HomeReal EstateColumn: Real Estate wholesaling needs to be outlawed in Georgia

Column: Real Estate wholesaling needs to be outlawed in Georgia

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South Carolina has outlawed real estate wholesaling, and it is time for the Georgia General Assembly to follow suit and issue new regulations to protect the public from unfair trade practices.

One point of clarity. In Georgia, the real estate commission does not exist to protect the public, professional or real estate industry. Its role is to administer the state license law. A change at the Georgia General Assembly level is the only way to solve the problem as the real estate commission can do nothing except enforce the law.

Wholesaling has grown in popularity in recent years. It is the practice of putting a property under contract only to market the contract for sale to the public. For the process to work, wholesalers must get a good enough buy to make a margin as being an unlicensed middleman often taking advantage of both the buyer and seller.

At its core wholesalers market properties for sale of which they are not the legal owners. The South Carolina Real Estate Commission ruled recently stating the following:

MORE: Beware of Real Estate Wholesalers

“The Commission has interpreted that the advertising of real property belonging to another with the expectation of compensation falls under the statutory definition of “broker” in S.C. Code Ann. § 50-57-30(3) and requires licensure. If unlicensed individuals are advertising these real property interests publicly with the expectation of compensation, the Commission has directed that Cease and Desist Orders be issued against those individuals to stop them from engaging in unlicensed practice.”

South Carolina’s stance is very clear and concise. Wholesaling violates the law.

There is a stark difference in someone assigning a contract verses wholesaling. Contract assignments normally involve the purchaser marketing the property for sale to another party.  Most assignments occur to a related party or entity the purchaser has an interest in.

Here is how you can avoid getting taken advantage of by a wholesaler

  • Use a licensed REALTOR® to help you sell your property. A REALTOR® is a licensed real estate salesperson who belongs to the National Association of REALTORS®, and are bound by a detailed code of ethics.
  • If you engage in “for sale by owner,” have a lawyer review or assist you with the purchase contract.
  • Ensure that any contract is not assignable. (The only exception is if the contact is to be assigned to an entity which purchaser owns or owns a large enough percentage of)
  • Make sure any purchase agreement states somewhere that “Purchaser may not market property for sale or offer for purchase in any capacity both privately or publicly.”
  • Earnest money: Make sure there is sufficient earnest money and make sure it is held by your lawyer or a neutral third party. Never allow the purchaser to pick who the holder of the earnest money is unless it is a reputable third-party entity. Do not let the purchaser’s lawyer hold the earnest money.

Joe Edge is the publisher for The Augusta Press. Reach him at [email protected] 

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