In August of 2019, the Governor of Illinois signed into law the Amended version of the Real Estate License Act of 2000. Among the many changes to the law, Wholesaling was added to the list of activities for which a real estate license is needed. This makes Illinois one of only two states in the United States where a license is required to wholesale properties. We receive a fair amount of questions from potential students about wholesaling, so I thought I’d address the benefits of having a license as a wholesaler..
What Is Wholesaling Anyway?
It's where an investor (wholesaler) enters into a contract with a motivated seller to buy a property at a discounted price. The wholesaler then markets the property to potential buyers, typically other real estate investors, and assigns the contract at a higher price to earn a profit.
For example, let's say a homeowner needs to sell their property quickly due to financial hardship. The homeowner owes $100,000 on their mortgage, but the property's market value is $150,000. The wholesaler offers to purchase the property for $110,000, providing the homeowner with some immediate relief. The wholesaler then markets the property to other real estate investors for $130,000, making a $20,000 profit.
It's a great way to make money in real estate without having to invest a lot of capital upfront. While it may seem like a simple process, wholesaling can be complex and requires a good understanding of the real estate market, contracts, negotiation skills, and marketing strategies. This is where having a real estate license can provide significant value to a wholesaler.
Why Do I Need A License To Wholesale?
First, let's talk about what a real estate license is and what it entails.
In order to obtain a real estate license in Illinois, one must complete a 75 Hour Broker Pre-License course, which I Love Real Estate School offers, and pass a state-administered exam. Once licensed, real estate brokers have access to a variety of tools and resources, including the Multiple Listing Service (MLS), which provides access to a database of properties for sale, as well as a network of other licensed agents and brokers. Brokers also have the ability to represent buyers and sellers in real estate transactions and earn a commission on those transactions.
Second, let's discuss the value of having a real estate license as a wholesaler.
One of the main advantages is access to the MLS which is a database of all properties listed for sale by licensed real estate agents. This means that a licensed wholesaler can find properties more easily and quickly than an unlicensed investor. As a licensed real estate broker, you have the ability to search for and identify properties that meet your criteria, including those that are listed for sale by other agents. This can be especially useful for wholesalers, who are always on the lookout for discounted properties that they can add to their inventory. The MLS also provides detailed information about a property, such as its history, current value, and any liens or encumbrances that may affect its sale.
Third, having a real estate license enables a wholesaler to legally market and sell properties.
In most states, it is illegal to market and sell a property without a license, even if the wholesaler does not intend to represent buyers or sellers in the transaction. This means that an unlicensed wholesaler must rely on other marketing strategies, such as bandit signs or direct mail campaigns, which may not be as effective as MLS listings.
Fourth, having a real estate license can provide wholesalers with added credibility and legitimacy in the eyes of potential buyers and sellers.
By being licensed, you demonstrate that you have the knowledge and expertise to navigate the real estate market, which can help to build trust with your clients and make them more likely to work with you. Buyers and sellers are more likely to work with a licensed wholesaler who adheres to a code of ethics and has a fiduciary responsibility to act in their clients' best interests.
Lastly, a real estate license provides access to training and resources that can help a wholesaler improve their skills and knowledge.
Licensed real estate brokers must complete continuing education courses to maintain their license, and many brokerage firms offer training programs for their agents.
At the end of the day, in Illinois a person who wants to wholesale as a part of or all of their business must have at a minimum a Broker license. Having a real estate license can provide significant value to a wholesaler. It provides access to the MLS, enables legal marketing and sales of properties, provides credibility and trustworthiness, and provides access to training and resources.
If you are interested in wholesaling as a real estate strategy, please contact us at I Love Real Estate School to get started on your Broker Pre-License classes. Our website is www.ILoveRealEstateSchool.com or feel free to call us at 630-596-8220 to register for classes.