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Author Topic: Legal or not???  (Read 18573 times)

Offline Helixpoint

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Legal or not???
« on: August 11, 2006, 02:13:20 pm »
I live in Pennsylvania. I just had a lawer tell me that he heard of 2 cases that the wholesaler got into legal isssues for wholesaling. Is this true?

Dave

Offline jbklaw

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Re:Legal or not???
« Reply #1 on: August 11, 2006, 03:18:08 pm »
I'd have to know more.  There is nothing per se illegal about wholesaling.  

It's more likely an issue of how they closed the deal, not that it was a wholesale deal.

Offline Helixpoint

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Re:Legal or not???
« Reply #2 on: August 11, 2006, 03:20:25 pm »
I am not sure what you are saying. So are you saying it is a fine line? Please explain further

Offline Roger J

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Re:Legal or not???
« Reply #3 on: August 11, 2006, 03:39:07 pm »
No, there is no "fine line" with wholesaling, as long as the person doing the wholesaling is doing it legally per the law.

What jbklaw is saying is that probably the wholesaler(s) deals were not performed in a legal manner.  More details would have to be given for anyone to provide you with a better answer.

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline Helixpoint

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Re:Legal or not???
« Reply #4 on: August 11, 2006, 04:32:29 pm »
Well I guess I am just looking for some proof that Wholesaling is legal in Pennsylvania

Offline Roger J

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Re:Legal or not???
« Reply #5 on: August 11, 2006, 07:14:04 pm »
Wholesaling is legal in all 50 states.  Wholesaling is simply buying something (anything, including real estate) at a big discount and reselling it at a smaller discount from retail.

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline JOHNNY Q

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Re:Legal or not???
« Reply #6 on: August 12, 2006, 07:58:05 am »
Get 50 people in a room and tell that 1 st person a phrase. Ask the last person what the phrase.Guranteed different. That is how rumors started.I know what you are asking.Illegally inflating home value and flipping it is illegal. Flipping is legal! If I didn't stop it in the bud , this rumor would spread like a wild fire.
John Quebedeaux-CEO-Quebedeaux Financial Investment Holding LLC
Residential, Commercial, Construction, Land Acquisitions, Lot Loans, Bridge Loan, Hard Money, Foreclosure Bailout & Short Sales.MTN, BG, SBLC etc...

Offline Helixpoint

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Re:Legal or not???
« Reply #7 on: August 12, 2006, 08:30:09 am »
Ok. Are their examples that would make wholesaling elligal? If it is not elligal. Why get a Real Estate licience? Don't get mad at me guys. I just want to be careful

Dave

Offline hurrikane

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Re:Legal or not???
« Reply #8 on: August 12, 2006, 08:35:38 am »
Not sure in PA. There was a discussion on another board about thie in MD.

the jist of it was if you have a contract on the house or have a POA from the seller to solicit to an investor you are ok. If you just find a property and pass it to an investor for a fee that could be considered illegal.

You likely have to check the laws in PA. You can do that online.

Offline Helixpoint

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Re:Legal or not???
« Reply #9 on: August 12, 2006, 08:37:24 am »
Yes I searched online. Could not fine a thing

Offline JOHNNY Q

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Re:Legal or not???
« Reply #10 on: August 12, 2006, 09:34:08 am »
Search on google. Put illegal flipping.let me know what you are reading , then will dicuss the myth and correct terms.
John Quebedeaux-CEO-Quebedeaux Financial Investment Holding LLC
Residential, Commercial, Construction, Land Acquisitions, Lot Loans, Bridge Loan, Hard Money, Foreclosure Bailout & Short Sales.MTN, BG, SBLC etc...

Offline Roger J

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Re:Legal or not???
« Reply #11 on: August 12, 2006, 11:46:11 am »
Here, read:

http://www.legalwiz.com/freearticles/7flipping.shtml

Then ask questions.  BTW, 10 seconds on Yahoo search.

Anyone can wholesale a property.  You do not need a RE license to do it.

If you just find a property and pass it to an investor for a fee that could be considered illegal.
It is not illegal to get paid to tell someone where to locate a property.  I cannot go to jail if I charge you $5 to give you directions.  Correctly done, birddogging is the same thing (courtesy of $Cash$).

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline Helixpoint

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Re:Legal or not???
« Reply #12 on: August 12, 2006, 01:09:50 pm »
Ok. So that sounds like a birddog

Offline JOHNNY Q

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Re:Legal or not???
« Reply #13 on: August 12, 2006, 01:24:49 pm »

CAN YOU GUYS READ....HE IS ON THIS SITE. YES ON REI CLUB......................ILLEGAL FLIPPING IS ILLEGAL... FLIPPIING IS NOT!NO AS FAR AS FINDING PROPERTY  FOR INVESTOR AND GETTING PAID IS ILLEGAL? WHERE DID YOU SEE THAT? BETTER YET DID YOU CONSULT A REAL ESTATE ATTORNEY THAT IS A PROFEESIONAL  WHO  HANDLE REAL ESTATE TRANSACTION 365 DAYS A YEAR. HE SAID , SHE SAID .. THEY SAID  .


HERE IS AN ARTICLE THAT IS FROM THIS SITE.
THIS IN FOR INFORMATION ONLY. NOT PROMOTING ANYONE!


Flipping is Illegal
by Ron LeGrand    
Oh No! All this time you’ve been telling me I could make a killing buying & selling (flipping) houses and now you’re telling me it’s illegal, Ron?
Well, sort of! But before you get all upset, I’d better explain. Don’t worry; you’re not going to jail. Here’s the deal. Illegal flipping is indeed illegal. But first, lets define flipping because it is a misunderstood term, sort of like the term "nothing down." When I say you can buy houses with nothing down, I mean you’re not using your own money. That doesn’t mean the seller doesn’t get money. Some-times they don’t and sometimes they get cashed out. But, it is NOT your money; it’s a "nothing down" deal.

When you take over a loan "subject to" the mortgage, and the seller doesn’t want any money, it’s a nothing down deal. When you pay all cash but borrow the money from a private lender, it’s still considered a nothing down deal. Thousands of people don’t believe in the nothing down philosophy and aren’t doing real estate because they simply don’t understand the term, and therefore they’re convinced they can't buy houses without their own money. Their loss. A closed mind and an open mouth will keep you broke and working for those who are willing to learn.

Just try and tell my Boot Camp grads (especially those who have become millionaires because they refuse to listen to the morons) you can’t buy houses without your own money. The same ignorance seems to be attaching itself to the term "flipping." Totally misunderstood and misrepresented.

Here’s The Shocker.

Every house you buy and sell is a flipper. Whether you’re in wholesale, retail, sell- on-lease-option or owner financing, you’ve just flipped a house. Most people use the term when applied to wholesaling, but it’s all flipping. It’s either a fast flip or a slow flip, but it’s still a flip no matter how you look at it.

Ok Ron, So How Come It’s Illegal?

The Answer Is It’s Not.

The term "flipping" seems to be used by the media in cases where an investor bought a property and sold it a short time later. However in all the cases I’ve read, fraud was a part of all their deals. These investors made a practice of illegal activities and got away with it long enough for the long arm of the law to catch up to them...then they instantly became a news item. Flipping houses is not illegal. Fraud is. So what kind of fraud did these guys get in trouble over?

Here’s A Short List Of Possibilities.

1. Paying appraisers to grossly appraise properties to get bigger loans for themselves or their buyers.

2. Rigging down payments to put unqualified buyers in houses that shouldn’t be approved for the loan in which they’re applying for.

3. Falsifying documents required to get a buyer approved such as pay stubs, verification of equipment, tax returns, verification of deposit, etc.

4. Selling houses to unsophisticated buyers, representing them to be in good condition but covering up obvious problems to get the loan closed. This is the most abused type of fraud, and once discovered it leads to an investigation of all the investor’s activities and usually uncovers all other kinds of fraud.

5. Back dating lease agreements to prove a track record of the tenant making payments on time and a year or more occupancy, when in reality the tenant just moved in. This is very common. I’ve had loan processors with large mortgage companies suggest I do it. The last time was on a $600,000 house. I asked the loan agent if he knew that was lender fraud. His reply was, "my boss said it was o.k. We do it all the time."

Just remember this. Anytime the deal is different than the contract presented to the lender, it’s lender fraud. The loan is based on the stated facts. If you misrepresent those facts, it’s fraud. Regardless of how many other people participate in the process.

O.K., Back To Flipping.

What does lender fraud have to do with flipping and the stigma some of the media have placed on it? Some lenders have had so many loans default on lower priced properties sold by investors it’s opened their eyes and made them cautious, and justifiably so, if I were a lender making loans at 80%-100% of the purchase price, I’d be cautious too. In fact, I’d be paranoid, but then again I’d be neither because I’d never even consider doing it.

I have no way of proving this, but if I had to guess, I’d say 75% of all loans closed to fund low income homebuyers contain some kind of false statement or fraud.

I know that’s a bold statement, but I’ve been around a long time. Long enough to see numerous loan companies take a dive from bad loans. It’s almost standard practice in the cheap house business to stretch the truth to get unqualified buyers qualified. This creates default and a bad name for those who operate within the law. That’s exactly what has happened with the term “flipping.” But, Ill say it again. Flipping is not illegal.

There’s no law against agreeing to buy something at price ÒAÓ and then finding a buyer at a higher price. Suppose you had a stereo unit you agreed to sell me for $500, and I told you I would pay you next month when I get my tax refund check (fat chance!). You agree to wait the 30 days it takes me to raise the money. We then sit down and write a letter stating that, and we both sign it.

A couple of days later, I’m talking to a friend who mentions he needs a good stereo. I decide to sell him the one I’m buying for $1,000 and make myself a $500 profit. Obviously I can’t deliver his stereo until I give you $500 because you probably won’t turn it loose until you get paid. However that doesn’t stop me from searching for a buyer.

Once the buyer agrees, I can collect all the money in advance and pay you, collect a $500 deposit and pay you, or I can pay you first with my money and then collect from him. There’s no law that says I have to pay you and take possession before I can talk to anyone about the stereo. If they were on Ebay, they'd have a problem. Half the stuff sold on eBay isn’t in the possession of the person doing the selling. They agree to buy at a lower price from another auction site and put it up on Ebay. When it’s sold, they simply have the old owner ship it to the new buyer.

That’s called drop shipping and it’s very common in any industry that sells products. That’s exactly what we do with real estate sometimes. You don’t have to own it to shop for a buyer. You simply must control it, which is what you do with a contract. The problem comes when lenders see investors buying at deeply discounted prices and selling for two or three times the amount a few weeks later. Some just assume there must be fraud somewhere to make such an unconscionable profit. You see, they haven’t attended my Wholesale/Retail boot camp.

If you’re buying and rehabbing houses it would be a good idea to document the work you’ve done to the house. Keep a file on everything you’ve spent to make a case on how you raised the value so quickly. You should also furnish before and after photos. It is also not a bad idea to create your own album to keep while you’re doing this. It will help with future credibility with everyone you deal with including bankers for a line of credit.

If you’re using private money from a loan broker, you probably have an escrow account for repairs. That means an appraiser may be supplying the mortgage broker with a completion certificate once the work is done. Get a copy and add it to the pile of evidence. Of course some lenders won’t be happy with anything you provide and simply won’t fund the loan unless you’ve owned the property for a year or more. I wrote a past newsletter article on six ways to get around that, but the best way to deal with lenders who don’t want your business is . . .Whack 'em!

Flipping is not illegal. The length of time you own a house is your business. Making a killing is your right. Providing for your family is your obligation and the smartest thing you can do with people or institutions who want to make life difficult is cut them off at the knees and tell them to take a hike . . . and that’s my final answer. They are the weakest link.

Before you even take a buyer to a lender for a loan, ask them right up front if your length of ownership is an issue. If they give you any indication that it’s a problem, move on. The country is full of lenders and there is a ton of money available. They need you more than you need them. Don’t take any crap from any lender and don’t let them make you believe their rules are the law or even the norm.

Well, I’m getting tired now! It’s been a long day of battling ignorance and skepticism and I’m worn out! I think I am going to go "flip" open the refrigerator and get a little snack, then “flip” on the shower, then “flip” down the bed spread and shut my eyes for the night. Life seems to be one flipper after another. Hope it’s legal.

 Ron LeGrand  
Ron LeGrand borrowed money 20 years ago to attend his first real estate seminar. Today, he is affectionately known as “The Guru” and is recognized as the nation’s leading authority on buying and selling single-family homes for fast cash and with no credit, and incurring little or no personal investment or risk.

His unique approach has made him an entrepreneur extraordinaire who is in demand as an author, trainer, lecturer, and consultant. Since 1991, over 250,000 people have attended one of Ron’s seminars and workshops. Ron LeGrand is a principal contributor to a nationally distributed newsletter for real estate entrepreneurs. His web site is ronlegrand.DOT COM
 

 
John Quebedeaux-CEO-Quebedeaux Financial Investment Holding LLC
Residential, Commercial, Construction, Land Acquisitions, Lot Loans, Bridge Loan, Hard Money, Foreclosure Bailout & Short Sales.MTN, BG, SBLC etc...

Offline Helixpoint

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Re:Legal or not???
« Reply #14 on: August 12, 2006, 01:30:17 pm »
Well. I am going to talk to a real estate lawer on Monday. Ihave not found any concrete evedence that it is illegal. Thanks for all the input guys

 




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