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The practice of wholesaling real estate, or the process of assigning purchase contracts, as an investment strategy has long been a topic of industry debate. Is it legal? Do I need to be licensed to pursue this as a career?
Depending on who you ask, you may get very different answers. The reality is that, like many other industries, the practice is legal if you follow specific rules, but in many areas, those rules are now expanding to protect sellers. Regulations vary by city and state, so knowing the local laws in Atlanta is key to protecting your practice.
As wholesalers traditionally have not been required to go through the formal training and licensing that real estate agents do, they’ve had considerable freedom with little oversight. This has led to increased attention in recent years for questionable business dealings. As a result, Atlanta has implemented regulations that require many real estate wholesalers to change the way they operate.
The issue of gentrification and the role of wholesalers has become an increasingly hot topic in the ATL. A recent report in Atlanta found homeowners in gentrifying neighborhoods are selling for less than their properties are worth. This becomes an issue of ethics when the seller is unaware of their true home value and are pressured or deceived into accepting a lower-than-fair offer.
For residents living in these neighborhoods, pressure from potential investors has only continued to mount. Incessant phone calls, letters, and inquiries pressuring homeowners to sell led the city of Atlanta to pass an ordinance prohibiting commercial harassment from wholesalers.
Prohibited predatory tactics are defined as, “repeated and unsolicited attempts, within any 180-day period, to contact a person or entity including via personal visits, or written material or similar means under circumstances where the person or entity has affirmatively requested the defendant or the defendant’s agent to refrain from such activity.”
Investors who violate the new regulation face fines of up to $1000 or six months in jail, the maximum allowed under state law.
It’s important to note that Atlanta is not banning wholesalers from contacting homeowners and asking if they would like to sell. In fact, in many cases, wholesalers are a positive resource in the community for sellers who need a fast, as-is transaction. The ordinance is only directed at the bad actor wholesalers who continue to pressure sellers who have already declined a sale or chosen to not respond to their inquiries.
The simple answer is no, but you must follow very specific protocol in real estate transactions: “get under contract on a house and flip (assign) the contract, or buy the house and sell it right away (double closing).”
Investors must be on the purchase contract or on the assignment contract – and earnings are either through an assignment fee or a double close, not through a commission. “This would be considered brokering a real estate deal and you must have a license to do this,” according to Matt Larsen with the Atlanta Real Estate Investors Alliance.
Though not required by law, there are many benefits to obtaining a real estate license as a wholesaler. The formal training will teach you how to act ethically and can boost your credibility with sellers.
Investors interested in pursuing a full real estate license in Georgia must be at least 18 years old with a high school diploma or GED and follow six key steps:
While disruption in the industry might feel daunting to some, change is inevitable. But by staying informed of what is happening in Atlanta, you can prepare yourself for the future. New regulation presents new challenges for investors and wholesalers alike, but with it also comes new opportunity.
Investors working to improve their communities while also pursuing their own goals of financial independence are in a unique position to step up, embrace the change, and refuse to allow bad actors to define our industry.
Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.