Real Estate Wholesalers Require Broker License in Illinois
Published Thursday, May 20, 2021
What is a Real Estate Wholesaler?
The question must be asked, “What is a wholesaler?” A wholesaler can make a profit by identifying properties being sold for under market value, making an agreement with the seller of the property, and assigning the purchase contract to another buyer. Revenue is earned through a wholesaling fee that is attached to the transaction — often a percentage of the overall property cost. All of these tasks are made easier with real estate training.
How do wholesalers make money?
End buyers are typically real estate rehabbers or other types of investors who prefer not to spend time identifying discounted properties or negotiating with sellers. By acting as the middleman, wholesalers generate income by using their real estate training to help real estate investors find and close on potential deals. However, there are some things to keep in mind to make wholesaling work well, discussed next.
A successful wholesaler must be able to identify properties that can be purchased well under market value, negotiate transactions with those sellers, and have a network of cash buyers willing to purchase the properties. Additionally, an Illinois Wholesaler must have undergone real estate training to receive a real estate broker’s license.
What is needed to become a real estate wholesaler?
The Illinois Real Estate License Act was recently amended and the definition of broker (activities which require an Illinois real estate license) now includes:
“Whether for another or themselves, engages in a pattern of business of buying, selling, offering to buy or sell, marketing for sale, exchanging, or otherwise dealing in contracts, including assignable contracts for the purchase or sale of, or 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.”
The amended Act also prohibits the payment of compensation to non-licensed person(s) or entity. “Compensation” means the valuable consideration given by one person or entity to another person. A licensee shall not pay compensation to an unlicensed person who is not or will not become a party to a real estate transaction in exchange for a referral of real estate services. 225 ILCS 454/10-15(e) (as amended by Public Act 101-0357). Public Act 1-1-0357, Section 1-10. Compensation refers to the following types of payments:
- Referral Fees
- Finder Fees
- Performance of Services
- Coupons or Gift Certificates
- A chance to win a raffle drawing, lottery, or similar game of chance…
- Retainer fee; or Salary
It is also illegal for the Wholesaler to coordinate with a broker and pay them a form of compensation such as a finder’s fee or performance of services. This new Wholesaling Law is outlined in the licensing requirements of brokers under Real Estate License Act of 2000, which is amended effective through January 1, 2020 to January 1, 2030. Every ten (10) years the Real Estate License Act is amended and updated. 225 ILCS 454/10-15(e).
The goal of the amended Act is “to evaluate the competency of persons engaged in the real estate profession and to regulate their activities for the protection of the public.” Until recently, the business of wholesaling real estate went unregulated by the State of Illinois.
The Illinois Real Estate License Act (as amended) provides for a $25,000 civil penalty for each offense of a violation for practicing without a license. The unlicensed individual is entitled to due process and a hearing. The Illinois Department of Financial and Professional Regulation has the authority to investigate all unlicensed activity.
in Summary, in order to comply with the Illinois State Wholesaling Law, one must obtain a license.
To obtain a real estate license an individual must:
- Be at least 18 years old
- Have graduated from high school or have a GED
- Completed 75-hours of state licensed coursework
- Be of good moral character
- Pass a written state exam
Upon passing the state exam, the individual must be (sponsored) employed by a licensed real estate brokerage business entity.
What is the first step to becoming a licensed real estate wholesaler?
Once an individual has undergone real estate training and received their license, they will be in a better position to identify properties to wholesale, comply with Illinois wholesaling law, and start meeting the high earning potential of real estate wholesaling. If this is something that interests you, we would love to help you “get started in real estate” by enrolling you in our Broker Pre-licensing course. Our course is the first step to a lucrative career in real estate wholesaling, call 630-844-0222 today to begin your real estate training today!