Well the age old battle about whether you must be licensed as a real estate agent to wholesale properties is being waged yet again and the battleground states seem to be Florida and Ohio.

Now before I proceed, I have to disclaim that I am not an attorney nor am I giving any legal advice. In fact, as an educator in this field, my goal is simply to bring this issue to your attention so that you may decide if it is prudent to discuss this issue with your attorney.

The Board of Realtors (BOR) is saying that wholesaling is nothing more than a work around to be able to sell a house without being licensed – and therefore, wholesaling is illegal.

Of course, we investors contend that we are simply following contract law. When we go under contract to purchase a property we create an equitable interest in the property.

So is wholesaling legal or not?

From what I can gather from listening to many different opinions – some from attorneys and some not – it appears that wholesaling is and is not legal. It all depends on how it is done.

As the BOR claims, it is not legal to identify a house for sale, then identify a buyer, then negotiate a deal with the seller based on that buyer’s offer. You must have the house under contract before you look for a buyer.

I have been saying for years that it is a dangerous practice to NOT place the house under contract before marketing the deal. The contract is what gives you the equitable interest that you can legally sell.

The BOR is going a step further by saying that wholesalers cannot advertise a house for sale that they do not own. OK. So what can we advertise? Well, we can advertise our equitable interest in the property. So it is no longer OK to say you have a house for sale. You must state that you are selling your equitable interest in the property.

Ohio is going a little overboard, in my opinion, by claiming that wholesalers cannot even show pictures of the house. So if you reside in Ohio, you should definitely consult an attorney before wholesaling any further properties just to see how this whole issue is going to shake out. It is better if you are NOT the test case.

The popular opinion seems to be that US property law allows you to sell your equitable interest provided for in the original Purchase & Sales Agreement (PSA) – (provided the PSA does not prohibit assignments.

The PSA I use and include in my courses specifically state that it IS assignable. I have gone a step further with a disclosure that states we are investors. We will make a profit. We may assign the property to another investor. The seller is not paying us any fees or commissions and should expect no representation or advice from us.

Bottom line – we’ll have to see how far the BORs around the country take this. In the meantime, my advice as an investor would be to ALWAYS have the house under contract before looking for a buyer; and make sure that you market your interest, rather than the house itself.

I am not overly concerned about this development, but it is something that I thought should be shared with you. As always, it comes down to operating in a legitimate and ethical manner. It is those few that try to take shortcuts or circumvent the system that create the new headaches for us all.

Expect abundance,
Lou Castillo

P.S. For those of you who already have any of my on-line courses, the revised contracts are already in place and available on the site.