Wholesaling real estate in Illinois—whether you’re in Chicago or Cairo, Galesburg or Galena, or anywhere in-between—has always been about hustle. Since I started my professional real estate investing career years and years ago, I’ve never slowed down. I’ve looked for deals all across the Land of Lincoln, especially in Cook and the collar counties, but all over the state. It never stopped.
Until, with a stroke of Governor Pritzker’s pen, the wholesaling industry seemed to come to a sudden halt.
See, last year, JB signed a bill that had been floating in the legislature for a few years, requiring wholesalers to have a real estate license. All over, people asked me if our industry was suddenly illegal. They weren’t sure if there were still legal and ethical ways to wholesale.
But, our business is still going strong. If you want to get started in wholesaling, you still can. You just have to know how to approach real estate wholesaling in Illinois—ethically, legally, and responsibly. Let me share some background details and your options.
Understanding the Illinois Real Estate Wholesaling Bill
In August of 2019, the Illinois legislature passed SB1872, an amendment to the Illinois Real Estate License Act of 2000 and Governor Pritzker approved it. What this amounted to was clarification of a legal gray area that had been in place for 20 years. Essentially, the amendment states that if you are going to wholesale more than one house in Illinois in a 12-month period, you have to have a real estate license.
See, what was happening was that there were a lot of investors acting more as go-betweens than stand-up folks. They’d sell the contract to the house they were buying, acting just as the go-between, and never really purchasing the house—and, often, not even telling the homeowner what they were up to. That seemed, to them, to be a low-money way to invest in real estate.
The problem? These people were brokering deals without actually being a broker. That seems like a semantic argument, but it is not. Brokers and agents have legal duties to put their client’s interests first. A wholesaler does not.
There were a few problems here. I want to clarify that these don’t apply to everyone making their living with wholesaling, but these were the risks.
- The go-between was inexperienced, which increased risk for both the buyer and the seller.
- The go-between was acting as an agent without a fiduciary duty toward their client’s best interest.
- The go-between could more easily misrepresent their interests and get out quickly.
Again, this doesn’t apply to all, most, or even many people who worked in this field. I act ethically both because it is my legal duty and because it is the right thing to do. Most people do. My colleagues do as well. But, as long as there was this loophole, there was the potential for it to be exploited.
In the eyes of Illinois legislators, the best way to close this loophole was to make sure that all wholesalers have to be licensed agents. That way, training is ensured and wholesalers can be regulated to put home sellers’ interests first.
So, the best advice is to follow the law. Does that mean wholesaling is dead? Does it mean there’s no way to achieve your real estate investing goals?
No, and no. I’m still wholesaling full steam ahead. Why? Because I know the best way to be a wholesaler is to get the right training and network. I sought legal advice from my local real estate attorney as soon as the legislation was signed and I suggest that you check with your attorney as well to truly understand the nuances of this recent legislation.
How to Still Wholesale Real Estate Here in Illinois
Now, of course, there still might be people trying to skirt the law when it comes to wholesaling. But, doing so comes with some pretty stiff penalties: $25,000 for every offense. That can take a huge bite out of your returns. And, it may ruin your local reputation pretty quickly.
That’s why I approve of requiring training. Not only is it safer for home sellers, but it’s also obviously safer for you. Training means fewer mistakes. You want to stay out of the legal gray area? Get the real estate agent’s training and license.
There is another way to wholesale here in Illinois, of course, and that is to buy the house outright. If you do that, even if you aren’t a licensed agent, you are not acting as a broker.
You are purchasing the property as a stand-up investor. You’re putting up your own money and actually have some skin in the game—not assigning a contract and facilitating a deal.
But buying houses outright introduces a little more risk and you’ll need to figure out ways to minimize that risk. For that, you’ll need real estate investing training and a network as well. You’ll need to know how to approach even the most motivated homeowners, understand their needs, and communicate your own interests. It also helps if you have support and a network to sell the house to as soon as you close on it.
Get Training and Resources for Ethically and Legally Wholesaling Real Estate In Illinois
Like I said, wholesaling requires speed. And, you might think these new laws slow you down. But, they don’t have to. Since I’m an independently owned and operated HomeVestors® franchisee, my work hasn’t slowed down one bit.
See, as a longtime HomeVestors® franchisee, I have been trained to invest in real estate with ethics at the forefront of every deal I do. And, if I ever have questions about whether I might be stepping into a legal gray area, I have a good real estate attorney to ask. Every franchisee, like me, is required to be in compliance with all laws so having a good local real estate attorney is just part of the business. The HomeVestors® franchise network is invested in maintaining the nationally-known and trusted HomeVestors® brand reputation.
I also don’t have to worry about whether I’ll find a buyer for my wholesale deals because I’m plugged into DealVestors®TM. That’s a platform that connects me to a network of investor-buyers, all professionals ready to close on a wholesale house with someone they can trust. It’s designed for wholesalers like you and me to sell houses that we buy outright quickly. And, the best part is that you can do it virtually.
I know a lot of people think that SB1872 hurt the wholesaling business. It shouldn’t. The bill provides an opportunity for those of us who know what we’re doing to do it even better because we have the talent and ethical resources. If you want to take advantage of this opportunity, request information about becoming a franchisee today. It’s the best way to grow a professional real estate investing business and to keep your properties moving quickly.
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