Is it now illegal to wholesale in Illinois?

Question

I’ve seen a lot of contradictions online about this subject. I was wondering was it illegal or not. I understand a lot of people are making money doing wholesaling did they make it illegal because of that or because they’re taking money from the realtors? Is it legal but very strict...just curious

Jay Hinrichs · Answer

they are state laws.  I sent one flyer in that I got in Oregon and asked for clarification the state promptly opened and investigation the person had to lawyer up .. at the end of the day first offense no fine but told not to do it anymore other wise there would be large fines etc.. that person is now licensed..  See below.    The reason is not brokers worrying about commission as much of the wholesale activity is in underserved areas . But its from owners who once their relatives understand what they did get pissed..  Or those that lose houses in foreclosure because the wholesaler who promised to close and the seller relied on someone with no intention of closing or ability left them in the lurch..  Its these complaints that changed the laws and clarified them.

See below from state of Oregon regulator:

Hello Jay,

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful.  Thanks!

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction.  Addressing the problems is like trying to put out small individual fires in a forest that is burning.  The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

Best regards,

Frances Hlawatsch | Financial Investigator

State of Oregon - Real Estate Agency

Account Closed · Answer

For any person, or entity, engaged in the business of Wholesaling real estate, you cannot wholesale more than one deal a year. A Broker’s license is required if an individual intends to wholesale more than one deal a year and they will be subject to the rules and regulation of the Illinois Department of Financial and Professional Regulation.

lIllinois revised the Illinois Real Estate License Act of 2000 back in August, which includes a change to the definition of a Broker. The new definition includes:

“Whether for another or themselves, engages in a pattern of business of buying, selling, offering to buy or sell, marketing or sale, exchanging, or otherwise dealing in contracts, including assignable contracts for the purchase or sale of, or Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements thereon. For purposes of this definition, an individual or entity will be found to have engaged in a pattern of business if the individual or entity by itself or with any combination of other individuals or entities, whether as partners or common owners in another entity, has engaged in one or more of these practices on 2 or more occasions in any 12-month period”

Be sure to familiarize yourself with the entirety of the new regulations, as there are important changes to Wholesaling that matter to how an individual engages in the business.

Braden C. · Answer

It's not very hard at all to get your RE license and then you don't have to worry about if/when it becomes illegal. You can also earn additional income as an agent, even if you just help family and friends with one or two transactions per year. You could of course earn a lot of extra income by offering to list properties for potential sellers that don't work out as wholesale deals. As an agent, you will need to disclose to all potential sellers that you have a license but in my 10 years and several hundred completed deals, it's never once been an issue and if anything has helped with some credibility.

Ronald P. · Answer

@Braden C.

But you do have to join a board to be classified as a Realtor, and you have to pay to maintain the license, and the MLS. There are additional costs associated too.

Braden C. · Answer

I am not sure for every state, but in Florida there are brokerages that allow you to hang your license to keep it active without having to join any boards. You can't get MLS access with these types of brokerages but it does give you the "active" status.

Will Barnard · Answer

“Wholesaling” is not illegal anywhere, but there are plenty of ways to wholesale illegally and if you intend to assign a contract to a buyer for a fee, yes, that would be one way to do it illegally unless licensed.

Scott Mac · Answer

I wonder how (if) they are going to enforce it.

With a Realtor they can always threaten to pull the licence, but it seems like for a non-realtor, they would have to be cited/fined somehow by someone (the Police???) and a calendared for a district attorney to prosecute it.

What then, jail time and a criminal record?

There is a LOT (A LOT) of worse crime in Chi-town filling up the courts and DA's office, many with very light sentences rendered.

So I wonder if they will take the time to enforce this--or like certain Federal laws just ignore the enforcement--or only enforce it in some areas and not in others?

(?????)

Brie Schmidt · Answer

@Jay Martin - now you need to be a licensed broker to do it legally

Is it now illegal to wholesale in Illinois?

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