If you are wondering if wholesaling real estate in Philadelphia is now illegal, this article will give you some information about what is happening.
Recently, over the past few years, city officials have been trying to regulate the practices of real estate wholesalers in the Philadelphia area. There's been a recent wholesale bill in Philadelphia and it's on it's way to becoming the law for wholesaling real estate in Philadelphia.
If you are within the real estate industry, you understand that Philadelphia real estate practices and transactions eventually trickle out and expand into the outer areas, like Bucks County, Montgomery Counter, Delaware Country, and other parts of Greater Philadelphia.
What Is Wholesaling Real Estate?
In the simplest terms, I'll tell you what wholesaling real estate is.
As simple as possible, here it goes:
Wholesaling real estate is the practice of buying properties at a deep discount and sell the rights to your contract for a price. Wholesaling deals are unique because for them to be truly successful, the deal needs to be deeply discounted.
Within the real estate investment industry, a wholesale fee AKA and assignment fee will typically yield a $5,000 profit to the contract owner. Some make a lot more and some make less. It truly depends on how the deal is structured.
Wholesaling real estate gets tricky when it's not done correctly, or when the original contract owner isn't transparent about the process. Deceptive practices happen often enough within wholesale that it has warranted enough attention from Philadelphia City officials — and prompted an investigation to initiate new laws and regulations around the topic.
Below is a pretty decent short video explaining wholesaling that was shared with me by one of my real estate mentors.
Why Wholesaling is Now “Illegal” in Philadelphia
So here's the thing, we have to be very careful about using the word “illegal.” Some better terms would be regulated, restricted.
By right, as individuals and professionals, we are allowed to “wholesale real estate” as well as many other things outside of the real estate business and industries.
The term wholesale in real estate is often used interchangeably with the concept of assigning real estate contracts. People assign their rights to purchase often and this does not just happen in real estate.
Thus, technically if this right is taken away from individuals and professionals, it intrudes upon certain inalienable rights and would affect other industries outside of the real estate industry.
It could have a major impact on many different industries. Bottom line is that wholesaling is not illegal just yet but there are many restrictions and regulations to come.
Can You Still Wholesale Real Estate In Philadelphia?
You can still wholesale real estate in Philadelphia and other areas that have tight restrictions on wholesaling real estate. Although other layers are now necessary to wholesale real estate it's still very possible.
Here is one of the cleanest ways to wholesale real estate:
Actually, purchase the property. You can still wholesale and make money doing this by buying the property and then reselling the property while keeping the profit in between.
So what you could do is instead of assigning your rights to purchase a real estate deal, you could purchase the property and resell it to someone else that is interested in buying that particular property. In addition to that, when you fully purchase the property, you open yourself up to other rights such as listing the property on the MLS.
When you list a property on the MLS, it allows you lots of exposure which means more people will see the deal and you will have more bids, effectively making those interested give you stronger offers.
You could also do what is considered to be a “double close.” Basically, a double close is when the real estate is purchased twice in the same day. But still allows the contract owner to make a profit by selling their rights to the property.
Staying Updated On Wholesale Laws and Regulations in Philadelphia
There are many ways to stay updated on what's happening with current real estate laws. My favorite way to stay updated is by keeping in contact with the proper real estate investment associations AKA REIAs.
In Philadelphia here are the best groups to stay in touch with:
Each community is filled with real estate investors of all backgrounds and many are aware of what is happening within the real estate investment association.
Both groups also provide excellent education around real estate investing for their communities and members.
Alternatives To Wholesaling Real Estate?
Wholesaling real estate seem too complicated for you?
I completely understand.
If you are thinking that this seems all too complicated, you might want to consider expanding into another market. This is currently how I run my business. I run my marketing in other areas that do not have tight restrictions and limitations on wholesaling real estate.
My strategy is based mostly on running successful Facebook Ads Marketing. See my below case study for the month of August. You may be able to duplicate similar results.
If you are interested in duplicating these results, you can follow my Facebook Ads Marketing Guide here.
More About The Philadelphia Wholesaling Bill
City of Philadelphia, Bill Number: 200544
This Philadelphia Real Estate Wholesale Regulation Bill was introduced on October 8, 2020, titled as:
“Amending Title 9 of The Philadelphia Code, entitled “Regulation of Businesses, Trades and Professions,” by adding a new Chapter, entitled “Residential Property Wholesalers,” to regulate the solicitation of purchases of real property and require certain disclosures by property purchasers to homeowners, and amending Chapter 9-1100 of The Philadelphia Code, entitled “Fair Practices Ordinance: Protections Against Unlawful Discrimination,” to provide protections to homeowners from solicitation and related problems, all under certain terms and conditions.”
Here is probably the most relevant part to any Philadelphia Residential Property Wholesalers:
“Residential Property Wholesaler. Any person or entity who is in the business of
purchasing or soliciting for purchase Residential Properties, not to use as their residence.. A
Residential Property Wholesaler shall not include any City or other public official or employee
who acts as a Residential Property Wholesaler in the course of their official duties; any person
or entity who is in the business of purchasing residential properties and substantially improving
those properties for the purpose of resale; or the following licensed professionals when acting
within the scope of their licensed practice area: (1) attorneys licensed to practice law in
Pennsylvania, and (2) persons licensed by the Pennsylvania Real Estate Commission under the
Pennsylvania Real Estate Licensing and Registration Act.”
According to the City Council website, the following people are listed as sponsors for this legislation:
- Philadelphia Councilmember Domb
- Philadelphia Councilmember Gilmore Richardson
- Philadelphia Councilmember Squilla
- Philadelphia Councilmember Quiñones Sánchez
- Philadelphia Councilmember Johnson
- Philadelphia Councilmember Gauthier
- Philadelphia Councilmember Parker
- Philadelphia Councilmember Thomas
- Philadelphia Councilmember Green
- Philadelphia Councilmember Brooks
- Philadelphia Councilmember Gym
For the latest updates on this legislation, you can visit the City Council website link referenced above.
Does Wholesaling Real Estate Now Require A License?
§ 9-5202. License Required and § 9-5203. License Issuance; Renewal.
Officially, not yet. But according to the bill referenced above, it is very likely you will be required to have a license to wholesale real estate in Philadelphia.
Once the ordinance passes, the law will be in effect after 60 days.
Stay updated on the bill/regulations by accessing the city council website we linked to above.
Here are some more interesting parts of the bill and where we see things heading.
§ 9-5204. Prohibited Conduct.
§ 9-5205. Disclosure Required.
§ 9-5206. Enforcement. — SECTION 2. Effective Date. This Ordinance shall take effect 60 days after it becomes law.
Some people are going to want to just get their Pennsylvania Real Estate License and I recommend that if you are involved in real estate you get a real estate license anyway. It provided some advantages that not having a license doesn't provide you with.
If you are interested in obtaining your real estate license, I recommend The CEShop For your real estate license.
Although real estate wholesaling isn't illegal yet, there are many restrictions coming in regards to this sector of the real estate investing community.
It is best that you prepare yourself with as many tools as possible. Get some real state education and even consider getting a real estate license so you can still succeed within our industry.
Check out my YouTube channel for updated videos on how you can get yourself ready for all that's to come within our industry.
Or maybe you should branch off into another aspect of real estate investing. Below are some alternatives. And I will be updating each section with suggested real estate training and education.
P.S. I recommend you check out this webinar on real estate investing with terms!
It's not about wholesaling but it's an excellent alternative, and I would even go as far as saying it's actually a much better real estate business and real estate niche.
Learn all about how you can get involved in real estate without using any of your own money. I promise if you dedicate focused time and intent it will expand your real estate investing goals and put you on a fast track to real estate wealth.
Coming Soon, Alternatives To Wholesaling Real Estate in Philadelphia:
- Lease Options Real Estate Investing Training
- Subject-To Real Estate Investing Training
Here's a recent radio show interview on this Philadelphia Wholesale law/bill by current Philadelphia Real Estate Investors Jabbar Fairweather and Nicole Purvy of Better Than Success Real Estate League.