Major changes have come to Wholesaling in Illinois and you need to know how they are changing the business. The State of Illinois has revised the Licensing Act to change the definition of a Broker in Illinois. The new definition includes:
“Whether for another or themselves, engages in a pattern of business of buying, selling, offering to buy or sell, marketing or sale, exchanging, or otherwise dealing in contracts, including assignable contracts for the purchase or sale of, or Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements thereon. For purposes of this definition, an individual or entity will be found to have engaged in a pattern of business if the individual or entity by itself or with any combination of other individuals or entities, whether as partners or common owners in another entity, has engaged in one or more of these practices on 2 or more occasions in any 12-month period”
Governor J.B. Pritzker signed Public Act 101-0357 (“hereinafter referred to as “New Wholesaling Law”), which essentially made wholesaling property illegal in Illinois. Senate Bill 1873 became law on August 9, 2019. The law in terms of wholesaling became effective immediately. Wholesaling is a when a party enters a real estate contract on a distressed property and reserves the right to assign another buyer to substitute in their place. Essentially, a wholesaler is a person or entity that finds good deals for real estate investors and receives a finder’s fee or some other form of compensation for their efforts.
For any person, or entity, engaged in the business of Wholesaling real estate, you cannot wholesale more than one deal a year. If you intend to wholesale more, you will need a Broker’s license and be subject to the rules and regulation of the Illinois Department of Financial and Professional Regulation.
To qualify for an Illinois Real Estate Broker License in the State of Illinois you must be at least 18 years old, have a Social Security Number of Individual Taxpayer Identification Number, have a high school diploma or equivalent (G.E.D.), successfully complete the required coursework, and pass the real estate licensing exam.
Wholesaling can serve as a valuable resource to help sell abandoned, low value, or poor conditioned property that would have trouble selling under conventional means. However, the low level of education and experience needed to enter the Wholesaling market saturated the market with new comers. Every webinar, seminar, and real estate investor event has been pushing Wholesaling as the secret for new investors to get involved in real estate. It resulted in a large amount of real estate professionals with very little education in real estate, ethics, or training on how to deal with property.
The revision to the Licensing Act has been signed into law and has taken effect. We expect a large number of disgruntled sellers, licensed Brokers, and especially licensed Wholesalers will be submitting complaints to IDFPR. Real Estate is a very competitive profession and many will seize the opportunity to eliminate competitors. Any individual involved with Wholesaling without a Broker’s license should cease all activity until obtaining a license.
The Licensing Act also dealt with changes to placing blind ads and we suspect this was not a coincidence. Often Wholesale ads hold out the property as their own, with no disclosure. Advertisements for a Wholesale going forward should disclose the seller as a licensed agent, the identity of your brokerage, and any other branding required by your office. All licensed agents are also expected to adhere to advertising and procedural rules for their office. Your Managing Broker may not allow you to represent yourself as the buyer for a Wholesale without providing an agent for the seller. The Managing Broker may not allow you to be the listing agent for your own property. Depending upon your Managing Broker, they may allow you to place the deal on the MLS, or they may not allow Wholesaling in the office at all. It’s important you discuss the office rules on Wholesaling and follow office regulations.