All Forum Posts by: David Stewart

If your assignment is still valid—that is, you did not void it, and wholesaler is bound by it—go to the closing and stop it with your valid assignment.

In your math, the .75 x ARV sticks out to me as unusual. If you figure selling costs to the investor who buys it from you at 10%, that 25% leaves only 15% of ARV for the profit and carrying costs (including any interest on a loan the investor might take out). The classic MAO (maximum allowable offer) formula (here on BiggerPockets calculators, e.g.) uses 30%.

Out of curiosity, have you made an offer on the property? I'm figuring it would be an offer of about $120K. ($270K x 70%) - $50K repairs - $20K assignment = $119K.

Anent many discussions of the legality (or lack thereof) of wholesaling property in Florida, here's my idea of a business model for wholesaling in Florida:

1. Find properties through marketing means.

2. Identify owners, and contact them.

3. Those who are prospects and looking to sell: Analyze and create offers for buying the property at a price to enable selling to rehabbers at a profit.

4. For a seller who accepts an offer, put a contract on the property at the negotiated wholesale price.

5. Close on the purchase with my own money, cash. (Probably from a real estate IRA.)

6. Sell the property to a rehabber, from a buyer's list or other form of advertising, at a price above what I paid for the property and the closing costs I pay.

7. Close on the sale and receive the check.

8. Collect my check, deposit all my funds into my real estate IRA.

It seems to me that I can do the above without a license. (I do have a real estate license, but could do it without.)

Of course, I'm not doing this with no money, and I'm not doing it "without even taking title to the property." I'm a principal on both sides: I am the buyer, then owner, and seller. No violation of Florida law respecting real estate brokerage.

And now I have to pay a bunch of closing costs, which reduce profit. I could, instead of using my own money, borrow from a hard money lender, or private lenders. But then I have to pay them interest, and that cuts my profit again.

Other than that, what's wrong with this model? Anything legally? Anything financially? Anything stylistically?

You make your offer to the Realtor, who is required to present all offers to the seller. The commission to the broker is paid out of the seller's side (almost always, as they are the ones who signed a listing contract agreeing to pay the broker a commission on sale of property). 

It shouldn't change anything, as you need to get the home for the amount that makes the deal make sense.

Fiduciary status is not automatic. In Florida law, the default position of a real estate sales associate or broker, even a listing brokerage and agent, is "Transaction Broker." That is the legal presumption, and obtains unless a specific relationship of either single agent for seller, single agent for buyer, or "no brokerage" relationship is established explicity (with a signed agreement). Only the single agent relationships are fiduciary relationships. All come with certain obligations, but only single agents have additional fiduciary obligations. So in Florida, as an agent I'm not a fiduciary for the seller unless I explicitly make myself thus. And if I were wholesaling the seller's property, I would not do so.

 Yes. You may do so. Assigning contracts is not illegal--it is explicitly legal, and an assignment of a real estate contract is an interest in real estate. The law (we're talking about Florida law here) does not prohibit assignment; it prohibits brokering without a license--and brokering is, in one of the aspects of the law, marketing a property for sale. Per Florida Statutes: "A person may not operate as a broker or sales associate without being the holder of a valid and current active license therefor. Any person who violates this paragraph commits a felony of the third degree...."

Now, here's an ambiguity. Florida Statutes also says "Exemptions.—This part does not apply to: ... (2) Any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property." The interesting thing here is the statute defines "real property" thus: "(i) 'Real property' or 'real estate' means any interest or estate in land... including any assignment, leasehold, subleasehold, or mineral right...."

It seems to me that as an assignment is an interest in real property, as defined in Florida law, an individual selling his/her own assignment, which is real property, would be exempt from the law prohibiting brokering without a license. I'm missing some subtle distinction here, maybe. But if an assignment is an interest, that clause would seem to exempt from the charge of brokering without a license anyone assigning their own contract.

Is it that there is no assignment until the assignment contract is created?

Anyone who can identify an error here, please do so.

Unless a licensee is a seller's agent, and thus has fiduciary obligations to the seller, one is not required to act in the best interest of the seller. One can broker and be representing oneself as a principal--in the case of wholesaling, the licensee who is a buyer is a principal (a party) and may act in his own interest. However, as a licensee one will still have certain obligations to the seller, per the state's laws. They won't interfere with acting in one's own interest.

Hi, I'm a new Pro member, and looking for a first opportunity. Here's a home in a 55+ community, bank-owned (as far as I can tell, no heirs could be found, so bank bought it). The house is cigarette tar-laden, so it needs a good cleaning of walls and . . . well, all the surfaces, probably paint, new carpet, and maybe some new bathroom porcelain. It's about 1350 sq ft, 2 bedrooms, 2 baths, 1-car garage.

I think it can go for $85K based on knowledge of the community and sales, possibly $90K. Have to put 30% down due to community rules, but still a small mortgage.

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*This link comes directly from our calculators, based on information input by the member who posted.