Wholesalers may need a license! Is the Cash Deal Legal??
Before you say yes to that ācash offerā that comes in the mail to buy your house at a discount, make sure the person making the offer is doing it legally. Some offers could be illegalāespecially if the buyer is planning to sell your contract to someone else. What weāre talking about is called wholesaling. Hereās how it works: A wholesaler puts a property under contract at a discounted priceāusually 60% to 70% of its fully renovated value. For example, if a townhouse is worth $500,000 once fixed up, the wholesaler might secure a contract at $300,000. They then find an actual investor or flipper to buy the property, not for $300,000, but for $350,000. The $50,000 differenceācalled the wholesale feeāis the wholesalerās profit. Wholesaling itself isnāt illegal. But states are increasingly requiring wholesalers to be licensed. In Virginia, for example, anyone dealing in real estate contracts more than twice in a 12-month period must have a broker license. Getting a broker license isnāt simple: - You must complete 60 hours of classroom education. - Pass the licensing exam. - Align with a licensed broker (like meāI have over 250 agents in my brokerage). - Demonstrate active engagement in real estate for 36 of the last 48 months, verified by a broker. In other words, you canāt just run down to Richmond and pick up a license. You need real experience. This stricter regulation is disrupting the wholesale market and may slow some cash offers, but it also ensures that transactions are legal and legitimate. If someone is offering you cash for your home, thatās fineābut make sure theyāre licensed and doing it legally. ** Have you ever thought of wholesaling? Would you like to see a video series on how to find houses off market for wholesaling?