Hi everyone,
Is it true that for a non-licensed private individual, that the California Law limits them to wholesale Real Estate contracts only up to 8-10 times in a year?
If so, does this also apply to a out state corporation that is wholesaling properties in California?
I found this in the California Code.
Broker Defined 10131. A real estate broker within the meaning of this part is a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:
(a) Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property or a business opportunity.
(b) Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or from business opportunities.
(c) Assists or offers to assist in filing an application for the purchase or lease of, or in locating or entering upon, lands owned by the state or federal government.
(d) Solicits borrowers or lenders for or negotiates loans or collects payments or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity.
(e) Sells or offers to sell, buys or offers to buy, or exchanges or offers to exchange a real property sales contract, or a promissory note secured directly or collaterally by a lien on real property or on a business opportunity, and performs services for the holders thereof.
Does this mean that I have to become a Broker in order to do more than 8 assignments? Does this pertain to assignments at all?
I don’t think so, but I’m definitely not rendering any form of professional or highly knowledgable opinion here!
It seems to me like the part of that closest to applying to a wholesaler is:
“(e) Sells or offers to sell, buys or offers to buy, or exchanges or offers to exchange a real property sales contract, or a promissory note secured directly or collaterally by a lien on real property or on a business opportunity, and performs services for the holders thereof.”
It seems like a broker would actually be performing a service for the holders thereof, whereas a wholesaler would be performing services for themselves, not the people holding that house.
Though I’d imagine that could be twisted and prove you wrong. I read things about wholesaling that really do make it seem dangerously close to brokering, although with care it appears you can safeguard yourself relatively.
I found a great article on that, I will do my best to find it for you (will have it up within half an hour if I do find it). But, semantically, that really does seem like you need to perform services for the holder of the property, and you are not doing that, you’re performing services for yourself (assigning your contractual interests for money; you’d be selling your personal property, and NOT selling their real property). But, the case that would likely be made is that although you are technically / on paper selling your personal property (contractual interests), it really is so similar to you selling their real property, and in the form of a net listing (where a seller wants a certain price for the property, and the agent gets the net sale price above the price set by the seller). I can see a court finding (or attempting to anyways) that you were doing it legally on paper, but in reality you worked too much like a broker, and therefore practiced unlicensed brokerage. The old ‘substance over form’ thing or whatever it is called.
This is just my understanding, I’m relatively new and don’t know the real world viability of what I’ve told you, it is just what I have read about. I’d imagine that with such a close call, the particular situation’s details / you / the court + judge will be what determines what happens. I do know that I’ve read about people who did have the state persue them for unlicensed brokerage, and of people who seem to do it with impunity from the law. I’d imagine the majority of the difference between the two outcomes comes down to what the judge wants to see, and how the situation’s details occured (for instance, if you called everyone on your buyer’s list to come check it out, and held a small bidding to see which of your investors would pay the most, it may seem strikingly like an open house, and that probably won’t help you when you claim you’re a wholesaler, not a broker).
GOOD LUCK!!