you shouldn't be in the business. I'd like to know more about this because it's not illegal to sale your own property nor likewise buy a property without licensed representation. 

[Brent Coombs]

@Bryan WilliamsonThe point isn't whether or not you have a License when you are buying or selling property, it's if you DO have a License, the other parties to the transaction MUST BE INFORMED of the range of your intentions AND your market knowledge when you are trying to negotiate a sale price, especially with Sellers (@Ned Careymight be inferring some tempted not to - or how can they prove they are, when they ARE expecting to profit on the deal)?

I agree "if you aren't doing thing openly and honestly already you shouldn't be in the business"! And I also agree, you don't have to be IN the business in order to buy and sell. Cheers...

[Bryan Williamson]

Originally posted by @Brent Coombs:

@Bryan WilliamsonThe point isn't whether or not you have a License when you are buying or selling property, it's if you DO have a License, the other parties to the transaction MUST BE INFORMED of the range of your intentions AND your market knowledge when you are trying to negotiate a sale price (@Ned Careymight be inferring some tempted not to - or how can they prove they are, when they ARE expecting to profit on the deal)?

My point was more toward if you start out with stating your intentions as you should regarless of licensure you need not worry. It's almost trivial but its just like keeping your cards above the table in poker.  

[Brent Coombs]

Originally posted by @Bryan Williamson:

Originally posted by @Brent Coombs:

@Bryan WilliamsonThe point isn't whether or not you have a License when you are buying or selling property, it's if you DO have a License, the other parties to the transaction MUST BE INFORMED of the range of your intentions AND your market knowledge when you are trying to negotiate a sale price (@Ned Careymight be inferring some tempted not to - or how can they prove they are, when they ARE expecting to profit on the deal)?

My point was more toward if you start out with stating your intentions as you should regarless of licensure you need not worry. It's almost trivial but its just like keeping your cards above the table in poker.  

 Are you are trying to say that if you found a Spiderman Number 1 comic at a yard sale going for $5k and you would have actually paid $10k for it, you should just give the Seller $10k for it? And then, why would you pay $10k for it in the first place? Oh, that's right, because you know it's worth a lot more than that!  But aren't you obliging yourself to inform the Seller of that too? Do you see where I'm going with these questions? If you are not a Licensed RE Agent, why would the questions be different regarding house prices? (If your answers are YES to all those questions, just how will you ever get that Spiderman Comic for less than full-blown retail)? Cheers...

[Bryan Williamson]

I like the comic book analogy but it's not about the worth of the property it's about your intentions and honesty up front. In most wholesale deals the property being sold is in some distressed situation. You are providing a service for their situation as long as you say you could get more for it if you went this direction however I'm here to give you this option.  That's a whole lot different than claiming it's only worth ex but you know it's worth more and then turning around and selling it for that much more. No matter I if your are talking comic books or homes; license or not ;  fiduciary responsibility or not. 

[Bill Gulley]

It's amazing how many folks are on here who don't really know much about real estate,  at it's very basic level, that real estate is not a comic book or treated or looked upon like other assets in business, there are reasons for that, the assumptions of treating all assets as being the same is misguided and wrong.

I've  not told anyone to stick signs in the yard, advertise on CL, advertise a property in wholesaling or to do anything advocated by the gurus......really......this is why.

Ned, sorry buddy, you're off on this one, it doesn't matter what contract or stack of papers you use, it's the function performed, the intent, the acting in between a real buyer and seller that is a brokering activity.

If you are going to perform WH functions as a business, get a license. :) 

[Mark Elliott]

maybe i am just uninformed? it would seem to me that acting as an 
 agent" between a buyer and a seller is clearly a violation of operating as a real estate agent without a license. wholesaling is a different thing. if you buy a house, and resell it for a profit, thats wholesaling. if you market a house for a seller, sign a contract for a commission, and set up a buyer for the seller, you are then acting as an agent. there is a world of difference here, people. there are no laws that i know of that prevent someone from selling whatever they legally own for whatever price someone will give you for it. but if you are selling it for someone else and expect to be given compensation for your efforts, you are NOT wholesaling, you are an agent and you better have a license.

[Vanessa Blais]

Or you could just use flash funding, or transactional funding, to close on the property yourself and then resell to your buyer.  

[Bill Gulley]

Originally posted by @Mark Elliott:

maybe i am just uninformed? it would seem to me that acting as an 
 agent" between a buyer and a seller is clearly a violation of operating as a real estate agent without a license. wholesaling is a different thing. if you buy a house, and resell it for a profit, thats wholesaling. if you market a house for a seller, sign a contract for a commission, and set up a buyer for the seller, you are then acting as an agent. there is a world of difference here, people. there are no laws that i know of that prevent someone from selling whatever they legally own for whatever price someone will give you for it. but if you are selling it for someone else and expect to be given compensation for your efforts, you are NOT wholesaling, you are an agent and you better have a license.

If you actually buy the house and sell it, that is not wholesaling, if you use contracts and assign them and don't buy it, that is wholesaling. Acting as a strawman on a deal is wholesaling. :)

[Wayne Brooks]

For a real answer, simply read the state statutes.  Ohio, and Fl to a lesser degree, specifically refer to the selling of options, assignments, etc., regardless of what the "equitable interest" proclaimers say.

[Guy Gimenez]

Every state has it's own real estate laws regarding what constitutes licensee activities. Texas too has been cracking down on "unlicensed activity", including heavy fines. 

As a broker/investor, if I meet with a seller whom I have no intention of representing, I am only required to notify them that I am a licensee and that I intend to buy their house, not represent them in the sale of their house. Period. The seller can think what they want, I have made my intentions clear and I have not created a fiduciary relationship in any form or fashion. 

The legal issue typically arises in Texas when unlicensed "investors", take a weekend course or read a book or watch a video and then perform licensee activities such as claiming "I have a buyer who is looking for an owner financed home" or "I have a motivated seller" who needs to sell quickly and the investor doesn't have any interest in the property, equitable or otherwise.

[Ibrahim Hughes]

Originally posted by @Bill Gulley:

I've  not told anyone to stick signs in the yard, advertise on CL, advertise a property in wholesaling or to do anything advocated by the gurus......really......this is why.

I agree Bill. About 6-7 years ago my actions were brought before a judge as I was wholesaling a deal. Long story short my tying the property up for $10, sticking a sign on the front lawn and bringing a buyer in to buy the property did not go over well with the judge. No fine but a threat of one if I did it again. Needless to say I tie properties up with substantial EMD's now, don't market "properties for sale" and have my license. We can debate all we want about what's legal, ethical, allowed and what isn't and debate it all day on BP. The last thing you want is to debate it in a courtroom. Be smart and stay far away from "brokering" properties, regardless of what you call it.

[Brian Gibbons]

Wow this is interesting reaction from everybody more than the "due on sale clause sub2" thread! 

There's so many articles on BiggerPockets about wholesaling and I bet you if you asked 100 of them what wholesaling meant, you get 10 different definitions

If you buy hundred thousand dollar property and close on it and get title now you own it, you can do whatever you want with it

If you option a hundred thousand dollar house or get a sale and purchase agreement with "and/or assigns" at the top of the agreement, you don't own anything, and the courts look at that as operating "agent for"

Have a title of something whether it's on a wrap or subject to or installment sale has real title.

Everyone is so afraid of having a real estate license that they'll be told what they can and  can't do

As long as you disclose to the seller that  you're a licensed agent and you're acting as a business person to make a profit as a principal in a transaction you were good to go to negotiate your best deal

Then you can write an option agreement and sell it, then you can enter into a lease and option is a principal and sell it, If you're licensed.

[Account Closed]

@Brian Gibbons

 so only licensed agents can legally wholesale and 95% of the wholesalers are committing illegal activity if they don't take an equitable title position ? Is that the conclusion?

[James Wise]

I don't understand how this always gets debated back and fourth.

If you do not own a property and you are trying to sell it to someone that is a brokerage activity. It is very simple.

[Brian Gibbons]

Study your laws what define agent activities

Google 

department of real estate California real estate agent activities

If you take title on a wrap and sell the property once you have title (aka AITDs) then on sell it that is different than an option

Big thing is have legal title and act as a principal

[Renee Harris]

what kind of license?

[Brian Gibbons]

Home Licensees DisciplinaryActions

Share on facebookShare on twitterShare on emailShare on printMore Sharing Services11 California Dept Of Real Estate Disciplinary Actions

ACTIONS TAKEN AGAINST A LICENSED OR UNLICENSED PERSON/ENTITY FOR LOAN MODIFICATION ACTIVITIES

View the list of persons and entities that have been served with a Desist and Refrain Order and/or Accusation by the Bureau of Real Estate resulting from a loan modification and/or foreclosure rescue transaction.

ACTIONS TAKEN AGAINST A LICENSED OR UNLICENSED PERSON/ENTITY FOR SHORT SALE TRANSACTIONS

View the list of persons and entities that have been served with a Desist and Refrain Order and/or Accusation by the Bureau of Real Estate for unlicensed or unlawful acts in connection with short sale transactions.

ACTIONS TAKEN AGAINST UNLICENSED REAL ESTATE ACTIVITIES

View the Unlicensed Activities listing of persons or entities that have been issued a Desist and Refrain Order for conducting real estate activity without being properly licensed. Use our Real Estate License Look-Up system if you are uncertain about whether a person or entity is licensed.

View the Citations Issued for Unlicensed Activity to persons or entities for conducting real estate activity without being properly licensed. Use our Real Estate License Look-Up system if you are uncertain about whether a person or entity is licensed.

ACTIONS TAKEN AGAINST COURSE PROVIDERS

View the list of course providers that have had disciplinary action taken against their Bureau of Real Estate approval to offer Pre-License/Statutory and/or Continuing Education courses.

ACTIONS TAKEN AGAINST SUBDIVISION VIOLATIONS

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ACTIONS TAKEN AGAINST UNLICENSED PREPAID RENTAL LISTING SERVICE ACTIVITIES

View the Unlicensed Prepaid Rental Listing Service Activities listing of persons or entities that have been issued a Desist and Refrain Order. If further information about a Prepaid Rental Listing Service Company is required, please check with the nearest CalBRE Enforcement Office.

NOTICES OF INTENTION TO ISSUE BAR ORDERS AND BAR ORDERS

View the list of persons and entities that have been barred by the Bureau of Real Estate from engaging in activities subject to regulation under the Real Estate Law and/or other specified real estate related activities.

SUMMARY OF ENFORCEMENT ACTIONS

View monthly summaries of enforcement actions issued by the Bureau of Real Estate against licensed and unlicensed individuals. Summaries include disciplinary actions initiated against real estate licensees; orders to desist and refrain from unlawful activities; decisions on petition applications to reinstate/remove restrictions from licensees; applications for licenses that have been denied and/or were issued restricted licenses; and licenses that have been voluntarily surrendered.

[Richard C.]

Originally posted by @Account Closed:

@Brian Gibbons

 so only licensed agents can legally wholesale and 95% of the wholesalers are committing illegal activity if they don't take an equitable title position ? Is that the conclusion?

 Essentially yes.  As Bill says, it is the activity that matters, not the dressing (and paperwork) you try to dress it in.

I suggested on here once that a wannabe wholesaler check with their state's REC about the legality of what they were proposing to do.  The cries of, "That's not funny, don't tell him to do that!!!" from experienced wholesalers here told me all I need to know about how confident they really are with all of their, "I'm just selling a CONTRACT!" and "equitable interest!!!" nonsense.

Not very.

[Brian Gibbons]

For the curious about California and acting as an agent 

http://secure.dre.ca.gov/publicasp/unlicenseddnr.asp