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The New Law to Regulate Wholesaling in South Carolina Is Crazy!

 South Carolina is proposing a new bill, House Bill 4754, that would require wholesalers to get a real estate license, but then prohibit them from using that license to wholesale. This video breaks down the details of this confusing and contradictory legislation, and provides guidance on what wholesalers in South Carolina and across the country can do to protect their business.

Introduction: The Stupidest Bill Ever

Imagine being told you need a license to do something, but then being prohibited from using that license to actually do it. That's exactly the situation proposed by House Bill 4754 in South Carolina. The bill mandates wholesalers to obtain a real estate license, only to turn around and forbid them from wholesaling with that very license. It's a baffling contradiction that has left many in the real estate industry scratching their heads in disbelief. In this section, we'll delve into the nonsensical provisions of this bill and explore the potential implications it could have, not just for South Carolina, but for wholesalers across the country.

The Rise of Wholesaling Regulation Across the U.S.

Wholesaling regulations have been a hot topic in the real estate industry, with several states implementing or proposing legislation that directly impacts wholesalers. The regulatory landscape is evolving, and it's important for wholesalers to stay informed about the changing requirements and potential implications.

Regulatory Positions in Different States

• Nebraska and Oklahoma: P regulation that requires a license to publicly market contracts for sale, considering it as brokering real estate.

• Illinois and Virginia: Passed laws defining the act of assigning a contract as brokering, necessitating a license regardless of how it's marketed for sale.

These varying positions reflect the ongoing debate about the nature of wholesaling and its classification under real estate laws.

Challenges and Industry Response

Wholesalers have contended that assigning a contract is not equivalent to brokering, as they act as principals in a contract and sell their position or equitable interest for a fee. However, the changing laws in several states are redefining brokering to include wholesaling in some form or another.

As an industry leader in wholesaling, I've been actively addressing these regulatory changes and providing solutions for individual wholesalers and the industry as a whole. It's crucial for wholesalers to understand the evolving regulatory landscape and adapt their practices to comply with the changing requirements.

Diving into the Details of South Carolina's House Bill 4754

Let's take a closer look at the provisions of House Bill 4754 in South Carolina and dissect the potential impact it could have on the wholesaling industry.

Introduction of Wholesaling into the Code of Definitions

The bill proposes to include wholesaling in the code of definitions, providing a specific definition for the practice. According to the proposed definition, wholesaling involves having a contractual interest in purchasing residential real estate from a property owner and marketing the property for sale to a different buyer prior to taking legal ownership of the property.

However, it's important to note that this definition has been met with criticism for its inaccuracies and lack of clarity regarding the true nature of wholesaling.

Confusion Surrounding the Definition of Wholesaling

• Wholesaling vs. Brokering: The bill's language blurs the distinction between wholesaling and brokering, potentially misrepresenting the fundamental principles of wholesaling.

• Inaccurate Description: The bill's description of wholesaling as marketing the property for sale is deemed inaccurate, as wholesaling actually involves assigning the contract for compensation, not marketing the property itself.

• Intention vs. Actual Language: While the intention may be to classify wholesaling as assigning and marketing contracts for sale as brokering, the actual language of the bill fails to accurately reflect this distinction.

These discrepancies raise concerns about the legislators' understanding of wholesaling and the potential implications of passing such legislation.

The Contradictions and Absurdities of the Bill

The proposed House Bill 4754 in South Carolina presents a myriad of contradictions and absurdities that raise serious concerns about its potential impact on the wholesaling industry. Let's delve into the nonsensical provisions of this bill and explore the potential implications it could have, not just for South Carolina, but for wholesalers across the country.

Conflicting Provisions on Real Estate License and Wholesaling

• Mandatory License with Prohibition: The bill mandates wholesalers to obtain a real estate license, only to turn around and forbid them from wholesaling with that very license, creating a baffling contradiction.

• Prohibition for Licensed Agents: The bill also prohibits licensed real estate agents from engaging in wholesaling, further complicating the regulatory landscape and limiting opportunities for both wholesalers and agents.

These conflicting provisions not only undermine the purpose of obtaining a license but also restrict the ability of wholesalers and agents to conduct legitimate real estate transactions.

Misrepresentation of Wholesaling Practices

• Blurring Wholesaling and Brokering: The bill's language blurs the distinction between wholesaling and brokering, potentially misrepresenting the fundamental principles of wholesaling and creating confusion about the legality of certain real estate activities.

• Inaccurate Description: The bill's description of wholesaling as marketing the property for sale is deemed inaccurate, as wholesaling actually involves assigning the contract for compensation, not marketing the property itself, leading to misinterpretations and misapplications of the law.

These misrepresentations and inaccuracies in the bill's language raise concerns about the legislators' understanding of wholesaling and the potential implications of passing such legislation.

What Can Wholesalers Do About It?

Wholesalers facing the implications of South Carolina's House Bill 4754 have several options to navigate this challenging regulatory landscape and protect their business interests.

Contact Your State Representative

If you're in South Carolina, reaching out to your state representative to express your disagreement with the bill can be a proactive step in advocating for the interests of wholesalers. Engaging in constructive dialogue with legislative representatives can potentially influence the shaping of the bill and its impact on the wholesaling industry.

Explore Double Closing Strategies

• Understanding the Nuances: While double closing is often suggested as a solution, it's crucial to carefully assess the language of the bill and its implications for marketing properties. Consider consulting legal experts to evaluate the viability of double closing within the context of the proposed legislation.

• Share Your Insights: Engage in discussions and share your perspectives on the feasibility of double closings under the bill's provisions. Collaborating with industry peers and legal professionals can provide valuable insights into navigating this regulatory challenge.

Access Transactional Funding

Securing transactional funding can serve as a strategic resource for executing double closings in compliance with the regulatory requirements outlined in House Bill 4754. Exploring funding programs tailored to the specific needs of wholesalers can empower individuals to pursue viable transactional strategies while adhering to legal parameters.

Becoming a World-Class Wholesaler

When it comes down to it, the best thing that you and I can do is operate at the highest level, do good to sellers, and treat people right. To become a world-class wholesaler, it's essential to prioritize ethical and professional conduct while honing your skills in the industry. My comprehensive wholesale training,
6 Figure Wholesale Blueprint, is designed to equip you with the knowledge and strategies to excel in the competitive world of wholesaling.

2024: A Turning Point for Real Estate Investing

 Challenging Times for Listed REITs

The past two years have been tough for commercial real estate and, more specifically, listed REITs. These investment vehicles have seen a significant decline, with total returns down around 17% from their peaks at the end of 2021. Prices have also dropped, falling approximately 22% or more.

However, the situation has started to improve in recent months. Over the past two months, listed REITs have rebounded, with gains of more than 25%. In fact, November 2022 was the fifth-best month ever for these investments.

Factors Driving the Rebound

The rebound in listed REITs can be attributed to several factors, with the decline in interest rates being a key driver. Both nominal and real interest rates have declined, and the market is now pricing in a 1% real rate environment.

But the improved performance of listed REITs is not solely due to interest rate movements. Credit markets have also seen a significant rally, with tightening credit spreads in both investment-grade corporate and real estate debt. Additionally, economic growth has held up relatively well, currently around 5% compared to the historical average of 2.5% to 3%.

The Office Market: A Microcosm of Broader Trends

The office market has received significant attention in recent times, with some high-profile stories of properties selling for as little as 50% of the value paid by previous buyers just a few years ago. This is largely due to supply and demand issues, as companies rethink their workspace needs and pivot towards more hybrid or work-from-home models.

While the office market accounts for only around 3% of the overall REIT exposure, the headlines surrounding this sector are warranted. Listed REITs have seen their office market exposure decline by more than 50% from peak to trough. The experts at Cohen and Steers believe that these listed REITs are a leading indicator of both downturns and recoveries in the commercial real estate market.

The Road Ahead: Further Declines Expected

According to the analysis, the office market valuations have only reset about 50% of the way through their declines. The private market has already adjusted to the higher interest rate environment, but the next phase of distress is expected to work its way through the system in 2024.

This means that investors can expect to see even more severe headlines regarding office property valuations in the coming year. The experts at Cohen and Steers believe that the listed REIT market is a reliable indicator of the broader commercial real estate trends, and the office sector's struggles may be a harbinger of what's to come for the industry as a whole.

Conclusion: A Pivotal Year Ahead

As the real estate landscape continues to evolve, 2024 is shaping up to be a pivotal year for investors. The decline in interest rates and the resilience of economic growth have provided a boost to listed REITs, but the road ahead may still be challenging, particularly for the office sector.

Investors will need to closely monitor the market developments and adapt their strategies accordingly. The experts at Cohen and Steers believe that the listed REIT market will continue to be a leading indicator of the broader commercial real estate trends, and understanding these dynamics will be crucial for navigating the real estate landscape in the years to come.

Check out the original news report here

As real estate investors raising money is a common practice for us. Many times raising money is the lifeblood of our business.

The download for this week is a promissory note template that you can use for your business. I suggest using this template as a starting point only for creating your own state specific, and need specific document.

** Please note, I am not an attorney. This template is not me giving you any legal advice on how to structure your own legal documents. I am simply giving you an example of something that I have used in the past. By no means am I endorsing this document for your use or that it will work for your needs. Please always consult an attorney before using any legal documents in any transaction

That being said, here you go! Promissory note template

DISCLAIMER: This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.