Wholesaling is an excellent way to make money, but like most business strategies, you have to go about it the right way!
In today’s blog, I cover 4 dos and don’ts so that your wholesaling process complies with Florida law.
1. Do not market the property. While you have an equitable interest in the property you have under contract, you actually own the contract rights to purchase. You must focus your interests on marketing the contract rights, not the property. This does not mean that you cannot discuss the nature of the property subject to the contract. But it does mean that you should not be marketing the property. A wholesaler should not be putting up for sale signs, promoting or negotiating the sales price of the property on behalf of the seller, or promoting or negotiating the sales price of the property on behalf of the buyer.
2. Do promote your contract rights. You are selling your rights to purchase a property, under a set price, for a specific time period, and under specific terms to the investor audience. As such, you should focus on the value of your contract rights. You can discuss potential gains to the prospective purchasers of your contractual rights, but should focus your efforts on the inherent value of the contract.
3. If doing an ABC closing, do disclose the source of funds. The major title insurance underwriters require disclosure to A of the source of B’s closing funds. After receipt of all documents and funds, the funds will be disbursed to the parties in accordance with the closing statements. Any closing in which the funds from B to A come from C will require pre-approval from the title insurance underwriters.
4. Do not think having a realtor license is required or sufficient. I cannot stress this enough. Selling the property of another is not only about a license, it is about a contractual relationship that permits that third-party marketing of someone else’s property. Therefore, if the seller has not contractually entered into agreement to sell their property with a licensed realtor- wholesaler that wholesaler is still only limited to promoting the sale/assignment of the contract.
Email me Natalia Ouellette-Grice, Esq. at Natalia@lcolawfl.com or schedule a meeting by contacting Justin at legaladmin@lcolawfl.com, to review your wholesaling processes, we can help you implement the right contracts, practices, and clauses so that your wholesales are compliant.