{"id":180379,"date":"2025-01-08T20:37:58","date_gmt":"2025-01-09T03:37:58","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=180379"},"modified":"2025-01-08T20:38:42","modified_gmt":"2025-01-09T03:38:42","slug":"oregon-law-clamps-down-on-wholesalers","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/oregon-law-clamps-down-on-wholesalers","title":{"rendered":"Oregon Clamps Down on Wholesaling With a New Law and Registry"},"content":{"rendered":"\n<p><span data-preserver-spaces=\"true\">The times are <\/span><span data-preserver-spaces=\"true\">a-changin\u2019<\/span><span data-preserver-spaces=\"true\"> for wholesalers. <\/span><span data-preserver-spaces=\"true\">Oregon has joined a growing list of states that have amended their real estate laws to increase transparency and strengthen consumer protections in transactions<\/span><span data-preserver-spaces=\"true\">, with a<\/span><span data-preserver-spaces=\"true\"> focus on eliminating many of the aspects that have given wholesalers a bad reputation.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What Is Wholesaling?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Before diving into the nitty-gritty of the new law, here\u2019s a recap on <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/wholesaling-strategy\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">what wholesaling is<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><span data-preserver-spaces=\"true\"> It is generally understood to mean putting a property \u201cunder contract,\u201d usually at an under-market price. That means signing a sales agreement with a seller and assigning it to another buyer without ever owning the property. By doing this, the wholesaler has acted as an intermediary, profiting from the difference between the initial contracted price and the final sales price.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Why Wholesaling Is So Contentious<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Wholesaling can cause issues for several reasons, most of which <\/span><span data-preserver-spaces=\"true\">have to do with<\/span><span data-preserver-spaces=\"true\"> transparency<\/span><span data-preserver-spaces=\"true\">, which<\/span><span data-preserver-spaces=\"true\"> is why laws are being enacted to rid the practice of its cloak-and-dagger reputation.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">These are some of the main issues:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">The initial seller fails to disclose that they are a wholesaler to the seller, who feels that they have <\/span><span data-preserver-spaces=\"true\">been manipulated<\/span><span data-preserver-spaces=\"true\"> when the wholesaler sells the house to another buyer, increasing the sales price without the initial seller\u2019s knowledge.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">A wholesaler can tie up a property without producing a buyer, preventing the seller from finding a legitimate buyer. This scenario worsens when the wholesaler does not include a deposit when they enter the contract, meaning the seller has no financial recourse.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Licensed Realtors and brokers feel wholesalers are taking their business.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What House Bill 4058 Is&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">House Bill 4058, which the Oregon Senate passed last year, <\/span><span data-preserver-spaces=\"true\">went into effect<\/span><span data-preserver-spaces=\"true\"> on Jan. 1, 2025. <\/span><span data-preserver-spaces=\"true\">It requires real estate licensees to use written agreements when representing buyers or sellers in real estate transactions, <\/span><span data-preserver-spaces=\"true\">and<\/span><span data-preserver-spaces=\"true\"> prohibits buyers\u2019 agents and sellers\u2019 agents from sharing compensation with each other without disclosing it to their clients<\/span><span data-preserver-spaces=\"true\">. It also<\/span><span data-preserver-spaces=\"true\"> prohibits the assignment of contracts without the homeowner\u2019s consent.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Here is a breakdown of the essential components of<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/legiscan.com\/OR\/text\/HB4058\/id\/2945152\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\"> House Bill 4058<\/span><\/a><span data-preserver-spaces=\"true\">:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Effective date: <\/span><\/strong><span data-preserver-spaces=\"true\">The law takes effect on Jan. 1, 2025.\u00a0<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Wholesaler registration:<\/span><\/strong><span data-preserver-spaces=\"true\"> Wholesalers must register by July 1, 2025.\u00a0<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Requirements: <\/span><\/strong><span data-preserver-spaces=\"true\">Applicants must be trustworthy and competent and provide evidence that they <\/span><span data-preserver-spaces=\"true\">are registered<\/span><span data-preserver-spaces=\"true\"> with the Secretary of State.\u00a0<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Definitions: <\/span><\/strong><span data-preserver-spaces=\"true\">The law defines wholesaling as marketing a property <\/span><span data-preserver-spaces=\"true\">where<\/span><span data-preserver-spaces=\"true\"> the marketer has an equitable interest or option to purchase and has invested less than $10,000 in it for less than 90 days.<\/span><span data-preserver-spaces=\"true\">\u00a0<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Other provisions: <\/span><\/strong><span data-preserver-spaces=\"true\">The law also prohibits future right to list contracts, requires real estate agents to use written agreements, and requires transparency in agent compensation.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Wholesalers Must Register With the Oregon Secretary of State<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">One of the most irksome aspects of the new law for wholesalers is the requirement <\/span><span data-preserver-spaces=\"true\">they must<\/span><span data-preserver-spaces=\"true\"> register their activities with the Secretary of State <\/span><span data-preserver-spaces=\"true\">by July 1, 2025<\/span><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The online registration to become a licensed wholesaler (real estate agents are exempt from this, as they are already licensed) includes:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Completing a complete background check, including fingerprinting,<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Paying a $300 annual fee for the license.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Wholesalers must also fall under the purview of state real estate laws.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">All wholesalers must have a high school diploma or a GED and provide a list of all the entities they plan to wholesale under.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can read a <\/span><span data-preserver-spaces=\"true\">full<\/span><span data-preserver-spaces=\"true\"> and detailed description of the new Oregon Property Wholesaling Law <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.oregon.gov\/rea\/newsroom\/Pages\/2024-OREN-J\/Property-Wholesaling-Law-Rule-Overview.aspx#:~:text=House%20Bill%204058%20(Chapter%203,the%20transaction%20and%20in%20advertising.\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">here<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Disclosures and Equitable Interest<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Another interesting aspect of the new law concerns the written disclosure the wholesaler must provide in at least 10-point bold type. Of particular concern to wholesalers is the \u201cequitable interest\u201d section. In short, the wholesaler must disclose that they have an equitable interest in the property <\/span><span data-preserver-spaces=\"true\">being sold<\/span><span data-preserver-spaces=\"true\">, even if they do not have legal title.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Buyers have equitable interest whenever they enter into a contract with a seller. According to the new Oregon law, they can still \u201cassign equitable interest to another party <\/span><span data-preserver-spaces=\"true\">prior to<\/span><span data-preserver-spaces=\"true\"> closing for profit.\u201d <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> means that if all parties <\/span><span data-preserver-spaces=\"true\">are agreed<\/span><span data-preserver-spaces=\"true\"> upon, a wholesaler can continue to wholesale\u2014 only with increased transparency.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, wholesalers must disclose upfront to potential buyers, sellers, and agents and in all advertising that:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">They are wholesalers.\u00a0<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">They do not have legal title (only an equitable interest) and might <\/span><span data-preserver-spaces=\"true\">not be able<\/span><span data-preserver-spaces=\"true\"> to transfer title.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">They are not a licensed agent or appraisal specialist.\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Other Important Aspects of House Bill 4058<\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Cancelation of contract<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Buyers and sellers may be able to cancel a contract up to three days after receiving a wholesaler\u2019s disclosures and get back deposits or earnest monies.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Exceptions<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Oregon wholesalers do not need to register their activities with the state if they attain a Realtor\u2019s license. In this case, other rules, such as disclosures, still apply.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">It\u2019s not surprising that the biggest sponsor of the new Oregon bill is the National Association of Realtors. Wholesalers are a disparate collective that often operates under their own rules\u2014clearly to the chagrin of licensed Realtors. As more states enact tighter measures to combat wholesaling, it is clear that the only way for wholesalers to function effectively will be to get Realtor\u2019s licenses.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If out-of-state wholesalers want to assign contracts in Oregon, they, too, will have to adhere to Oregon state laws. They can accomplish this by <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/get-your-real-estate-license\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">getting a Realtor\u2019s license<\/span><\/a><span data-preserver-spaces=\"true\"> or teaming up with someone who does. One workaround in the latter scenario is for a wholesaler to pay for lead generation and marketing costs and get paid a consultation fee on the settlement sheet, which would come from the Realtor or broker\u2019s proceeds, having disclosed their involvement <\/span><span data-preserver-spaces=\"true\">ahead of time<\/span><span data-preserver-spaces=\"true\">.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The times are a-changin\u2019 for wholesalers. Oregon has joined a growing list of states that have amended their real estate laws to increase transparency and strengthen consumer protections in transactions, [&hellip;]<\/p>\n","protected":false},"author":613725,"featured_media":180382,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7384],"tags":[],"class_list":["post-180379","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics-policy"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/180379","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=180379"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/180379\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/180382"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=180379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=180379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=180379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}