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I am a licensed broker/associate with an active license and

I am thinking about getting...
I am a licensed broker/associate with an active license and I am thinking about getting into the wholesaling business. I would be getting a purchase contract and assigning the contract to another buyer without ever actually closing. I would be performing the wholesaling activities under a different business name and not associated with my broker. I just want to make sure I'm acting within the law and not putting my license at risk.
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Answered in 39 minutes by:
8/15/2013
Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,386
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
Verified

Hello there --

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When you say "wholesaling business" do you mean purchasing houses at wholesale prices and then assigning them to another purchaser for a fee? Or do you mean some other type of wholesaling business? Can you clarify this a little more for me?

-

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MARY

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Customer reply replied 4 years ago
I mean finding properties that sellers are willing to sell about 75% below market value for cash. I then assign the contract to a cash buyer for a fee.

Hello there Jake --

-

Your activities would be subject to the parameters placed upon you by your license (for example, it would be as if you are acting as a buyer's agent and if you are generally required to make certain disclosures to purchasers of properties then you would still be required to follow those same procedures even if you are just assigning the contract over to a buyer for a fee). However, what you are proposing is not illegal and you can do it as a licensed broker/agent without any licensing issues. You did state that you will use a different name -- but that will not make a difference because if scrutinized by the licensing board, they will still look at you and any company you create or name you use as operating under the one real estate license that you hold.

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MARY

Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,386
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
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Customer reply replied 4 years ago
Hello Mary,

Thank you for your response. My question is... am I really performing real estate activities? After all, I am not representing the seller in any type of brokerage relationship. Also, I am not buying, selling, or performing services to a particular party for a fee in a real estate transaction. The way I see it is this, I am securing a contract, then selling the rights associated with that contract for a fee.

Thank you for your opinion.

Jake

Hello again Jake -

-

Yes, you are securing a contract. But you are securing a real estate contract for a piece of residential real estate which is something that your license regulates. Because the contract touches and concerns residential real estate, your license is involved. I view this as similar to being a buyer's agent. While typically a buyer will hire the agent FIRST and the agent will then scout out properties for the buyer, what you will be doing is still pretty close to that -- except that you will have the property under contract FIRST and then you will find buyers. Unfortunately, because there are so many different and creative ways to handle the purchase and sale of property these days, the statutes and laws cannot address every possible scenario in a specific manner and so you would probably not see any kind of legal review of a situation like this unless there was a conflict and you ended up in a lawsuit over a contract or a property and then the Real Estate licensing board and the courts would have no choice but to get involved and the end result would be a legal definition for what you propose and an opinion from the RE board and the court regarding whether or not this rises to the level of being regulated by the RE board as part of your license and if so, the parameters and guidelines of such regulation. My suggestion here is to contact the RE licensing board and ask for their opinion on this matter -- most RE boards will let you speak with an administrator who can at least offer a verbal opinion regarding whether or not you must follow the strictures of the RE board due to the fact that you have a broker/agent license (a verbal opinion in such a situation may not hold up in court as a defense for you later if there is suddenly some legal action or legal conflict regarding what you are doing -- but it may help any judge to know what you were told because a judge could use it as guidance).

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MARY

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Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,386
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
Verified
Legalease and 87 other Business Law Specialists are ready to help you
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Customer reply replied 4 years ago
Thank you Mary,

Your advise is very valuable and I generally agree that I should appeal to the board for guidance. I still question the premise with regards XXXXX XXXXX question; am I actually using my license (and therefore, am I responsible for the liabilities inherited in, when I perform any action? (possibly with a disclosure of "no brokerage relationship") business transaction, with a disclosure stating that I am not providing any RE services. Generally speaking,Can I either, disclose my brokerage license and not assume the responsibilities, or suspend those responsibilities and still perform the desired functions using a disclosure and not perform these functions under my brokers license, since I am not selling or buying RE n the what I interpreted it. Not physical, or intangible rights t... Other than rights to sell a contracts t purchase? That is really the thin line I am trying to walk...

Thanks,

Jake.
Customer reply replied 4 years ago


Hi Mary,


 


I think my last response got a bit scrambled. I think I was trying to replace a sentence in the middle and did not erase the old sentence. Anyway, I reread your previous response and I think you have a adequately answered my question.


 


Thanks,


 


Jake

Hello again Jake --

-

I think it is a thin line that you are walking here and a conversation with the board is in order. As I said there is nothing concrete, legal to support your position and so you will have to rely on general interpretations and hope that all works out well. Good Luck

Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,386
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
Verified
Legalease and 87 other Business Law Specialists are ready to help you
Ask your own question now
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Legalease
Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,386
16,386 Satisfied Customers
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements

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