Uncategorized
New city law aims to crack down on real estate ‘wholesalers,’ seen as exploiting underinformed property owners

New city law aims to crack down on real estate ‘wholesalers,’ seen as exploiting underinformed property owners

“With the passage of this bill, Philadelphia will establish fair rules and expectations for wholesalers buying and selling homes in our communities,” said Councilmember Allan Domb, the legislation’s lead sponsor, whose own real estate interests made him known, for a time, as the “Condo King.”

Among wholesalers’ most frequent targets are the heirs of deceased property owners, who are often a generation or more removed from their late relatives’ real estate and often unaware of its value, The Inquirer has reported.

“The industry is often most active in our city’s rapidly gentrifying neighborhoods, where longtime homeowners may not appreciate how much their home is worth to out-of-town investors,” Michael Froehlich, a lawyer at the nonprofit group Community Legal Services, said at Thursday’s City Council hearing. The new regulations “would curb the most predatory and out-of-control tactics of residential property wholesalers.”

Real estate investor Joseph Spina, whose citywide portfolio of more than 400 properties includes some acquired from wholesalers, said officials will likely struggle to enforce the rules in an industry that operates largely in the shadows.

For example, because wholesalers regularly avoid actually buying properties outright — instead collecting generous “assignment fees” for transferring negotiated purchase rights to buyers without putting their names on a deed — a great number of deals can occur out of sight from regulators.

Wholesalers have typically operated without a state real estate license, placing them largely outside the reach of rules that bar agents and brokers from making claims about a transaction that they know — or ought to know — are untrue.

Although Pennsylvania law broadly requires those involved in the “purchase or sale or exchange of real estate” to be licensed, the requirement does not apply to people who own properties they sell — even if they have owned them for less than a day. This loophole lets wholesalers take advantage of property owners.

The legislation requires wholesalers to pay a $200 licensing fee and to disclose all companies in which they hold an ownership interest. Wholesalers who have been convicted of fraud or who have violated ethics laws within six years of their application are disqualified from getting licensed.

Wholesalers can lose their license if they violate a code of ethics stating they may not “knowingly make any substantial misrepresentations, make any false promises, untruthfully advertise, or engage in any conduct which demonstrates bad faith, dishonesty, untrustworthiness, or incompetency.”

At least three days before concluding a purchase, licensed wholesalers also must present sellers with a disclosure explaining how they might independently research their property’s value and informing them of their option to hire a lawyer or state-accredited real estate agent to help with the transaction.

The legislation was endorsed by Greater Philadelphia Association of Realtors, whose members have had to compete with until-now unlicenced wholesalers who are unbeholden to the professional standards they must follow.

Before Thursday’s vote, she urged councilmembers to reject the legislation, arguing that elevating wholesalers to the status of license-holders without requiring them to take professional classes or pass exams, as real estate agents must, would only embolden them to further victimize disadvantaged neighborhoods.

“Let’s do something that’s really going to help the Black community — the gentrifying Black community,” she said. “This is a sham here and you need to be more respectful of people who really are practicing professionals.”

This content was originally published here.

Leave a Reply

Your email address will not be published. Required fields are marked *

SPIN TO WIN!

  • Try your lucky to get discount coupon
  • 1 spin per email
  • No cheating
Try Your Lucky
Never
Remind later
No thanks