Hudson, FL · Member since 2016 · 7 posts · 6 votes
My wife and I are new to this whole REI thing and are learning as we go. We have started to look into wholesaling and have seen many success stories and advice on how to complete the process from start to finish. The problem is that I am starting to see quite a few articles and posts from people saying that wholesaling is "illegal if you're not a licensed broker". How is this possible when there are so many people that have been successful in wholesaling, create videos on YouTube, post on BP and write books about the subject and never say anything about the practice being "illegal"? If the purchase contract clearly states that I may assign the contract and the assignment contract states that I am assigning the contract, why would it be illegal? I am a police officer and definitely can NOT take a chance of doing something illegal. I have an appointment later in the week with my real estate attorney to get the final word, but I would like to hear some thoughts from the BP crowd. We are in Florida and I know laws differ from state to state.
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
I totally agree with Ken. I have been wholesaling in Missouri and now Florida for 17 years. There are no problems in wholesaling if you do it right. I have 43 properties right now that I'm wholesaling and the way I do it if the spread between the price I'm buying it for is less than $10,000, I just have the buyers sign a Consulting Fee agreement. That way they buyers 'Assumes' my contract (be sure that is allowed on the contract) for the price I would have bought it. They buyer then buys the house for the price I have on my contract and the title company pays me in the closing for the price listed on the Consulting Fee Agreement. Even though I'm a licensed real estate agent, I still do it this way. I only use my RE License to do my larger commercial deals.
Now if the amount I'm getting is more than $10,000 I don't want the buyer or seller to know how much I'm making so I will do a double closing. Yes it costs more because I have to pay for 2 closings but it is better this way to maintain a good relationship with both the seller and to do more future business with the buyer.
Miami Lakes, FL · Member since 2015 · 133 posts · 83 votes
10y
I've got lots of friends successfully wholesaling here; none of them are in jail! No cops have come knocking on MY doors as well!
There are some states where wholesaling is "illegal", such as Ohio, but Florida is not one of them.
As far as places like Ohio are concerned, the way I understand it, they don't want you to "assign" the contract. However, there's nothing stopping someone from double closing, where they actually buy the property, even if only for 5 minutes, then turn around and sell it to an investor.
But here in Florida you're cool.
You might get harassed for bandit signs, but that's about it.
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
I totally agree with Ken. I have been wholesaling in Missouri and now Florida for 17 years. There are no problems in wholesaling if you do it right. I have 43 properties right now that I'm wholesaling and the way I do it if the spread between the price I'm buying it for is less than $10,000, I just have the buyers sign a Consulting Fee agreement. That way they buyers 'Assumes' my contract (be sure that is allowed on the contract) for the price I would have bought it. They buyer then buys the house for the price I have on my contract and the title company pays me in the closing for the price listed on the Consulting Fee Agreement. Even though I'm a licensed real estate agent, I still do it this way. I only use my RE License to do my larger commercial deals.
Now if the amount I'm getting is more than $10,000 I don't want the buyer or seller to know how much I'm making so I will do a double closing. Yes it costs more because I have to pay for 2 closings but it is better this way to maintain a good relationship with both the seller and to do more future business with the buyer.
Hudson, FL · Member since 2016 · 7 posts · 6 votes
10y
Thank you gentlemen for the input. Great advice. I feel a little better now, but i will still speak with my attorney later this coming week. I did like the idea of the double close. Thanks again, I love being a part of the BP community.
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y
There are legal ways to operate and illegal ways to operate. Just as important, there are honest ways to operate and dishonest ways to operate. Promising a seller you will purchase their property with NO intention of closing if you cannot assign the contract is not an honorable way to do business. Many "wholesalers" post on BP telling how they lie and deceive sellers, ask for escape clauses, etc. This is the BIG problem. The state is cracking down on these types. We had the state speak at our local REIA meeting and they stated these bogus contracts with 900 escape clauses, etc would not pass scrutiny. I don't have any interest in "wholesaling" mainly for the reason that real wealth is made through buy and hold rentals. You might make 4K, 5K, whatever on an assignment, but may make 8K or 10K a year EVERY year you own the same property.
Real Estate Agent · Colorado Springs · Member since 2017 · 73 posts · 9 votes
9y
@John Thedford that may be true dependent on the specific circumstance, but buy and hold properties have a disadvantage in the short term because profits are deferred and are by nature not as liquid as straight cash immediately
Lakeland, FL · Member since 2017 · 44 posts · 25 votes
9y
Great amount of info here. I've been looking into it lately trying to learn the ins and outs of wholesaling, wondering if its illegal in FL too but it seems not . Its just a matter of how you conduct yourself and not leaving the Seller high & dry! I think if get into it seriously I would like to be in the position to buy what I couldn't assign and add to my portfolio but things don't always go as planned though.
Bay Village, OH · Member since 2016 · 155 posts · 55 votes
9y
Everyone should presume wholesaling is illegal. Spend a few weeks and just a few thousand bucks to get your license and save from stress and potential for criminal defense legal fees.
Is the legality an issue mainly when it comes to HOW you market a property under contract? If I do not have a RE license and get a property under contract but then immediately post the address and pictures to CL, that is illegal right? But if I send that directly to one of more buyers who I already have a relationship with, then it is legal isn't it? Can you correct/elaborate on this as far as FL is concerned?
Is the legality an issue mainly when it comes to HOW you market a property under contract? If I do not have a RE license and get a property under contract but then immediately post the address and pictures to CL, that is illegal right? But if I send that directly to one of more buyers who I already have a relationship with, then it is legal isn't it? Can you correct/elaborate on this as far as FL is concerned?
Thanks guys!
Wholesaling is not illegal in Florida. Period. Assign the contract, double close, whatever. Perfectly legit either way.
When you get a house under contract and subsequently post pictures of said house on CL (or FB or anywhere else) you're not selling the house, you're selling the rights to the contract.
You don't need a license to do that. Maybe in some other states, but not in Florida.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Ken Badziak I am pretty sure the moment you put up a house on criags list or your website that you do not own.. describe it with bed bath etc.. your engaged in real estate brokerage activities and that requires a license.. flipping homes is legal for sure.. but going about it like your a real estate broker simply is not.. its just so rampant that the states can't keep up. and some states take a completely blind eye to it.
if you read the REGS on what is required to bring two parties together on property you don't actually own in a scheme or business model you will see that the definition needs a license..
I have known many an investor get in big trouble over this in multiple states..
One in MS who was a turn key operator.. and I was funding his buyers in LA he never took title just made the ubiquitous marketing fee on the hud... buyer got steamed about a deal that did not go right turned him into the Department of real estate there in Jackson MS and boom Cease and desist and fine. I then created a model for him ( transactional funding) so that he could come into title on everything he was marketing and things were fine.. he then left our fold and went right back to his bad ways.. gets caught again this time he is arrested and thrown in jail on a Friday in Jackson MS not a place you want to spend a weekend in Jail... and was then banned from the industry for life.
I have another vendor I fund here in Oregon .. he simply put a for sale sign in the yard of a home he did not own.. someone turns him in to the state.. 5k in legal fees cease and desist and 5k fine later .. He now uses me to fund all his deals... :)....
AS long as you don't advertise in the public median send out blast e mails you can occasionally assign a contract without getting in trouble.. especially if you closing on a bunch.
But is your scheme proves out you never bought anything you created a website and hold yourself out there as owning these property for worse assigning them.. then your clearly breaking the rules.
Being a pilot your familiar with the regs.. you may find it enlightening to actually read the state real estate regs.
PS. I read your page.. one of my buddies flew reserve for AA for years.. we all lived at Silverado CC in the Napa Valley he played a lot of golf... but had to be to SFO in I think 2 to 3 hours when called.. so no drinkin after golf we had a great group the golf game was even called the pilots game.. about 35 pilots lived at our CC... great group of guys..
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
9y
Putting a property under contract (with the intent and ability to perform per the terms of the contract), then assigning that contract to another buyer is perfectly legal.
Where many wholesalers run afoul of the law is in the marketing of the property.
"In Florida, it is unlawful to engage in the following real estate related activities for compensation without possessing a real estate broker's license or sales associate license.
Advertising or marketing another person's timeshare or property for compensation.
Auctioning or attempting to auction another person's property for compensation.
Buying or attempting to buy real estate on behalf of another person for compensation.
Listing another person's timeshare or property for compensation.
Operating as a real estate broker or sales associate without a license.
Renting, leasing, or attempting to rent or lease real estate on behalf of another person for compensation."
Getting your real estate license is not particularly difficult. So why not just just get licensed? I gives you so many more ways to make money in real estate!
475.43 specifically states using contracts to broker RE as a means to circumvent license laws is ILLEGAL. Anyone taking your advice can get a cease and desist OR a 3rd degree felony charge.
See 475.43 as well as my post above. Using contracts to circumvent license law is ILLEGAL. Market properties you do NOT own, for compensation, is illegal. There are a lot of FRAUDS and SCAMMERS claiming they are selling a contract, but they are advertising REAL ESTATE they do not own. Sorry charlie....the smoke screen is easy to see through. I turn in an average of 3-5 people per week for playing these games. I am sending in a packet of four of them Tuesday morning for brokering without a license. The ONLY way to "wholesale" legally is either OWN IT---or get licensed.
You can always post 475.43. I have posted this info 100 times--a DAY LOL! However, some will never learn, and others don't care and feel entitled to break laws!
Here is 475.43: 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.
Miami Lakes, FL · Member since 2015 · 133 posts · 83 votes
9y
Hey so I looked into it some and it turns out you guys are absolutely correct; I've been given some bad information and have been erroneously promulgating said info. My bad! Thanks for setting me straight.
Your post hits a local case right on the head. We have a civil case pending in Collier County, FL. "Buyer" allegedly took a lot of "inspectors" through the house, etc. Buyer didn't try to close in their name but assigned instead. Seller defaulted. "Buyer" has sued. Seller has counter sued. Seller's attorney has responded to the lawsuit with interrogatories. Several of the questions deal with "buyers" intentions of closing, past history of purchase within the past few year, past history of assignments in the past few years, banking balances to prove whether he had the ability to ever purchase and fulfill that contract. So, if a bad pattern can be shows, that bolsters the defendants case. Defendant also claims "buyer" is violating FL law and brokering without a license.
It is EASY to "wholesale" if someone wants to pursue that avenue: 1. BUY and then resell OR 2.get licensed.
I would not be surprised if the state mandates several changes, etc for those agents that want to strictly assign and circumvent paying broker commissions, etc. The problem is the sellers have NO IDEA what they are paying for the "service" and many are being taken advantage of. It is a very opaque transaction that benefits the agents but not the seller.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Ken Badziak you go on Reserve and you will have plenty of time to study and get your license.. I funded a few hundred deals for folks up in Orlando.. and the major wholesalers they used all had real estate companies and were licensed.. they have since closed shop since wholesaling in any volume is about done in FLA these days.... Hangover OREO inventory has pretty much flushed through the system.. which is a good thing.... my guys I am funding now.. at a few a month are enjoying a very nice fix and resell retail market.. with homes selling in a matter of a few days to few weeks to homeowners. so your not flooding neighborhoods with rentals.. this is a good thing as well.
Real Estate Professional · Mesquite, TX · Member since 2017 · 28 posts · 5 votes
9y
I am just now getting into RE and have worked for a wholesaler and never even thought that it could be illegal.. but after reading some of these threads, my concerns raise..
I understand where the legality comes in is marketing a product that you do not own without having a license and acting as a broker without doing a double closing as well.. However, How is it illegal if you have a contract that states this contract is assignable and the seller has the ability to market the property ..? Would this change the legality of it all?
Also, would having an agent market the properties for you help the legality as well?
Personally I plan to get my license, but I am honestly not wanting to wait to finish the course and get my license to get started, because the place I am in in my life right now..
I am just now getting into RE and have worked for a wholesaler and never even thought that it could be illegal.. but after reading some of these threads, my concerns raise..
I understand where the legality comes in is marketing a product that you do not own without having a license and acting as a broker without doing a double closing as well.. However, How is it illegal if you have a contract that states this contract is assignable and the seller has the ability to market the property ..? Would this change the legality of it all?
Also, would having an agent market the properties for you help the legality as well?
Personally I plan to get my license, but I am honestly not wanting to wait to finish the course and get my license to get started, because the place I am in in my life right now..
Marketing a property you do not own, for compensation, is brokering regardless if you have a contract or not. Solutions: 1. purchase it..then market and resell 2. get licensed
I am just now getting into RE and have worked for a wholesaler and never even thought that it could be illegal.. but after reading some of these threads, my concerns raise..
I understand where the legality comes in is marketing a product that you do not own without having a license and acting as a broker without doing a double closing as well.. However, How is it illegal if you have a contract that states this contract is assignable and the seller has the ability to market the property ..? Would this change the legality of it all?
Also, would having an agent market the properties for you help the legality as well?
Personally I plan to get my license, but I am honestly not wanting to wait to finish the course and get my license to get started, because the place I am in in my life right now..
Marketing a property you do not own, for compensation, is brokering regardless if you have a contract or not. Solutions: 1. purchase it..then market and resell 2. get licensed
Upon doing my research. I have learned that by getting a contract on the property with the proper statements and disclosures give you equitable interest and allows you to market the property as if it is your own..
I understand there will always be varying opinions on this and even some RE attorneys will agree and disagree.. just wanting more opinions on this as well.
I am just now getting into RE and have worked for a wholesaler and never even thought that it could be illegal.. but after reading some of these threads, my concerns raise..
I understand where the legality comes in is marketing a product that you do not own without having a license and acting as a broker without doing a double closing as well.. However, How is it illegal if you have a contract that states this contract is assignable and the seller has the ability to market the property ..? Would this change the legality of it all?
Also, would having an agent market the properties for you help the legality as well?
Personally I plan to get my license, but I am honestly not wanting to wait to finish the course and get my license to get started, because the place I am in in my life right now..
Marketing a property you do not own, for compensation, is brokering regardless if you have a contract or not. Solutions: 1. purchase it..then market and resell 2. get licensed
Upon doing my research. I have learned that by getting a contract on the property with the proper statements and disclosures give you equitable interest and allows you to market the property as if it is your own..
I understand there will always be varying opinions on this and even some RE attorneys will agree and disagree.. just wanting more opinions on this as well.
That is not correct. You do have equitable interest, but marketing property you do not own is illegal. The state specifically addresses that in 475.43. You are giving wrong information, and information promoting illegal activities. Here is the statute:
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.
This man was using contracts to broker real estate in violation of the statute. He got a cease and desist.
