Quote from @Don Konipol:
@Jonathan Greene “Huh? You think it's odd that a fiduciary duty would apply to someone who calls a person or markets to them to buy their house, tells them how they are going to buy it (or assign it), puts down a deposit on it, brings in other people to show said person's house, and then executes a deal with a third party where they get paid?
I think what you said is more odd and the exact reason why laws against wholesaling are being put in place all over.”
If the person in question were the REAL buyer, no question of fiduciary responsibility exists; the buyer is merely a PRINCIPAL in the transaction, and as such has no duty to the seller. The question of fidelity, honesty, disclosure and or fiduciary exists BECAUSE the person in question (wholesaler) is NOT the real buyer. So, states are beginning to look at the “role” of the wholesaler two ways. First, if the wholesaler is a PRINCIPAL in the transaction, then if he signs a contract stating he will purchase the property but has NO INTENT to close, merely wants to flip the contract, that is arguably fraud. The other way some states are looking at the role of wholesaler is that the wholesaler is NOT a principal to the transaction; i.e., he is an intermediary. As an intermediary he is subject to the laws, rules and regulations regarding real estate broker activities in the state in question.
The pros in the areas we do business do more than just assign contracts. Sure they may assign to the right end buyer... but they will also buy, rehab and resell retail, or buy and hold short-term and resell, etc. Point being they find good deals and then figure out how best to monetize them. That's hardly fraud. And there is definitely no fiduciary relationship established with the seller.
There are wholesale companies that cater to investors and stay within the law. Look up Express Home Buyers, NewWestern, MarketPro, just to name a few.
