Liscenced wholesaler !!!

[Marlon Jackson]

Is it true that I would make more money with a license than without?

[Don Konipol]

@Marlon Jackson

There are potential legal issues with both being licensed and not being licensed.

If you wholesale without intending to complete a purchase transaction yourself, i.e., you “sell” the contract, then in many if not most states you will be practicing brokerage without a license. Even if you are in a state that regards this activity as requiring a license, the chances of your being subject to an enforcement action may not be large.

On the other hand, if you do receive your license, you will then be held to the standards for a licensee. As a licensed real estate broker or agent, you owe a fiduciary obligation to your client, and an honesty obligation to your customer. The problem is your client or customer is the home seller. If the regulatory authority declare the seller to be your client, then by attempting to purchase at a low price you are violating fiduciary responsibility. If the seller is your customer, then by not disclosing the price the seller could obtain by marketing the property himself, or listing on MLS, you could be violating the honesty/full disclosure requirement.

If you want to fully understand where you would stand, you’d need to get the opinion of a well informed, local real estate attorney. The problems with “wholesaling” occur when you aren’t really wholesaling. To actually be a wholesaler, you must at some point actually have ownership of the asset in question. Most people use the term wholesaling to describe a process by which someone “ties up” a real property by use of a purchase contract, and then sells that contract to an end buyer for a fee. This process was an out growth of a former, rarely used process whereby the buyer bought the property and immediately resold the property in what was called a simultaneous or back to back closing. Since mortgage companies will no longer finance the back end, title companies will seldom do this and only if it’s fully disclosed to the mortgage companies, and transitional lenders have lost their shirts, it is almost never utilized.

IMO, and this is just my opinion, getting your license will not add to the protection of the seller. And it may put you in a detrimental position should you be sued. What is needed is full disclosure, so that in the special provisions part of your purchase offer you clearly state that you will not complete the purchase of the property unless you are able to sell the contract to someone else for a fee, or that you will not complete the contract unless you can resell the property at a higher price (assuming this is the case). This is what most people attempting to “wholesale” won’t do. They either will let the seller believe that they’ll actually buy the property without finding a end buyer at a higher price; or they’ll state some nebulous catch all phraseology like “ bringing in financial partners”. The problem is that these sellers are often desperate, and inexperienced people coming in with no money, no connections, no experience and frankly little ability to close can cost the seller valuable time that he may have been able to use to actually take some action that can result in his bettering his situation.