Is Department of Licensing (DOL) acting in cooperation with the Department of Financial Institutions against wholesaling?

The following is not intended to be legal advice..... I think it's a crock that they say if you assign a property, you are "putting transactions together for others". Who is the mystery buyer you are putting the transaction together for? Oh, I see, you wake up in the morning saying "I think I'll put a transaction together for somebody today. I don't know who I'm putting it together for yet, but the DOL says I am." You are putting it together for yourself. You are acting as a principal in the transaction and you are not being compensated by the buyer or the seller. You are not acting in the capacity of an agent and you have no fiduciary responsibility to either party. However, it does say you are ok if you "complete the transaction with the original property owner". So you just get some transactional funding and do a double close. Cuts into your profit a little, but you can still do deals. Just my opinion and I may be wrong. Another example of "I'm here from the govt and I'm here to help." Why can't they just get out of our way so free enterprise can work and get the economy back on track. I can't believe how the govt is hindering the housing market with crap like the SAFE act and now this.

I also agree That using transactional funds and doing a double close will be OK.
Also, I think contract assignment would be ok to. You are assigning a contract, not buying and selling real estate.
This is NOT legal advise, just an opinion.

Michael Mangham
MD Home Acquisitions LLC

Michael I see you got those sites up on the board, good job. Let the board work for you after all the the helping and teaching others.

Thanks. As for fiduciary responisibility, I have heard other arguments before. Looking at wikipedia's non- official definition of fiduciary relation makes one think if indeed an investor does or does not have fiduciary responsibility towards the seller: "in a fiduciary relation, one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests."

"justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter."....the seller would expect that from an agent, not a buyer. The investor you are flipping to would not expect that, that's why he has to do his due diligence.

"I think contract assignment would be ok to. You are assigning a contract, not buying and selling real estate."...but they say if you obtain an interest in the property with the intent of finding another buyer and you don't complete it with the original owner, you are structuring transactions for others. As much discussion as there has been on the legality of assigning contracts, this is the first situation that I have seen that specifically addresses the legality of assigning a contract in black and white rather than "my realtor said it was illegal." In all the posts I have participated in regarding the legality of assignments, I have asked for the citation of a code or law that specifically addressed assignments. None were given until now. We finally have a definitive one in Washington.

I have spent about 2 hours trying to get a simple, straight forward answer to this scenario and the "potential" need to obtain a real estate license.

I am a real estate investor and hold no real estate license. I look for sellers and put into place an assignable contract. I then assign the contract to a buyer/real estate investor for an assignment or finder's fee (clearly stipulated in the correlating contracts) I receive a finder's fee, not a commission.

QUESTION>>>>>DO I need to have a real estate license if I receive compensation via a finder's fee. Also, is this law "state" specific?

Thank you so much! I have learned a great deal from your expertise, knowledge and experience You all ROCK!!!!

Assignments have been legal in all states since the beginning of our country and date back to times much earlier than that even. Get the laws in your state about 'assignment of contracts'. They are not just for RE, they are for any type of contract. Simply, you are not selling the real estate; you are selling the interest in the contract. They can try to go after you but they'd be made fools of in court. There is nothing wrong with this. Instead of falling out or breaking contract, you are merely bringing in someone else to take your place so the contract isn't broken. I am NOT a lawyer,but make sure if you seek the advice of a lawyer, it is a contract lawyer.

It is CERTAIN we will SUCCEED!

A complete crock. Dept. of Lic. and Dept. of Fin. Inst. are both specific to your state (if they even exist at all). Other states have tried similar "rules" (see DE, RI, TX, AL) with varying degrees of success. Usually it just makes the investor use a different type of document to do an assignment of contract. Federal departments do not ban or limit assignments at all - except FHA/VA to a small extent (which is usually just the seasoning requirement on ownership before reselling for a 20% or higher profit, usually 30-90 days). Actually said Zion's comment almost verbatim a couple times in different threads a looooong time ago, only to hear crickets afterwards.

To answer your question, NO a wholesaler does not have a fiduciary duty to his end seller, his end buyer, or anyone else for that matter. The wholesaler works for himself at his own risk. He simply has the same reasonable requirement we all have to do your due diligence first, caveat emptor ("buyer beware"), not be dishonest in any way, and not do anything fraudulent.

There are only 3 ways I know of to create a fiduciary duty. A state can enact a law automatically creating one (EX: parent --> child), a court can create or order one (foster kids and elderly care are great examples), or two parties can enter into an agency agreement. I'm scared to say "agency" because usually only lawyers know that is a legal term for a fiduciary duty, not just an RE or insurance word. Examples are: Signing over "Power of Attorney" to someone, hiring a lawyer or an accountant, certain types of partnerships, etc., etc. To an extent a RE agent or broker is required to act "in the best interests of his client" which can be applied to be fiduciary (varies by state). The Hippocractic Oath of Medicine ("Do No Harm") is one of the most ancient and basic examples of a fiduciary duty...

BTW guys, you DON'T NEED to put out a legal disclaimer ("I'm not an attorney, etc...") before posting comments online for anything. Admin. have a small responsibility to use caution, which is why they only post facts, almost never opinions someone might misinterpret as advice. Your postings will not get you sued if someone else relies or acts upon it, only to screw something up in their own lives. It's called the 1st Amendment, and your freedom to be mistaken or have an opinion are completely covered by it. If you forget everything else I've said here, please remember that and spread the word to everyone else, okay? May 2012 be everyone's best year in REI yet! Class dismissed...

and Funny (class dismissed) lol

Thanks for the responses, appreciate it! I was pretty confident that you did not need a real estate license to "wholesale" and assign contracts. There is a lot of info out there but nothing straight forward. I have contacted my lawyer on this as well. It makes sense that you would not need a license since you are simply "assigning" and not actually owning the property.

I am still trying to gain clarification around needing to get licensed in the state of VA for marketing to sellers/buyers then placing "assigning" contracts under my LLC. I never own the property, it is never placed in my name. What I am being told however is that you still need a license as this falls under the "broker" guideline.

Here is what my VA lawyer sent:

prev | next
§ 54.1-2100. Definitions.

As used in this chapter:

"Real estate broker" means any person or business entity, including, but not limited to, a partnership, association, corporation or limited liability company, who, for compensation or valuable consideration (i) sells or offers for sale, buys or offers to buy, or negotiates the purchase or sale or exchange of real estate, including units or interest in condominiums, cooperative interest as defined in § 55-426, or time-shares in a time-share program even though they may be deemed to be securities, or (ii) leases or offers to lease, or rents or offers for rent, any real estate or the improvements thereon for others.

Can you share with me your thoughts? I understand you cannot offer legal advice, just trying to clarify this before I move any more forward.

Thanks

Cathleen, you're not selling RE, negotiating it, representing a buyer, or representing a seller. At all. You are assigning your INTEREST in the contract. Talk to a CONTRACT lawyer, not a RE lawyer; quote it this way.

If I have a contract and I want to sell the contract to someone else, is that legal? Don't even MENTION RE.

There's also LOTS of threads on this. The one I remember most has a grammatical error in the title. I believe it is called "is assigning is legal in my state" Check it out.

Thank you for the reply! Makes perfect sense.

I am now officially a student (with my husband) as we attended your Richmond VA conference last week and will be in VA Beach this weekend for the Real Estate training.

We look forward to learning much and growing in our knowledge and understanding of the real estate business.

Have an amazing day!