How To Wholesale Real Estate In Illinois: Step-By-Step (2024)Jan 16, 2024
Illinois, from the shores of the Great Lakes to the fields of soybean and corn, epitomizes a classic midwestern landscape of real estate opportunities. From the innovative sprawling Chicago metro area to the rural farmlands, there are real estate options to meet the needs of any individual who wants to learn how to wholesale real estate in Illinois.
Illinois’ central state capital is Springfield which ranks as the sixth largest city in terms of population. Though, no matter where you're located in the Prairie State, there are opportunities for you to get involved with wholesale real estate and the investment market.
Our goal is to show you how to do just that in this guide. Let's dive right in.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Illinois (9 Steps)
- Is Wholesaling Real Estate Legal In Illinois?
- How Much Do Real Estate Wholesalers Make In Illinois?
- Do You Need An Illinois Wholesale License?
- Illinois Wholesale Real Estate Contract
- Can A Realtor Wholesale Property In Illinois?
- Is Virtual Wholesaling In Illinois Feasible?
- Is Wholesaling In Illinois Easy?
- Final Thoughts On Wholesaling In Illinois
*Before we teach you how to wholesale real estate in Illinois, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!
Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!
What Is Wholesaling Real Estate?
Wholesaling real estate is a short-term investment strategy. Often, a wholesale real estate deal includes both a) property in need of updates or TLC and b) a seller with a strong desire to relinquish their property ownership – or both.
The meteoric rise in popularity of real estate wholesaling is likely derived from the fact that, unlike traditional real estate investing, wholesale investments offer profit-generating opportunities once considered out of reach for most.
At its simplest level, the goal of real estate wholesaling is to find and contract to buy a piece of real estate and find another buyer (at a higher price) for the same property. Ideally, a wholesaler would like to complete the wholesale transaction before they ever take title to the property by using an assignment of contract. Alternatively, a wholesaler can take temporary title to the property to complete the transaction using the "Double Close" exit strategy.
When wholesaling in Illinois is done right and within the letter of the law, there is excellent potential to generate a profit.
How To Wholesale Real Estate In Illinois (9 Steps)
Real estate wholesaling, like any investment strategy, consists of several steps.
A wholesaler in Illinois performs like a middleman in any business transaction. A middleman (i.e., the wholesaler in this instance) seeks to buy a property below market value and then find another buyer at a higher price.
Wholesalers generally market their legal right to purchase the property (a.k.a. their Equitable Interest or Equitable Title) to other real estate professionals who specialize in the “fix and flipping houses” investment technique. The subject property is then marketed and sold to a retail buyer (or someone who plans to occupy the property as a residence) and not an investor.
Here's our simple step-by-step process for wholesaling real estate in Illinois:
- Partner With A Wholesale Mentor
- Learn Illinois Real Estate Wholesaling Laws & Contracts
- Understand The Illinois Real Estate Market & Lingo
- Build A Cash Buyers List
- Find Motivated Sellers & Distressed Properties
- Put Distressed Properties Under Contract
- Assign The Contract To Cash Buyer
- Close Deal And Collect Assignment Fee
- Double Close Or Wholetail When Necessary
1. Partner With A Wholesale Mentor
Mentorship is formalized guidance by a trusted professional. A real estate wholesale mentor has the capacity and experience to guide wholesalers with less knowledge and experience to a successful conclusion. With a wholesale mentor, you have an expert guiding a newbie wholesaler’s professional direction and actions, this collaboration increases the wholesaler’s chances of avoiding investment potholes – those that are obvious to a more skillful wholesale investor.
Prior to the development of an organized educational system, the techniques known as apprenticeship or mentorship were the primary mode of developing craft and tradesmen. In the modern education landscape, mentorship takes on new forms – with quality programs available online that offer similar guidance at more affordable costs and improved ease of access.
2. Learn Illinois Real Estate Wholesaling Laws & Contracts
To stay within the legal limits as a wholesaler in Illinois, it is essential to understand the laws that govern real estate and real estate licenses in Illinois.
The Illinois Real Estate License Act (RELA) is the primary piece of legislation, enacted originally in 2000 and has been revised and annotated several times since, as needed. The objective of the RELA is to enhance protections for Illinois consumers and strengthen requirements for training and professionalism.
Up until recently, Illinois had no specific language on the books regarding wholesaling; however, a recent change to the broker’s definition now includes a modification about wholesaling in Illinois.
The purposes of this definition become clear:
Item 5, highlighted below, is the revision that is most relevant to Illinois real estate wholesalers. It states that wholesaling more than one property – in any 12-month period – is considered an activity that requires an Illinois real estate license!
So, wholesaling one property per twelve-month period is a legal wholesale strategy in Illinois. But, when done as a regular business practice, “real estate wholesaling” is now governed by RELA’s enforcement provisions, and the wholesaler will need:
- A real estate broker’s license
- And be subject to the provisions that protect consumers, like dual agency and disclosure of self-interest.
Illinois Real Estate Licensing Laws
The Illinois Division of Real Estate (DRE) is an agency within– the Illinois Department of Financial and Professional Regulation. The Division of Real Estate’s objective is to protect the public by requiring real estate professionals to meet licensing and education requirements to practice legally.
Wholesalers in Illinois who have an interest in becoming a licensed agent in Illinois (with an appropriate brokerage sponsorship) might consider reviewing the requirements in the Illinois State Real Estate Examination Program’s Candidate Handbook.
The Illinois Division of Real Estate issues three types of real estate licenses, which renew every two years –
- A Broker’s License
- A Managing Broker’s License
- A Residential Leasing Agent
3. Understand The Illinois Real Estate Market & Lingo
Most markets operate in nuanced and unique ways. Each market’s written and unwritten rules should be known to a real estate wholesaler, who will have the best chance of completing a wholesale real estate deal with this knowledge. For example, the Illinois REALTORS Association represents more than 50,000 real estate professional members across Illinois and should be researched and potentially added to your network.
Here is an example of an Illinois-related real estate market protocol:
In addition, market metrics and statistics are incredibly helpful when analyzing the potential of a new wholesale investment opportunity. In May 2022.
*These were the relevant market statistics for the Land of Lincoln:
Real Estate License Reciprocity In Illinois
According to the Illinois (DFPR) Department of Financial and Professional Regulation, Illinois has a reciprocity agreement with these states. The IDFPR offers this reciprocity guidance and contact information for these states:
Read Also: 7 Best Markets To Wholesale Real Estate
*Before we continue our guide, be sure to watch our video on the 10 BEST States To Wholesale Real Estate! Learn why Illinois made our top 10 list!
Covering the entire span of the country, we delve into what sets each of these states apart, creating a perfect environment for both wholesalers and real estate investors.
Want more real estate videos? Be sure to visit our YouTube channel, here!
4. Build A Cash Buyers List
Creating a cash buyers list is an integral part of any professional’s networking tasks.
A real estate wholesaler’s deal is only as good as the wholesale professional’s ability to find another buyer who wants to buy the contracted property. One of the benefits of wholesaling is that the process allows real estate investors to learn the process and build a curated buyers list as they learn the real estate wholesaling business.
However, a wholesaler’s buyer’s list should be proactively updated because a long list of buyers who are no longer interested will not create a profitable venture. In a perfect scenario, a professional wholesaler would have one or more buyers with interest in the subject property.
*You can also check out this quick video below that talks about how to find cash buyers online for free!
5. Find Motivated Sellers & Distressed Properties
As middlemen, real estate wholesalers search for properties in need of repair and priced below market value. Ideally, a wholesale property will also have a motivated seller, which helps move the deal along at a faster pace.
There are several ways to locate distressed properties to wholesale in Illinois. First, the digital marketplace offers current and historical information on real estate sales, which helps you begin to define your marketplace. Check out:
Another smart place to find potential wholesale deals is to search the internet for expired and non-expired Multiple Listing Service properties. The MLS is the gold standard for marketing real estate but can also be helpful to new wholesalers.
But don’t neglect the tried and true, old-fashion techniques that include –
- Driving For Dollars
- Searching On the MLS and Other Listing Sites
- Pre-Foreclosures and Foreclosure Auctions
- Tax Delinquent Properties
- Code Violation Lists
*Dive into real estate wholesaling with confidence. Download our FREE Wholesaling Cold Calling Script!
6. Put Distressed Properties Under Contract
Turning a profit when wholesaling house requires investors to establish and follow investment criteria that determines the potential profit of a wholesale deal. Most investors utilize two primary metrics to determine an investment's viability.
- An industry-standard criterion, better known as the 70% Rule, is a great starting point. This rule essentially states that the maximum a wholesaler will pay would be 70% of the ARV – the After Repair Value. With experience, wholesalers can modify this standard to meet alternate investment objectives.
- The Maximum Allowable Offer (MAO) Formula. This metric further considers the expenses required to bring the property to move-in ready and carry the property while it’s being rehabbed. Flippers’ maximum offers will subtract the anticipated expenses from the After Repair Value.
The following example should help clarify the simple calculations required to analyze a potential wholesale investment’s viability for profit.
7. Assign The Contract To Cash Buyer
A wholesaler in Illinois ideally finds a well-priced property and generates a profit without ever taking title to the property.
An Assignment of Contract exit strategy is the preferred transaction conclusion. An assignment is a legal instrument that a wholesaler uses to assign a marketable asset - their right to buy the property - to an alternate end buyer. When an assignment is executed, the new buyer takes the title from the original seller, not the wholesaler.
8. Close Deal And Collect Assignment Fee
A successful wholesale real estate deal typically follows one of two exit strategies, both of which offer the opportunity to generate a profit through assignment fees or referral fees.
9. Double Close Or Wholetail When Necessary
When assigning is not an exit option, wholesalers can also complete the transaction using the double-close strategy. In the double close scenario, the title to the property passes through 3 people – the original property owner, the wholesaler, and then the end buyer.
A double closing, as its name suggests, requires dual closings.
- The first closing meets the terms of the initial purchase agreement in which the Illinois wholesaler is the buyer.
- The second closing follows – immediately or a day or so later. In the second closing, the wholesaler is now the contract’s seller.
Note that while a double close requires a wholesaler to have funds (or access to funds from a traditional or hard money lender) to close, it also helps establish, without question, that the wholesaler is the principal seller – which requires no license. A double close allows the wholesaler to keep their profit/fee confidential, which is not typically available with the assignment exit strategy.
Another exit strategy for Illinois wholesalers is wholetailing. This simply means the wholesaler closes on the property, completes some minor repairs (if any), then lists it on the market. This allows a wholesaler to have more time and flexibility to find a buyer that will pay top dollar.
Wholesale Real Estate Example
An Illinois wholesaler locates a potential wholesale property that looks to be priced below its current market value.
This single-family dwelling is being offered for sale at $200,000. Surrounding properties and basic analyses estimate the property could likely be sold (a.k.a., its ARV) for $425,000 after updates, etc.
The wholesaler’s goal is to find an alternate buyer willing to pay more for the property than the wholesale has agreed to pay ($200,000). A wholesaler’s typical buyer is another professional who intends to update and market the property to a retail buyer.
- How Much Would The Fix And Flipper Pay?
- Does This Property Have The Potential To Generate A Profit For A Wholesaler?
The answer can be calculated in only a few steps.
House flippers also apply the 70% rule. However, to ensure they can make a profit, the flipper subtracts their costs from the 70% ARV amount. The result of the above calculation is known as the Maximum Allowable Offer (MAO). The MAO is the maximum amount a wholesaler should expect when analyzing the property’s potential.
In the above-noted example, the After Repair Value of $425,000 is $297,500. [$425,000 * .7 = $297,500).
However, the flipper’s analysis must account for the capital required to finish the job.
In the above-noted scenario, if the estimated repair costs and expenses to carry the property are $55,000, what would the cash buyer's Maximum Allowable Offer be to the wholesaler?
The end buyer’s MAO would be $242,500, calculated using this equation – the ARV – Expenses = MAO, or,
$297,500 - $55,000 = $242,500
The wholesaler’s gross profit in the above example would be $42,500. This is calculated as follows –
$242,500 (the buyer’s MAO) - $200,000 (the original contract price).
Is Wholesaling Real Estate Legal In Illinois?
Yes. If wholesalers stay within the legal limits established by the enactment and updates to the Illinois Real Estate License Act (RELA), wholesaling is a legal investment strategy.
Remember, as noted above, a broker in Illinois has been redefined to include anyone who wholesales more than one property – in any 12-month period – is considered to rise to the level of someone requiring an Illinois real estate broker license!
(5) 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.
How Much Do Real Estate Wholesalers Make In Illinois?
Wholesaling is a real estate career that appeals to entrepreneurs because, for the most part, the potential wholesaling profits are only limited by the wholesaler’s motivation, innovation, imagination, ability, and at times, market conditions.
Similar to other real estate ventures, wholesaling provides potentially unlimited income to wholesalers – especially those who take the time to hone intuitive skills that help them search and wholesale deals that meet their established investment criteria.
The amount of profit one may generate from wholesale real estate deals vary, contingent upon the following -
- The wholesales negotiation skills to secure the lowest purchase price from one of the potential homeowners.
- The strength of the market.
- The real estate wholesaler’s network of title companies and lending institutions.
- The wholesaler’s buyer’s list.
- The property’s competition, to name a few.
Do You Need An Illinois Wholesale License?
No, you do not need a real estate license to wholesale in Illinois if your actions stay within the legal lanes set forth by Illinois state law.
The law in Illinois allows for non-licensed individuals to wholesale one real estate transaction in a 12-month period.
New Wholesaling Law In Illinois
Recognizing the burgeoning wholesale real estate market, legislators in the state of Illinois revised relevant language in the governing RELA law (Real Estate License Act of 2000 Updates) regarding wholesaling properties.
The most pertinent revision to the definition of an Illinois broker is the fact that it adds language that – requires a wholesaler to be licensed if they wholesale (flip paper or flip contracts) more than once in a twelve-month period.
Any individual in Illinois who wholesales more than one property in a 12-month timeframe without the appropriate real estate license will be violating Illinois law – which carries consequences. According to this legislation, unprofessional conduct (unethical or dishonorable) may have these penalties:
Illinois Wholesale Real Estate Contract
A real estate contract of sale (a.k.a. a purchase and sale agreement) is the most important legal document in the wholesale transaction as it defines the terms by which the wholesale deal must close. The contract of sale is memorialized in writing and legally enforceable.
A purchase agreement includes standard yet relevant information. The contract most often used in Illinois is 13 pages without amendments or revisions. If you are unfamiliar with contracts (or their legal consequences), it is wise to consult with a real estate attorney for legal advice.
Can A Realtor Wholesale Property In Illinois?
Yes, a Realtor can wholesale property in Illinois. However, it is imperative to note that not every real estate agent or real estate broker is a Realtor. Specifically, a licensed real estate professional who wants to call themselves a Realtor is someone who
- Has Met The Credentials Required To Obtain A Real Estate License In Their Relevant Jurisdiction. - And
- Is A Paying, Active Member Of The Largest Trade Organization In The Nation – The National Association Of Realtors® (NAR).
In Illinois, the largest professional real estate organization is The Illinois REALTORS (IR), with about 50,000 members across the state. Those who are Realtors are held to higher ethical standards (than non-Realtors) because Realtors, as a membership condition, must comply with the NAR’s Code of Ethics.
Real estate wholesaling is an investment strategy that can be used by a Realtor if they choose to act as a service professional and not an agent with fiduciary responsibilities.
The NAR’s Code of Ethics denotes that a licensed professional representing a client must comply with the mandates defined by your fiduciary capacity as a licensed agent. However, with appropriate disclosure, a licensed realtor can apply their training and experience to negotiate a wholesale transaction rather than establish an agency relationship with hard and fast rules.
A real estate wholesaler, especially one with experience and connections, can easily transact a wholesale deal – if they do not represent a party as a licensed agent with fiduciary duties. However, because of the revised law, Illinois Realtors have the license to legally transact multiple wholesale properties.
Is Virtual Wholesaling In Illinois Feasible?
Virtual wholesaling is a clear option for Illinois wholesalers who seek to operate in geographies with fewer restrictions. As technology and innovation continue to evolve, these advances continue to create and transform the ways in which real estate investors have access to different markets. In fact, virtual wholesaling is a great way to circumvent the licensing requirements enacted by RELA’s recent revisions.
The following offers some valuable insight into just how important the internet has become to the real estate business. On average, in 2022, the NAR survey revealed that 93% of buyers used an online website when searching for a home to buy – and these are not real estate professionals. However, there is an inverse relationship between the age of the buyer and the percentage of buyers in the age group using the internet.
The following graphic details the actions that occurred as the result of internet home searches -
Is Wholesaling In Illinois Easy?
Real estate investing has never been for the faint of heart, but it offers great potential for opportunistic, think-outside-of-the-box investors.
The good news is that if you have a serious interest in learning how to wholesale real estate in Illinois, you don’t have to go it alone, with our Pro Wholesaler VIP Program, you get quality guidance and training available and is easily accessible online. Built and designed for the modern entrepreneur, it is 100% online and is used for local and virtual real estate wholesaling.
Final Thoughts On Wholesaling In Illinois
Real estate wholesaling’s popularity has garnered the attention of investors and those tasked with governing real estate transactions in Illinois. While real estate investing offers no guarantees, the unlimited potential and control of one’s career make it a great fit for entrepreneurs.
For those wholesaling houses in Illinois– the law is clear – if you wholesale one home, you must –
- Wait 12 months to wholesale another investment property – or-
- Earn an Illinois real estate license to wholesale one (or more properties) over the next 12 months. Wholesaling more than one property in a twelve-month violates Illinois license law.
- Learn how to wholesale real estate in other markets virtually, therefore you are not subject to local restrictions.
Check out our brand new free training on how we help investors all across the country wholesale and flip houses from the MLS using only a laptop and a cell phone. See you there!