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.

[Ryan Dossey]

I think its pretty darn simple in Ohio.... Don't wholesale. Wholetale. 

3 steps. 

Buy that sucker. 

Sell that sucker. 

Deposit Check. 

Repeat. 

You should be making offers that make sense for someone to pay. That someone should be you. Think of it like skipping title on selling a used car. Just don't do it. Take title. Then sell it. Honestly... You should just get your license anyway. Investors are wanting to buy it from you at 75% of the ARV give or take. You can easily get 85-90% of the ARV on the MLS. You WILL make more money. You WILL NOT get in trouble with the state. Win-win.

[Account Closed]

[Alan Williams]

Guys thank you for all the great posts on this.  It has been very informative reading all the info.  

That being said, I am seeing three schools of thought and the contention revolves around how you market, what you market, and when you market it.

1.  It's illegal to market the contract if you haven't closed.

2.  It's illegal to market the property if you haven't closed.

3.  Any marketing of the property/contract is illegal.  You must close on the house without marketing.

Does bigger pockets have a polling function?  That would come in really handy right about now ;).  Are you listening webmaster? =D

So which one is right using OHIO as our test bed?

[Brent Coombs]

@Alan Williams, all three points you wrote are from the ONE correct school! 

Of course, if you are LICENSED, or are already the OWNER, market away...

[Alan Williams]

Originally posted by @Brent Coombs:

@Alan Williams, all three points you wrote are from the ONE correct school! 

Of course, if you are LICENSED, or are already the OWNER, market away...

 Hey Brett....the assumption of 1 and 2 is that if 1 is illegal....2 is not and vice versa ;)

[Brent Coombs]

Originally posted by @Alan Williams:

Originally posted by @Brent Coombs:

@Alan Williams, all three points you wrote are from the ONE correct school! 

Of course, if you are LICENSED, or are already the OWNER, market away...

 Hey Brett....the assumption of 1 and 2 is that if 1 is illegal....2 is not and vice versa ;)

Why would you assume it's either/or?

[Alan Williams]

Originally posted by @Brent Coombs:

Originally posted by @Alan Williams:

Originally posted by @Brent Coombs:

@Alan Williams, all three points you wrote are from the ONE correct school! 

Of course, if you are LICENSED, or are already the OWNER, market away...

 Hey Brett....the assumption of 1 and 2 is that if 1 is illegal....2 is not and vice versa ;)

Why would you assume it's either/or?

 That was the premise of my "schools of thought".  I have seen posts on here that support each number.  Some say its ok to market the contract....others say its not ok to market the contract, but ok to market the property.

[Brent Coombs]

@Alan Williams, I believe you will find that the preponderance of informed posts will agree that marketing of Property OR Contracts is deemed illegal in Ohio unless you are the Titled owner of the property or are duly Licensed to do so. (ie. 1 and 2 and 3 equally apply).

[Alan Williams]

Originally posted by @Brent Coombs:

@Alan Williams, I believe you will find that the preponderance of informed posts will agree that marketing of Property OR Contracts is deemed illegal in Ohio unless you are the Titled owner of the property or are duly Licensed to do so. (ie. 1 and 2 and 3 equally apply).

 Awesome man....thanks for your vote.  You are the first one to say so (answering my specific post) but lets see how many we get ;)

[Lee S.]

The only thing that seems illogical to me is that as a principle entering into a purchase contract, while disclosing I'm licensed, allows me to operate under different rules as a principle.  Either I'm acting as a licensee or I'm not.

I'm happy I decided to get my license for many reasons, this issue included, but I can still point out the flaw in the logic.  For those not licensed, just get it done.  I know every state is different but in California it probably took me 30-40 hours including 4 hours drive time to testing location and ~$400 over a 3-4 month period.  It's about as difficult as  passing 6th grade.

[Brent Coombs]

@Lee S. *principal.

In Ohio, who mentioned anything about logic? Cheers...

[Lee S.]

Originally posted by @Brent Coombs:

@Lee S. *principal.

In Ohio, who mentioned anything about logic? Cheers...

I think the same logic applies in California.  Don't sweat the the spelling errors on a forum, I'm working from an iPhone.

[Christina Carey]

@Alan Williams Refer to Brian's post, which I have copied here since this is suuuuch a long thread. Despite him being in CA, he is spot-on for Ohio. He was further validated in a subsequent comment by @Account Closed who, until very recently, was an investigator for the Ohio Division of Real Estate. My husband and I have talked extensively with Nic about this, as well as many other people here in Ohio. The bottom line is, if you do not have the ability to close on it yourself (even if you are immediately reselling it), don't put it under contract.

(Regarding wholesaling in any other state, I have absolutely no idea.)

Originally posted by @Brian Gibbons:

ok folks here is legal wholesaling:

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 Ohio 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. Check the specifics in your state. 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. You can advertise the contract.
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 by Dept of RE Regulators.
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 states 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.

Google "Jeff Watson attorney Ohio illegal wholsaling" for videos on the matter.

[Alan Williams]

Ok so using Ohio as our example:

LEGAL:  Marketing the CONTRACT

Illegal:  Marketing the PROPERTY

So what happens if I only market the CONTRACT.....I attract interest in the contract....then we decide just to do a double close to finish the transaction?

[Brian Gibbons]

Originally posted by @Alan Williams:

Ok so using Ohio as our example:

LEGAL:  Marketing the CONTRACT

Illegal:  Marketing the PROPERTY

So what happens if I only market the CONTRACT.....I attract interest in the contract....then we decide just to do a double close to finish the transaction?

 Hi Alan

in Florida is close to Ohio but not the same,

in Florida there's criminal charges if you always a sign especially without a license. 

If your business plan is to never ever close and always assign and you don't have the capacity to close ever and you don't put down a reasonable earnest money, and you are not agent licensed, Florida is gearing up to prosecute you. It's almost like foreclosure rescue operations earlier before 2010. Department of real estate and Attorney General's office are both getting ambitious.  

When I can't stand is Florida's not giving Real Estate Investors that are licensed or not licensed clear instruction on what they should or should not do.

I've said this over and over and over again, get some kind of funding and get on title, and then resell, you don't need a license for that, being on title and then reselling

Now if you don't want to do that get your license and act as a principal.  And assign. Disclose that to your seller. And to be fair to the seller, tell him it's a nonexclusive option where they can sell it too, and not be stuck being contracted to you

Allan  read the statute it's important

[Brian Gibbons]

Originally posted by @Lee S.:

The only thing that seems illogical to me is that as a principle entering into a purchase contract, while disclosing I'm licensed, allows me to operate under different rules as a principle.  Either I'm acting as a licensee or I'm not.

I'm happy I decided to get my license for many reasons, this issue included, but I can still point out the flaw in the logic.  For those not licensed, just get it done.  I know every state is different but in California it probably took me 30-40 hours including 4 hours drive time to testing location and ~$400 over a 3-4 month period.  It's about as difficult as  passing 6th grade.

 Lee, 

One of my favorite lawyers in Long Beach has said to me

"Brian if you are  licensed in California, 

The legislature in Sacramento has created laws that allows licensed agents to have a limited ability to practice real estate contract law in front of sellers regarding the sale of their homes."

conversely, the new head of the Bureau of real estate,  formally the department of real estate in Sacramento has said that they are cracking down on unlicensed ac conversely, the new head of the Bureau of real estate in Sacramento has said that they are cracking down on unlicensed activity, as ting as a Real estate agent without a license

[Chet Mazur]

not say loop holes that aren't my friend... I was going to siffed a finders. Amazingly the dept. real estate law were quite clear

Is you don't do X,Y or Z you area ok to be a finder, if you do any of these prohibited acts, you much have a broker license and you busted.

[Neil G.]

Get LICENSED, yet act as a PRINCIPAL? 

why? (CA)

[Brent Coombs]

Originally posted by @Alan Williams:

Ok so using Ohio as our example:

LEGAL:  Marketing the CONTRACT

Illegal:  Marketing the PROPERTY

So what happens if I only market the CONTRACT.....I attract interest in the contract....then we decide just to do a double close to finish the transaction?

Correction:- Marketing the CONTRACT: ILLEGAL (read page one of this thread).

Unlicensed In Ohio? First, close. THEN you can start your marketing!

[Brian Gibbons]

Originally posted by @Neil G.:

Get LICENSED, yet act as a PRINCIPAL? 

why? (CA)

You buy real estate on your own account in your own LLC and disclose that you're licensed agent, or

get on title with transactional funding, Hardmoney lending, joint venture partner Lending, or Sub 2 or wrap AITD or TIC co owner purchase, but get on title!

[Lee S.]

Originally posted by @Brian Gibbons:

Originally posted by @Lee S.:

The only thing that seems illogical to me is that as a principle entering into a purchase contract, while disclosing I'm licensed, allows me to operate under different rules as a principle.  Either I'm acting as a licensee or I'm not.

I'm happy I decided to get my license for many reasons, this issue included, but I can still point out the flaw in the logic.  For those not licensed, just get it done.  I know every state is different but in California it probably took me 30-40 hours including 4 hours drive time to testing location and ~$400 over a 3-4 month period.  It's about as difficult as  passing 6th grade.

 Lee, 

One of my favorite lawyers in Long Beach has said to me

"Brian if you are  licensed in California, 

The legislature in Sacramento has created laws that allows licensed agents to have a limited ability to practice real estate contract law in front of sellers regarding the sale of their homes."

conversely, the new head of the Bureau of real estate,  formally the department of real estate in Sacramento has said that they are cracking down on unlicensed ac conversely, the new head of the Bureau of real estate in Sacramento has said that they are cracking down on unlicensed activity, as ting as a Real estate agent without a license

Just to be clear, I'm not questioning the legal Issues or ethical issues, I was pointing out the silly logic.  Maybe the perspective is if I have a license I have something to lose while someone conducting business without a license does not.

*I'm licensed, not trying to justify my own illegal activity.

[Brian Gibbons]

The departments of real estate are protecting the average home seller and buyer

Would you want to buy insurance reimbursements from someone who has been busted for felony?

Getting a license weeds out the really bad people

The seminars attract everybody, Con men and women, and honest people alike

[John Thedford]

@Brian Gibbons

@Bill Gulley

Here is part of the chapter. We have a local guy facing three felony charges. Whatever your business plan, make sure you are acting legally.

475.43 Presumptions.—In all criminal cases, contempt cases, and other cases filed pursuant to this chapter, if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, or such party has maintained an office bearing signs that real estate is for sale, lease, or rental thereat, or has advertised real estate for sale, lease, or rental, generally, or describing property, the title to which was not in such party at the time, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved.

We will have more cases of the state going after unlicensed operators. I am sure this is due in part to the number of victims of these fraudsters leading a homeowner to believe their house was sold then the fraud had not intention of buying it when they signed the contract. Go through and read many of the BP posts in the "wholesaing" forum to get an idea just how prevalent this practice is. Some are even licensed agents.

[Brian Gibbons]

@John Thedford

Ohio is a cease and desist letter.  Maybe a fine.  Maybe you cant be a licensed agent down the road.

Florida is a FELONY.

[John Thedford]

Originally posted by @Brian Gibbons:

@John Thedford

Ohio is a cease and desist letter.  Maybe a fine.  Maybe you cant be a licensed agent down the road.

Florida is a FELONY.

 Florida may start with a cease and desist. Continued or outrageous acts can be a felony charge out of the gate.