Did you know that Wholesaling real estate can be against the law if you are not doing it correctly?
There are many factors to consider when attempting to wholesale real estate. If not done correctly it can actually be considered illegal and you can get your tushie sued off ; worst case scenario fined and put into the slammer. On the other hand, you can possibly get away with it and profit handomely, but why risk your future, sanity and fall victim to illegal practices of the business that comes with consequences when it takes the same amount of time and effort to do your deals the right way?
So is wholesaling illegal, you ask? Why yes, when done incorrectly, in other-words, if the paperwork looks shady, it might just very well be illegal, however, when done correctly it is 100% legal and one of the best ways to make a fortune in real estate and for that matter one of the best ways to build generational wealth to be passed on even after your long gone.
In my FREE Special Report, “How to Make $10,000 this Month with No Money or Credit”, I go over some of the procedures required to ensure the entire process is done 100% legit and on the up and up.
Let me highlight a few guidelines that you want to make sure you fall within the parameters of when proceeding with a deal, but before I do so, let me share the following tip:
Many times differentiating legal from illegal is as simple as how something is worded in your contracts. All the little clauses, and phrases and choice of wording can either have you under fire or swimming in a goldmine!
Now let me go a little further in depth, by giving you an example. It is illegal for anyone, EXCEPT for a Realtor or Broker to sell a home for a third party. In the meantime, as a wholesaler of real estate you are acquiring vested interest in the property, therefore, if contracted accurately you have the FULL right to “ASSIGN” your contract to a third party.
Now real estate contracts are fully assignable, which means that you are allowed to assign your interest in the property to a third party (typically an investor) for a wholesaling fee, which is most commonly referred to as an “assignment fee”.
The majority of real estate contracts do not state that it is assignable, however, when I do my deals I include “an assignable” clause within the context. That’s just me and my personal preference. I never want to make anyone feel mislead in anyway, however, it is considered that all real estate contracts are assignable unless within the contract it clearly states that the contract is not assignable.
Okay now here are a few tidbits to help ensure you do not get your rear end hiked up in the court of law:
Do all that you do with precaution. Now you dont want to be so scared that you won’t get out and do a deal, but you do want to make sure you watch the way you word things in your contracts.
For example, it is 100% illegal to receive commission as a real estate wholesaler. The only people whom are allowed to receive commission for buying or selling property for a third party / end buyer is a realtor or broker, otherwise it is illegal.
If you have in your contract that you are entitled to or will be receiving commission upon completion of a deal you are out of your boundaries and subject to prosecution. In the meantime, if your assignment contract states you will be receiving an assignment fee you are then within the proper protocol and legal boundaries of the deal.
Do you see how that determining whether or not the deal was legal was the simple choice of wording between a commission and an assignment fee? Now, do you really want to risk your tushie in the court of law for something simple as your choice of wording in a contract? I don’t think so, I wouldn’t want to take that risk either!
Now the list goes on and on about what is determined legal and illegal, but rest assured if you follow a few simple steps that I list at my site Blog.REIMillions.com you will be one step closer to being within the legalities of the deal and exploding your networth like never before. Hope this little tidbit helped you out. If you enjoy the read please “like” this post, “tweet it” and feel free to comment. The more interaction my posts receive the more likely I am to post more secrets the “Guru’s” don’t want you to know. Till next time folks!