BWAL/Wholesaling/State Statutes - Posted by Kristine-CA

Real Estate Investing Real Estate Law
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BWAL/Wholesaling/State Statutes - Posted by Kristine-CA

Posted by Kristine-CA on November 28, 2002 at 03:23:44:

Greetings. I want to ask more about wholesaling and brokering without a license. If the state statutes say that only a licensed agent or the seller can “sell” the property, then wholesaling with double closes or assignments is in violation of this statute. If I have an option contract and/or purchase agreement, I am not an agent and I am not the seller.

So what am I selling? I’m selling my option to purchase or my interest in my purchase contract. Now, selling these do not appear to violate any law if the contracts are prepared properly. However, if I don’t have a deed, I am not the seller. If I don’t have a license, I am not an licensed agent. So, I would be breaking the law?

Does anyone have any idea if marketing style makes a difference here? If I market my option or my desire to sell my interest in my purchase contract, instead of the property, would I then be in line with the statute(s)?

Does anyone know what the statute in CA says regarding who can sell a property? I’ll be honest, I haven’t read the statutes regarding who can sell and who can’t. I’ve been too busy selling.

Does anyone have any feedback if this is a technicality. Are people getting busted for selling property that isn’t “their’s” even when they have sound contracts/options? In some states, it sounds like it doesn’t matter that you are selling your “beneficial interest” if you are marketing to sell a property that you do not own (and if you are not an agent.)

I’ve run into some questions and concerns from agents and from buyers when they find out I am not the “owner.” I have always responded with “I’m selling (or assigning) my interest in the contract.” I’ve started to take Joe Kaiser’s advice and now tell them the numbers, too. Because I can’t handle the the things that have been sneaking up on me at the last minute. Might as well get all the details out in the open.

Would love any and all feedback on this. Please understand that I am clear that I am selling my interest in my options and contracts and have legal counsel for the procedures and docs (and believe it is totally legal). What I want to know about is in regards to marketing my interest vs. marketing the property.

Sincerely, Kristine

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Re: BWAL/Wholesaling/State Statutes - Posted by Rob (AL)

Posted by Rob (AL) on November 29, 2002 at 16:35:17:

Kristine,

First, I want to state that I’m not an attorney, However, I want to shed some light on my perspective of this whole issue of selling real estate without a license. I had a similar question on this forum a while back concerning wholesaling and sandwhich L/O deals. The way I understand it is in my state that a person cannot LEGALLY market a property they donot own (deed - evidence of ownership) if they are not in a “agency” agreement (real estate agent) with a seller or are the owner of record. However, there is nothing in my state statues and codes that would prevent me from marketing my interest (contract rights) to another person for a profit as long as in all of my marketing materials I state that I am selling my interest in the property to potential buyers and I am not the legal owner (deed) of the property. So, I’m thinking maybe I’ll add a small disclaimer to all of my marketing materials stating this fact to keep me out of hot water with the real estate commission (I know if I every were investigated by the real estate commission they would use my marketing materials to try to find me guilty of brokering real estate w/o a license. Ya see, the fact of the matter is that your marketing materials and failure to provide a disclosure to potential buyers is the only real evidence I see that can be potentially used against you)

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Staying legal - Posted by John Merchant

Posted by John Merchant on November 29, 2002 at 12:42:54:

You should understand that the selling of RE “interests”, less than full deeded title, goes on ALL the time, has for lots of years, and there’s nothing illegal about it.

The actual area of concern, legally is “Agency”, and
as long as you’re doing it for your own profit, and not as an agent for somebody else, you’re legal without any kind of license.

Now, a caveat: if you decided to defraud somebody, or otherwise started doing illegal activities in regard to the RE interests you’re buying and selling, some attorney general or DA, somewhere, could certainly start trying to find things to charge you with…and he/she could certainly allege your activities required a license, but you had none, etc. When a prosecutor is looking for charges, he/she can come up with all kinds of criminal charges and allegations, whether meritorious or not!

But “options and rights” entrepeuners have been doing business for lots of years, without any legal difficulty, just selling their options and legal rights, and this is no area of legal uncertainty.

Heck, I’ve even known people to sell their “contract” rights, immediately after they’ve entered into a P/S agreement with a seller, but LONG before they close…e.g. Able finds a real deal with a fixer SFR, and gets Saler to sign P/S agreement at a bargain basement price. Able could sell that the same day, for a BIG profit, without any more legal rights than contained in the P/S agreement, all very legal.

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Re: not an attorney - Posted by DANO (OR)

Posted by DANO (OR) on November 28, 2002 at 21:56:09:

Oh yeah, I’m definately not an attorney, I hope I don’t get in trouble for answering your post, sorry…

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Selling a commodity… - Posted by DANO (OR)

Posted by DANO (OR) on November 28, 2002 at 21:54:05:

Kristine, I’m still a newbie, but I am intrigued by your question.

Your worried about marketing the property you don’t own, but have an interest in and then selling your interest to another party; well if selling an interest is selling a commodity according to the IRS, I don’t believe we [as investors] could ever get hit for brokering without a license. we may be marketing the property (deed or no deed), but we’re selling our interest.

Do you think it makes a difference if we don’t get a deed signed off before we assign? We might not have the deed, but we’re still just selling our interest, right? I think I need to also read up on my states statutes. good call.

I still have yet to wholesale any properties, I am still putting a system together. Thanks for all your posts they have helped me get my bases covered - :slight_smile:

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Re: Staying legal - Posted by Kristine-CA

Posted by Kristine-CA on November 29, 2002 at 13:53:49:

John Merchant: thank you for your answer to my question, specifically “agency.” This was my only point of concern, as I felt I had addressed all the concerns regarding my acting as a principal in my wholesaling transactions before I started down this path.

I have an REI attorney and was certain that he would have told me if there was anything regarding my marketing that could cause a problem. He is totally aware of my strategies and has many, many more clients doing similar transactions that are much higher end.

I haven’t yet been able to sell my contracts rights on the same day, but I’m getting close…The best I’ve done so far in regards to timing is two weeks from purchase agreement to assignment cash. But I know it’s not about speed, but about the soundness of the deal.

“Options and rights” entrepreneur? That’s me. Love the sound of that. I can finally tell my family that I have a career.

Thanks again. Sincerely, Kristine