Is Wholesaling Real Estate Legal In Florida?

For decades, Florida has remained one of the most attractive places to live in America.

The perfect mix of a mild climate, economic opportunities, a growing population continues to create a dynamic mix of opportunities for millions of people.

New building is booming with almost $20 billion in non-residential construction and another $33 billion in residential construction in 2019, placing Florida sixth in the United States.  Building permits also continue to grow at a double-digit pace, further strengthening the housing, transportation, manufacturing, and other related sectors.

The bottom line is that there is a sustained healthy demand for real estate from top to bottom in the Sunshine State.  New investors looking for bargains at or below market value are plentiful and real estate investing remains an attractive and profitable venture for many people.

Many Floridians are cashing in on this demand, enjoying traditional paths in the real estate field as brokers or agents. 

However, many others are also seeking a more flexible and equally lucrative career in real estate through other means, such as wholesaling investment deals.

Can you pursue a career in real estate wholesaling in Florida?

Here are the answers to several questions you may have. 

• What Do You Need To Know About Wholesaling Houses In Florida?
• Is Wholesaling Real Estate Legal In Florida?
• Do You Need A Real Estate License To Wholesale Houses In Florida?
• What Are The Wholesaling Laws In Florida?
• Is Co-Wholesaling Real Estate Legal In Florida?
• Is Reverse Wholesaling Real Estate Legal In Florida?
• Florida Real Estate Wholesale Contracts
• Legal Tips For Wholesaling Real Estate In Florida
• Final Thoughts

What Do You Need To Know About Wholesaling In Florida?

Overall, Florida is an economic powerhouse.  Consider the following:

Even in the midst of the Corona virus pandemic, Florida posted exceptionally healthy growth and a low unemployment rate.  

Drilling down even further, Florida’s Gross Domestic Product in the Real Estate, Rental and Leasing Sector generated more than $172 billion in activity over the five-year period from 2013-2018.  That reflected an annual growth of 5.7% further supporting the notion of a healthy real estate sector.

The sheer size, scope, and growth reflected in these numbers translate into tremendous opportunities for Florida wholesalers.

But it’s not enough to simply understand overall market conditions and economic vitality in Florida.  Wholesalers must drill down even more, and understand the market conditions and real estate forces at work at a local level.

Fortunately, there is no shortage of information wholesalers can tap into.  

For example, Florida Realtors is the largest trade association in the state with close to 200,000 members. Members and site visitors can network, track real estate-related legislation, pursue ongoing educational opportunities, and more. 

Some of Florida’s largest Realtor associations include:

• Daytona Beach Area Association of Realtors
• Miami Association of Realtors
• Orlando Regional Realtor Association (ORRA)
• Tallahassee Board of Realtors
• Greater Tampa Realtors (GTR)

You can access a complete list of Realtor Associations in the state here.

As a wholesaler, you must also understand the laws that govern real estate transactions in Florida.  Many of these are found in Florida Statutes Chapter 475.

The bottom line is that to be successful as a wholesaler, you must set the table the right way by learning as much as you can, instead of letting experience be a harsh teacher. 

It’s critical to understand the nuances of flipping houses by using wholesaling methods such as Assignment of a Contract, The Double Close, and Buying and Selling (sometimes referred to as Wholetailing.)

 Consider some key statistics of the state's five largest cities: 

Source: Florida Demographics

Is Wholesaling Real Estate Legal In Florida?

The short answer is Yes!  Wholesaling real estate is legal in Florida.

However, you do need to educate yourself on laws and limitations you might face as a wholesaler. 

Let’s look at what some of those are.

What Are The Wholesaling Laws In Florida?

The laws governing real estate transactions in Florida are found under Title XXXII – Regulation of Professions and Occupations, Chapter 475 – Real Estate Brokers, Sales Associates, and Appraisers:

Contracts of Unlicensed Person For Commissions Invalid

One of the areas where a wholesaler can run into trouble by not fully understanding that in the Assignment of a Contract, the wholesaler can only market the contract and collect a fee for that service.  Only a licensed Realtor can market an actual property and collect a commission.  Florida statute Chapter 475.41 states:

Contracts of an unlicensed person for commissions invalid.—No contract for a commission or compensation for any act or service enumerated in s. 475.01(3) is valid unless the broker or sales associate has complied with this chapter in regard to issuance and renewal of the license at the time the act or service was performed.

Violations and Penalties 

Chapter 475.42 spells out the provisions for improperly conducting business without an active license.  In part, it reads

(a) A person may not operate as a broker or sales associate without being the holder of a valid and current active license, therefore. Any person who violates this paragraph commits a felony of the third degree, punishable as provided in s. 775.082 or s. 775.083, or, if a corporation, as provided in s. 775.083. 

NOTE:  This does not apply to wholesalers as long as they are not practicing real estate brokerage without a license.

Authorized Brokerage Relationships; Presumption of Transaction Brokerage; Required Disclosures

Chapter 475.278 pertains to disclosures and ethical behavior, including in part: 

The duties of the real estate licensee in this limited form of representation include the following:

(a) Dealing honestly and fairly;

(b) Accounting for all funds;

(c) Using skill, care, and diligence in the transaction;

(d) Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;

(e) Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;

(f) Limited confidentiality, unless waived in writing by a party.

Disclosure is important whether you are licensed or not.  Transparency is one of the keys to a successful real estate wholesaler.  You run the risk of legal problems unless you practice full disclosure.

NOTE:  If you are a wholesaler working with a licensed agent on a transaction, it’s important to understand the fiduciary duty that a licensed agent has.  As an unlicensed wholesaler, you have certain limitations, but you are also not bound by this statute as well.

Dual Agency Representation

Chapter 475.278 also states:

FLORIDA LAW ALLOWS REAL ESTATE LICENSEES WHO REPRESENT A BUYER OR SELLER AS A SINGLE AGENT TO CHANGE FROM A SINGLE AGENT RELATIONSHIP TO A TRANSACTION BROKERAGE RELATIONSHIP IN ORDER FOR THE LICENSEE TO ASSIST BOTH PARTIES IN A REAL ESTATE TRANSACTION BY PROVIDING A LIMITED FORM OF REPRESENTATION TO BOTH THE BUYER AND THE SELLER. THIS CHANGE IN RELATIONSHIP CANNOT OCCUR WITHOUT YOUR PRIOR WRITTEN CONSENT.

FLORIDA LAW REQUIRES THAT REAL ESTATE LICENSEES WHO HAVE NO BROKERAGE RELATIONSHIP WITH A POTENTIAL SELLER OR BUYER DISCLOSE THEIR DUTIES TO SELLERS AND BUYERS.

Read Also: Virtual Wholesaling - How To Flip Houses From Home

Do You Need A License To Wholesale Real Estate In Florida?

No.  But without a license, you can’t legally market a property. 

The only thing you can legally do if you are a wholesaler without a license is to market the rights to real estate you have under a purchase agreement with the seller.  You can sell the rights contained in the contract, but you can’t represent that you are selling the property. 

As a licensed real estate agent, you’re not bound by contract assignment limitations or how you can market a property after you have an agreement with the seller in place. 

This is an important distinction to make.  It is also where most Florida wholesalers run into legal problems.

Also, in the interests of transparency, you do need to disclose upfront if you are a licensed Realtor or not.

As an unlicensed wholesaler, when you complete the assignment of contract, you collect an assignment fee for your efforts.  As a licensed Realtor, you are paid a real estate commission when a property is sold.

Because disclosure is required regarding the amount of your wholesaling fee, in some cases, a seller or a buyer may try to negotiate a lesser fee as a means of closing the deal. 

Although there are time and expense involved in getting a Florida real estate license, some wholesalers prefer to go this route.  

With a double closing or buy and sell arrangement, because there are two separate transactions, you are free to negotiate the best possible deals.  This means buying the property at the lowest price and then selling it for the highest price to maximize profits.  You do not need to disclose what these profits are because you are engaged in two independent transactions.

The only downside to this is that you must have the financial resources at your disposal to facilitate the initial purchase, either working with your own money or with a real estate investor.  This can be a limiting condition for some Florida wholesalers who are just starting out.

Is Co-Wholesaling Real Estate Legal In Florida?

Some people prefer to pool their resources and enter into co-wholesaling business arrangements.  Typically, one partner will work at finding distressed properties or investment property deals and the other partner will concentrate on other aspects of the deal.  Most times this centers on deal financing but it can also include contract and legal work or other relevant expertise. 

Florida does not place any particular restrictions on co-wholesaling.  You simply need to make sure you comply with all laws and statutes related to wholesaling and real estate transactions, and you should have no problems with this type of partnership.

To protect both partner’s interests, it’s a good idea to get the nature of your business relationship in writing.  The Small Business Administration is a good source to find a standardized co-wholesaling joint venture template. You can also draft a more customized version if you prefer.

Is Reverse Wholesaling Real Estate Legal In Florida?

Many wholesalers like to line up buyers first and then find properties to put under contract in a process known as reverse wholesaling.  The deal structure is the same.  It’s just the order of events compared to regular wholesaling that are reversed.

There are no specific restrictions on reverse wholesaling in Florida.  Wholesalers simply need to follow all pertinent laws and statutes as applicable. 

The benefit of reverse wholesaling is that it creates a more stable exit strategy for a wholesaler.  Working from a buyers list, with pre-qualified end buyers lined up, either ready to receive an assigned contract or complete the second half of a double close or buy and sell method, there are less likely to be problems to finalize agreements. 

Wholesalers find it easier to build long-term relationships this way.  The pre-alignment with private and hard-money lenders creates an efficient process and more reliable outcomes.

Florida Real Estate Wholesale Contracts

The Florida Bar and Florida Realtors have created standardized forms to facilitate a variety of real estate transactions.  There are two forms wholesalers can utilize. 

FAR/BAR “AS IS” Contract and the FAR/BAR Standard Contract

There are some important differences to note between the FAR/BAR “AS IS” Contract and the FAR/BAR Standard Contract before deciding which one is best for you.

As a wholesaler, most times you will use the “As Is” contract since the majority of deals involve purchasing distressed properties that need repairs.  A wholesaler is often able to negotiate a favorable deal by accepting and assuming these problems and in some cases, making repairs before selling the property to a third party.

These forms standardize most of the key elements in a real estate transaction.  It makes it much easier for people without legal expertise to prepare and complete a real estate transaction.

The main difference between the FAR/BAR “AS IS” contract and the Standard contract is that no repair obligations are placed on the seller.  The Standard contract, by default, includes terms that require the seller to make certain types of repairs up to a specified dollar amount.

The other difference is that an AS IS contract gives the buyer a chance to inspect a property for 15 days following the effective date of the contract.  By contrast, in the Standard contract the buyer has 15 days, unless specified, after the effective date of the contract, or five days before closing, to complete a property inspection and notify the seller of any deficiencies.  After the seller has been notified, he or she has 10 days to obtain repair estimates for the buyer or to order a second inspection if there is disagreement with the inspection report.

If there is still a disagreement between the buyer and seller, the contract states that bother parties will share the cost and enter into binding inspection results.

Paragraph 10 of both contracts also contain critical language related to disclosures.  It states, “Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and which have not been disclosed to Buyer.”

However, in the AS IS contract, there is additional disclosure language that states the seller “extends and intends no warranty and makes no representation of any type, either express or implied, as to the physical condition or history of the Property.”

Contract Assignment

Under Florida law, most real estate contracts have provisions related to the buyer’s right to assign the contract.  It is legal for a buyer to transfer his or her rights to an independent third party.

There are some instances where contract assignment is prohibited.  These include:

• There is language in the contract that prohibits it in that particular deal
• If the assignment would violate public policy in some way
• If it would violate some state or federal law or statute.

One other possible limitation of assigning a real estate sales contract is that it may not be assigned if the seller has agreed to sell to a particular buyer because of an explicit reliance on that buyer’s personal credit to cover the transaction.

Florida real estate laws can be complicated at times.  If you feel like you’re not clear on some parts of the law, or you encounter unforeseen legal issues, it’s always best to get legal advice from an experienced real estate attorney to protect your interests. 

Read Also: Wholesaling Lease Options - The (Ultimate) Guide

Legal Tips For Wholesaling Real Estate In Florida

Contingency Clauses

Buyers and sellers will build in contingency clauses to real estate deals as a way to legally protect themselves from entering into a bad deal.  When a contingency isn’t met, either party can consider the purchase contract null and void.

Some of the most common contingency clauses are:

• Inspection Contingency
• Appraisal Contingency
• Financing Contingency
• Clear Title Contingency
• House Sale Contingency
• Proof of Lease Contingency

Disclosures

Transparency is critical in any real estate transaction.  By law, many disclosures that could materially impact the value or desirability of a home are required to protect both the buyer and the seller.  

Some of these disclosures include:

• Radon
• Lead Paint
• Erosion (for coastal properties)
• Condo or HOA Membership
• Termites
• Sinkholes
• Court proceedings
• Structural
• Agency/License

The Florida Association of Realtors provides a standard form that covers many of the disclosure obligations.  It is separate from the contracts used in most real estate transactions.

Marketing and Advertising

As a wholesaler, unless you have a real estate license, you cannot market a property.  You can only market the rights to the contract and your ability to assign it.

If you are not the seller or a duly contracted agent for the seller, you are not allowed to post For Sale signs, list the property for sale, or offering the property to others.

Final Thoughts

If you want to pursue a real estate wholesaling career, there are few places more dynamic and filled with real estate investment opportunities than Florida.

When you do the work, apply the knowledge, and stay persistent, you are well on your way to a financially rewarding future.