Hello there! Today’s topic is wholesaling in the real estate sector. There’s a lot of chatter out there that it’s “illegal.” But is that really the case? The quick response is – “It depends.”
Now, let’s peel back the layers and look closer.
Real estate laws aren’t the same across the board; they differ from state to state. But there’s a universal rule: if you’re assisting someone to buy or sell property and getting a fee in return, you’re typically required to have a license. The reason? It’s to make sure you have the right training, education, and adhere to ethical standards to protect the buyers and sellers.
Here’s where wholesaling enters the scene. In wholesaling, you’re not directly playing matchmaker between a buyer and a seller for a fee. Rather, you’re passing on your right to buy a property to someone else.
Let’s use an example to make it clearer. Suppose you’ve found a gem of a property that’s on the market for $80,000, and you believe it’s a steal. Instead of connecting a cash buyer to the seller and asking for a fee (which could land you in hot legal water), you put that property under contract in your name. Then, you sell this contract to your cash buyer for, let’s say, $90,000. In this scenario, you’ve earned a neat profit of $10,000 without breaching any licensing laws.
But there’s a caveat to remember. These contracts, termed “assignments,” aren’t always enforceable. If your cash buyer gets cold feet and backs out, you’re the one bound to the original contract. That means you’re on the hook to buy that property, whether it fits your plans or not.
The crucial point here is this: Wholesaling isn’t automatically illegal. It’s all about how you approach it. Be sure to understand the difference between being a licensed real estate broker and a wholesaler. Always secure properties under contract in your name, then assign those contracts for a fee. Follow these steps, and you’ll steer clear of any legal issues.
So, that’s the lowdown on wholesaling – no longer a mystery! Keep these tips in your toolkit, and you’ll navigate the real estate world like a seasoned pro. Until next time, happy investing!