I need clarification please.
I am concerned that some of the tasks involved in the process of wholesaling are inherently connected to practicing real estate without a license.
I am a wholesaler.
I never intend on taking title to a property.
The unilateral option agreement, once signed by seller and me, surely states that I have an equitable interest in the property but am not required to perform i simply have the right to buy the property at our agreed on price within stipulated time frame. Where it gets cloudy to me is what happens AFTER the option agreement is signed.
The minute I get the option signed my sole focus is to find a real rehabber to purchase my “option” at whatever markup i feel is realistic. Are we not then “working for the seller” in a sense?
All I’ve read so far is we are “selling our contract” not selling a property, but realistically look at what we do…once we have our option contract signed we blast out to craigslist and to our buyers list a detailed description of a “real property” to generate as much buyer intrest as fast as possible. Call it what you want but it is marketing a property isn’t it, which is the only way you can be successful and do the deal!
My question is about the interpetion of our “intent” as wholesalers. We tell the seller our true intentions, that we are simply placing the house under option in order to have an “equitable interest” in order to buy it ourselves. Of course we actually start marketing the property/option contract to real rehabbers the minute after we sign the option, then is it not obvious our intent was to never purchase the property? How would a judge rule?
I think this is where the gray area is…the option contract covers our RIGHT to buy however our INTENT is to unload the property as fast as possible which is obvious to anyone understanding wholesaling.
I just don’t want trouble by my actions as a wholesaler being interpreted as practicing real estate without a licence. The marketing portion seems to cross that line. Are there precedents in Illinois I can refer to? I want to run ann ethical and profitable business…
No, they’re not. Unlike a real estate agent, you have the exclusive right (regardless of ability) to obtain the title via an option, lease/option or contract to purchase. You can assign your (equitable) interest to any third party you want, during your ‘option’ period, which includes the escrow period of a purchase contract.
What may get foggy is actually attempting to find a buyer on behalf of a seller while failing to secure the right to buy the property yourself, or even create an option to buy. This would be called selling real estate without a license.
So, as long as you secure an option to buy, you can assign the option to anyone you like for as long as the option you hold exists. This includes marketing your option ostensibly “as an owner” until you either exercise or abandon the option.
Meantime again, how you advertise has nothing to do whatsoever with your equitable interest. That said, you cannot collect a “commission” from the sale of a property without being an agent. But you can certainly collect a spread on either your option price or your contract price, respectively and it would not be considered a commission.
Meantime, your biggest concern is being categorized by your state as a dealer …if you sell more than “x” numbers of properties in a given 12-month period that you actually take title to. In this case your state may have special regulations, limitations, franchise taxes, bonding, etc. required if you are considered a ‘dealer.’ However, short of taking title, you’ll just pay ordinary income taxes…and doing deals as often as you can.
Hey Javipa…thanks for the info :cool… to clarify there would be no marketing action by me until the option contract ( securing my equitable interest) was in place. This is what I wanted to hear, and what I thought was standard wholesale protocol…So…the process in this order is acceptable with no negative legal impact to me the wholesaler… meet with seller>> secure option agreement>>find buyer to assume my position in contract ( market property )…thanks
As long as your contract (or option or whatever) doesn’t explicitly state the agreement is non-assignable, it’s assignable. Therefore you can assign it to your heart’s content with no moral dilemma whatsoever…doesn’t really matter what the seller thinks your intentions are, nor will a judge care one bit.
I make it clear to sellers that I intend to “partner” with another investor who will be the one actually bringing the cash to closing. If they’re a motivated seller typically they don’t care as long as you can ease their pain.