Legal Question in Real Estate Law in Illinois
assignment of contracts in real estate
I've seen this referred to as wholesaling or assigning contract. Numerous real estate professionals advocate this technique of making an offer on a contract and putting down the buyer's name ''and/or assigns.'' The person making the offer puts the property under contract to control the property, then sells the rights to that contract to another assigned party. In this case, the person who originally put in the contract is able to profit and never will have to close. I have a friend who is insisting this is illegal, but I've seen this advocated by every investor under the sun. Is my friend correct??
2 Answers from Attorneys
Re: assignment of contracts in real estate
As I answered to a previous e-mailer, your friend is correct because the license law that governs real estate agents and brokers in Illinois (225 ILCS 454/1-1 et. seq.) makes "finder's fees" and such things illegal. If you bring together a buyer and seller of real estate in almost any fashion, you are performing the role of a real estate broker or agent. There are certain exceptions (such as an employee of a company working on behalf of the company and some other limited circumstances) where a license is not required.
The relevant state agency is authorized to fine people for that kind of stuff, but I'm not sure how often that happens. Whether this is "right" or not is irrelevant since this is the current status of Illinois law.
Also, all fees related the the closing MUST be shown on the "HUD-1" according to RESPA (a federal statute), so the "finder's fee" would have to be disclosed along with all the other numbers under federal law.
I suggest the person who wants to make money in this way obtain a real estate agent's license and hook up with a broker or get a real estate broker's license directly and work for themselves. I know this is not the answer most people want to hear, but it is what it is, as they say.
Re: assignment of contracts in real estate
It is legal. It is not selling the property, it is selling the contract.
email: joeWmichelottilaw.com
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