Heads Up Ohio Wholesalers! Potential NEW Legal Ramifications of Wholesaling

[Suzette West]

The other day, I had an interesting conversation with the executive director of the Ohio Department of Commerce. He had called me in response to a complaint I filed against a broker who asked me not to make any offers on any more of her properties in the future. It was apparent that she either does not like--or does not understand--the business of wholesaling. Anyway, the complaint earned me a call from the director who told me that his department is actively pursuing wholesalers in Ohio who are not licensed to "market properties that they do not own." In other words, even though there is a purchase and sale agreement, a wholesaler needs to have a real estate license in order to market the property during the inspection period. Insane!

He called it "unlicensed activity." The funny thing is when I asked him about marketing the contract--as oppose to the property--he never responded.

Anyway, just take this as a heads up that Ohio is not playing nice. They are investigating and fining unlicensed wholesalers $1,000.00 per day per violation.

It's very sad , but true that people tend to fear what they do not understand. I wonder if wholesalers in other industries experience the same type of static?

Take care out there.

[Darrin Carey]

Everyone should note the lead sentence in the article includes the clause "which may be providing instructions on how to circumvent real estate license law"

@Steve Babiak @Jonny S. @Andy Argonaut The unlicensed activity on page 8 was for Property Management without a license. There is no court of law involved, only the Division of Real Estate.

• Interestingly, after looking through several years of disciplinary actions for unlicensed activity, I did not find a single instance where it was for wholesaling. @James Wise have you found any?

I've had a few conversations with the State of Ohio Division of Real Estate about wholesaling and other typical real estate investor activities.

Back in 2007 the Division of Real Estate head Attorney explicitly stated that wholesaling by assigning a Purchase and Sale agreement did not need a license, however for an option agreement she thought it did need a license.

In Sept 2013, I had a lengthy conversation with one of the Division of Real Estate enforcement section investigators. I believe he was the lead investigator.

The summary of the conversation is as follows.

1. The Dept is concerned about people who are writing a lot of contracts with the intent to only wholesale, and no intent or ability to close otherwise. He gave an example of people writing 40-50 contracts a month, and only closing on one or two.
2. Assigning a real estate contract is legal. I was very specific about this one. I literally told him I was about to assign a current contract to another investor for a few bucks, because I had decided I was too busy did not have time to rehab it. He said it was fine.
3. One of the items he keyed in on was I had the intent and the ability to close the contract.
4. I was unable to pursue the marketing of a real estate contract due to time constraints, The methods how wholesalers are marketing their deals may be an issue.
5. See #1 for what the states hot button is.