Florida RE Attorneys: Wholesaling Legalities

[Amanda Fishman]

I've scoured this site for months upon months and haven't come to a solid conclusion...so, I'm sure I am asking something similar to every other newb- and I apologize not only for the repetition but the length.

***My question is for those proficient in RE Law pertaining specifically to Florida.** 

My husband and I have decided that we would like to begin wholesaling (specifically contract assignment)- because let's face it, with about as much capital as a handful of beans (which will get eaten up mostly in marketing,) it seems the most feasible way to build a nest egg for our eventual fix and flips/buy and holds. Plus, there's a large market with all of the dilapidation/tax default/absentee owners in our area. That's another part of the reason we want to do this! We genuinely see a need for it. In my experience there aren't a lot of RE agents in our immediate area that are determined/honest/compassionate/savvy enough to deal with truly motivated sellers OR investors (not all, but a lot.)

That being said, I'm here because we're having an issue with the legalities of it all. Ethics are another story, as I DO know that it is possible to conduct ANY business dealing ethically. My concern is being slammed by the AG. Risking my family's well being isn't worth any amount of money.  

As you'll hopefully be able to see from my spiel below, I am not interested in back-dooring anyone by any means, especially someone who may be in a bind and genuinely NEEDS the quick out- I've been there. Karma is a twit and I don't intend on facing her.

So, seeing as neither of us are realtors or brokers or working under a broker, and do not plan (as of this very moment) to purchase any of the homes we are hoping to put under contract- is simply putting a home with an agreed upon assignment contract ALONE, LEGALLY considered enough EI here to market property? 

Or/also, if in being completely honest with a distressed/motivated seller about what we're doing and some form of cash IS required (IE: "While your home doesn't currently fit our needs, we do have access to other serious cash investors who may be interested {and we absolutely do}. So, to affirm that we are serious in helping you- would you be willing to allow us to place your home under contract with us, along with a non-refundable amount of {let's say $100- so we have the ability to market?} for the duration of 30 days? And in that time, let us see what we can do for you to get you out of XYZ situation! If in that time we're unable to procure a serious cash buyer and our contract then becomes null and void, we'll be more than happy to point you in the direction of another reputable wholesaler, RE agent, etc who will be more than happy to further assist with what you may need.....") are we then free, with an approach such as this, to move forward (contract, market and assign) lawfully (and would you consider my above approach the most ethical way to go about an assignment?) Or, does the upfront intent of us NOT being the end buyer disallow us from legally placing the home under contract to begin with?

I would ask if we should just get our RE license and do it that way, but from what I understand in this form of wholesaling, you'd have to work as the principal anyway, and not the realtor....?

I've seen SO many varying opinions on all of this. But, I can't work with opinion. Opinion could mean the difference between jail or no jail, and "I didn't know" doesn't hold up well in court. 

WHEW! Okay, I'll stop! I really look forward to your replies! Thank you, again! 

[Bill Gulley]

Sorry, I'm not an attorney.

You know, the Florida Real Estate Commission really isn't full of monsters, they are in public service and are probably fairly nice people. Why don'y you just call them and tell them what you have written here and ask them if your planned activities would violate Florida Laws and real estate ethics? 

Really, just call and ask, it won't cost you anything to ask and you'll be getting information from the horse's mouth! 

BTW, your statement about ethics, I have a feeling you're off a bit on that angle.

Business ethics, as I just recently posted, is not your opinion or anyone's opinion of what is acceptable in any industry, it's not a religious point of view, it's not what we personally feel might be right or wrong, business ethics are established expectations of conduct for those dealing in that industry. Each profession has a code of ethics, in real estate we have a bit of a problem;

Just about every profession that deals in the real estate arena has a code of ethics except individuals or entities that operate as "investors", for investors it's the Wild West, each is left to make up their own ethical boundaries. 

But what we can and should do is look to the established ethical boundaries established by those related professions as this will give you a guideline of what others in the industry expect as acceptable conduct. 

Personally, I adopt the Realtor's Code of Ethics as that applies to real estate operations, I also adopt the Code of Ethics of lending institutions such as confidentiality, disclosures, fair dealing and much of that is also anchored in law. 

The short of it is, is that you might do something that is perfectly acceptable in the auto sales arena but that can be highly unethical (and illegal) in real estate. An example might be helping you neighbor sell their car, you find a buyer and the car owner flips you a reward, that may fly without having to be registered as a car dealer, but that is not acceptable conduct in real estate. But, if you go into the business of consignment sales with cars, you'll need a dealer's license.

Breaking laws is unethical conduct in all industries.         

Real estate is not a commodity like cars or boots or cans of green beans or airplanes. Commodities can be produced, real property.....dirt, cannot be produced or reproduced. Real property is not personal property and we deal with it differently than personal property. 

When dirt has a legal description it is real property. The bag of soil for sale at the garden center is personal property.  That's said just in case we have some wise guy remark in the forums. :)

Now, IMO, what you outlined above is clearly broker without a license, I think you already know that.

As to contracts, basic contract law requires certain aspects be present for a valid contract, two of those are -the ability to perform as written or agreed and the intent to perform as written or agreed. If one or both of those requirements are missing, you do not have a valid contract! It is voidable.

We recognize that when we sell real estate the title must be clear of any defects. If you buy a new lawnmower, is there any expectation that it runs properly and is free of defects? Yes! So, one who holds a contract that is defective, it's voidable, are you holding your "product" out as being genuine and free of defects? That's what a wholesaler does, they assign defective contracts. Some may construe that as fraudulent dealing. 

With just a tad bit of research on the elements necessary to contract you will see what the legal requirements are, it's pretty plain. 

And, just because a contract is voidable doesn't mean one or both parties will void the contract, but they can and that is the point of the contract being defective. 

After I did further in depth research into this wholesaling niche, reading opinions of lawyers and regulators, breaking through the glaze at the top, I have formed this more current opinion. I didn't pull my opinion out of my hat. 

Other than protecting the public from scammers or people who don't have a clue as to what they are doing, I have nothing at steak in defending or attacking wholesaling activities that are carried out by assigning contracts.

All is not lost, you can do basically the same thing a wholesaler does by taking title so you can sell. You don't need a ton of cash or good credit, and there are several ways to close a deal as required. It's not rocket science! You will then have the intent and ability to purchase, you won't be brokering without a license if you take title then sell. This is not a "double closing" which is now restricted by ALTA, but is a back to back settlement. You buy and immediately sell minutes later. Now, you're ethical and legal at least with regards to the wholesaling thing. :)