June 30, 2024

FAQ: Do you need a wholesale license to sell in Illinois?

Unlike traditional real estate agents, wholesalers act as middlemen. But with the fact that wholesale is growing popularity, a key question remains: Do wholesaling in Illinois require a special license? Don’t rush, we answer that question here. 

What is wholesale in real estate?

Basically, wholesale is the type of selling properties that offers a lower cost entry point compared to traditional real estate models. Here’s how it works: wholesalers find motivated sellers looking to unload properties quickly. They secure a contract with the seller, then find a rehabber or investor willing to pay a premium. Their profit lies in the gap between the initial contract price and the final sale price negotiated with the buyer. 

Do you need a wholesale license to actively sell in Illinois?

First question: why Illinois? 

Because Illinois, or they call the “Land of Lincoln,” is a potential area booming with real estate opportunities. From cozy condos to bustling commercial spaces, its diverse market offers something for every investor. Add in a thriving economy, and wholesalers got a prime environment to launch their wholesale journeys. 

Next question: do you need a wholesale license to actively sell in Illinois? 

Yes, we do! One of the main reasons is we found that the Illinois Real Estate License Act was claimed, and now it redefines the term for wholesalers and brokers: 

“Whether for another or themselves, engages in a pattern of business of buying, selling, offering to buy or sell, marketing for sale, exchanging, or otherwise dealing in contracts, including assignable contracts for the purchase or sale of, or options on real estate or improvements thereon.” 

To briefly break down the law, you cannot team up with a broker and pay them a finder’s fee or for their services unless they are professionally licensed. This is part of the updated Real Estate License Act from 2020 to 2030, which is reviewed and updated every ten years. This applies not only in the real estate segment, but also to any other wholesale industry in Illinois. 

Somehow, Illinois threw a curveball at traditional wholesale, but it’s not a game over. They didn’t shut it down completely, but now wholesalers need a broker’s license and follow specific rules, including income disclosures and fair housing regulations. It’s about keeping things fair for sellers and keeping the industry on the right track. 

Speaking this, Andrii Sazhnev, a starting-out wholesaler in IL, shared his uncertainties about the wholesale license requirement act on BiggerPocket a few months ago: 

“Some say the wholesaler needs a broker’s license to do wholesale more than 1 deal every 12 months, and there is no way around it, and others say you can work with a licensed broker, and have them represent you, the wholesaler, in every deal you do. Please shed some light on this topic, especially if you currently are wholesaling in Illinois.” 

Many investors gave out their thoughts and case studies, offering us a glimpse at how this wholesale license act is being applied across this state. 

“I am by no means an attorney and to my limited knowledge I don’t know of anyone who has gotten ‘caught’ with the new Illinois law, but my understanding is that you cannot “Market” (aka sell side of wholesale) more than one property per year. So, if you have a licensed agent to do the “marketing” of the property once it’s under contract then you should be in the clear. 

You can of course double close, but the law is more specific to the marketing of the property vs. how it’s closed. 

My suggestion to Andrii would be to find another wholesaler who has their broker’s license to work with them while starting to get your license…in my opinion (if you have the time) it is worth it for anyone who is doing real estate full time to get there license – simply for the education and MLS access.”, said by Jonathan Klemm, a seasoned contractor and investor actively focus on Chicago, IL market. 

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.

Reece Almond