Is Wholesaling Real Estate Illegal? In California you can Not Practice Real Estate, Unless you are an Investor dealing with your Property.
You may have seen the Bandit Signs on the side of the Road, or some where that says "We Buy House for Cash." Some maybe serious Investors, but some are Wholesalers. I was recently contacted from a For-Sale-By-Owner who wanted to use my Company to Sell their Home. They thought the Investor was ready to move forward in Buying their Home. The Red Flag came when the Wholesaler tried to Assign the Contract to a Serious Investor. Here is how Wholesaling Works:
Homeowner wants to Sell their Home, calls the number on the Sign "We Buy Houses for Cash." The Wholesaler meets with Homeowner and get them under Contract at a significant Discount of their Home. Example, Home Valued at $600,000 under Contract at $475,000. The Wholesaler Sells their Equity Position to a Serious Investor for $500,000 making a Commission of $25,000. The Investor can Flip this Property. The Homeowner loses $125,000.
What if the Homeowner used the Service of a Professional Real Estate Agent at 6% Listing(Broker Fees are not set by law and vary from Broker to Broker). The Agent was able to get Multiple Offers, and Accepted an offer of $625,000. In the End of the Transaction the Seller comes out on Top using the Service of a Real Estate Broker.
If they are a Serious Investor make them deposit 10% of the Purchase price in Escrow, contingent upon Inspections. If they hesitate move on.
1st Prime Realty is a Full Service Real Estate Company. Our Broker Fees are 4%. We look forward in helping you get your Home Sold for the Best Market Price.
1st Prime Realty
CA D.R.E. LIC#01456248