Washington laws regarding wholesaling

Member since 2021 · 18 posts · 1 vote

I need to know if I would need a license in Washington State to wholesale, I’ve had people tell me you don’t need one and others saying you do need one. Ive tried finding the answer for myself but no luck so far. My plan is to definitely get one in the near future though, I’m just wondering if I really do need to get one before I start.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Maurice Smith:

@Lynn Knaak I would definitely encourage everyone to put a set of questions together and sit down for an hour or so, and get the basics surrounding the legality of wholesaling in your state.

That's said, if you are seeking some additional opinions for personal consumption/consideration, I'd personally recommend engaging at your local REIA. Make sure the REIA is part of the National REIA too. You will find ever sort of investor their; including, wholesalers. If your state is not wholesale-friendly you will likely find licensed individuals that wholesale as well. After all, it's just one of many exit strategies, which I am sure you are aware.

BP is a great place, but I’ve found SOME members to be particularly unwelcoming to wholesalers. I have gained a lot of value, education, and even access to capital at the local REIAs.

Lastly, get the license. It just expands the options you can offer the seller. If the property is marketable in current condition and a cash offer isn’t right for them, you can list it. One of the first conversations I had with my real estate attorney after general legalities, was about how to ethically and effectively wholesale as a licensed individual. I’d have that conversation and let an attorney give you their professional legal opinion.

There is ONLY ONE PLACE to go find this answer and its free.. go to the department of real estate walk in talk to an enforcement officer and lay out your bizz plan full plan.. if its just tie someone up with no ability to close it and assign the contract and thats your bizz model explain that and then ask if a license is needed.. then ask if you can legally advertise a home you do not own ?? ask them if a small amount of Earnest money and a purchase contract is considered equitable interest ( Oregon it is not) Lawyers will give you both sides one will say fine will say no.. and for sure the public does not know they are not the ones who make the laws and enforce them. so why would you ask anyone other that the state agency ??? i dont get it.. well in fact I do get it.. people just want to hear what they want to hear so if Johnny says its OK it must be OK..

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Maurice Smith
Investor · Richmond, VA · Member since 2020 · 108 posts · 135 votes
5y
@Lynn Knaak I would definitely encourage everyone to put a set of questions together and sit down for an hour or so, and get the basics surrounding the legality of wholesaling in your state.
That's said, if you are seeking some additional opinions for personal consumption/consideration, I'd personally recommend engaging at your local REIA. Make sure the REIA is part of the National REIA too. You will find ever sort of investor their; including, wholesalers. If your state is not wholesale-friendly you will likely find licensed individuals that wholesale as well. After all, it's just one of many exit strategies, which I am sure you are aware.
BP is a great place, but I’ve found SOME members to be particularly unwelcoming to wholesalers. I have gained a lot of value, education, and even access to capital at the local REIAs.
Lastly, get the license. It just expands the options you can offer the seller. If the property is marketable in current condition and a cash offer isn’t right for them, you can list it. One of the first conversations I had with my real estate attorney after general legalities, was about how to ethically and effectively wholesale as a licensed individual. I’d have that conversation and let an attorney give you their professional legal opinion.
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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Maurice Smith Thank you Maurice. I have connected with my local REIA and plan on asking about laws/rules as a unlicensed wholesaler in Washington and Idaho. I definitely am planning on getting licensed since you can do more with it. It's just I'm financially tight right now I recently got laid off so I'd love to make a deal unlicensed then put that money towards getting licensed. Just want to make sure I will do it legally. Thank you for those pointers, have a nice day!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
Originally posted by @Maurice Smith:
@Lynn Knaak I would definitely encourage everyone to put a set of questions together and sit down for an hour or so, and get the basics surrounding the legality of wholesaling in your state.
That's said, if you are seeking some additional opinions for personal consumption/consideration, I'd personally recommend engaging at your local REIA. Make sure the REIA is part of the National REIA too. You will find ever sort of investor their; including, wholesalers. If your state is not wholesale-friendly you will likely find licensed individuals that wholesale as well. After all, it's just one of many exit strategies, which I am sure you are aware.
BP is a great place, but I’ve found SOME members to be particularly unwelcoming to wholesalers. I have gained a lot of value, education, and even access to capital at the local REIAs.
Lastly, get the license. It just expands the options you can offer the seller. If the property is marketable in current condition and a cash offer isn’t right for them, you can list it. One of the first conversations I had with my real estate attorney after general legalities, was about how to ethically and effectively wholesale as a licensed individual. I’d have that conversation and let an attorney give you their professional legal opinion.
There is ONLY ONE PLACE to go find this answer and its free.. go to the department of real estate walk in talk to an enforcement officer and lay out your bizz plan full plan.. if its just tie someone up with no ability to close it and assign the contract and thats your bizz model explain that and then ask if a license is needed.. then ask if you can legally advertise a home you do not own ?? ask them if a small amount of Earnest money and a purchase contract is considered equitable interest ( Oregon it is not) Lawyers will give you both sides one will say fine will say no.. and for sure the public does not know they are not the ones who make the laws and enforce them. so why would you ask anyone other that the state agency ??? i dont get it.. well in fact I do get it.. people just want to hear what they want to hear so if Johnny says its OK it must be OK..

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Lynn Knaak
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Member since 2021 · 18 posts · 1 vote
5y
@Jay Hinrichs I’ve already been speaking to some attorneys about it, but I want to ask other investors who’s been in the game in my state and ask them about it as well, nothing wrong with that woman.
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Lynn Knaak
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Member since 2021 · 18 posts · 1 vote
5y
@Jay Hinrichs I will go ahead and look into that as well, don’t assume I’m just going go ahead and shoot the gun on peoples opinions because I’ve already heard plenty and haven’t started yet.
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Lynn Knaak
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Member since 2021 · 18 posts · 1 vote
5y
@Jay Hinrichs so no in my case it’s not “if Jonny says it’s okay then it’s okay”
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
Originally posted by @Lynn Knaak:
@Jay Hinrichs so no in my case it’s not “if Jonny says it’s okay then it’s okay”
OK so I got tired of all the is wholesaling legal questions
wholesaling defined as :
marketing a property you do not own but you have a contract that you can assgin. Marketing meaning website site email blast any type of promotion etc.
So I got an e mail blast of a nice flyer of a home.. I deduced that the person sending it was not licensed ( actually was from Washington) and did not own the property so they were trying to flip their contracts.. nice flyer with picture of house bed bath rehab estimates you know the whole Mary Ann..
I then sent that to my state regulator and asked them to opine on is this legal can you market a property you dont own.. IE transact exactly like a real estate agent would You know bring two people together for compensation..
here is the response i got from the state and they did open an investigation and this person is now licensed.
Hello Jay,

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

Best regards,

Frances Hlawatsch | Financial Investigator

State of Oregon - Real Estate Agency
They confirmed with me through this case that you cant sell property you dont own.. so you know if U think about it logically if yoiu can market property you dont own then why have a real estate industry at all.. why does anyone need a license.. In China you dont need a license your free to do what you want.. IN singapore they will string you up if you dont..

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Lynn Knaak
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Member since 2021 · 18 posts · 1 vote
5y
@Jay Hinrichs I’m not worried about Oregon. Your waisting yours and my time. So just quit responding
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
Originally posted by @Lynn Knaak:
@Jay Hinrichs I’m not worried about Oregon. Your waisting yours and my time. So just quit responding
not worried about my time.. and for sure good luck on your wholesaling career

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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Jay Hinrichs Don’t need your luck
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
Originally posted by @Lynn Knaak:
@Jay Hinrichs Don’t need your luck
LOL someone having a rough night ?"

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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
5y
Originally posted by @Lynn Knaak:
@Jay Hinrichs I’m not worried about Oregon. Your waisting yours and my time. So just quit responding

If you want to be successful in real estate (wholesaling or otherwise) you have to be able to get along with people and not have a chip on the shoulder. You will get a thousand "no'"s before you get a "yes". That's just hhow the business is. The man you are bad mouthing has been very successful and is actually trying to help you. But, you won't have it, to your detriment.

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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Mike Hern I thought you and I were done talking?
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
@Lynn Knaak let me say that @Jay Hinrichs has forgotten more about real estate than a hundred of us know. Being dismissive of fair warnings and good advice from reliable sources is a mistake in my opinion.
Jay hit the nail on the head. If you want to know if or how to do something legally, contact the licensing and regulation body responsible for it. In Washington that is the real estate commission. Describe exactly what you are doing. They will tell you if it is legal, if licensing is required and may even give you advice on what to do differently to make it legal. Here are WA state real estate laws and contact email addresses:
https://www.dol.wa.gov/busines...
Keep in mind that some wholesalers confuse "not getting caught" with something being legal.
If you are unwilling to just pick up the phone and call the real estate commission, you have to ask yourself why that is. Odds are good you are afraid of the answer, which should be all the more reason to call or email.
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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Joe Splitrock I already had said I would do that, so I don’t know why your speaking as if I’m unwilling.
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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Joe Splitrock I have called them and they don’t even know what wholesaling is, I’ve called a real Estate attorney as well and they said as long as I’m not representing anybody then I’m good. But I know there’s more to this so I’m going to continue to ask around.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Originally posted by @Lynn Knaak:
@Joe Splitrock I have called them and they don’t even know what wholesaling is, I’ve called a real Estate attorney as well and they said as long as I’m not representing anybody then I’m good. But I know there’s more to this so I’m going to continue to ask around.

That is because wholesaling is a made up term that actually encompasses multiple methods. I asked a friend who just passed his real estate exam what he thought of wholesaling and he never even heard of it. That is why I said "describe what you are doing". There are three main ways people wholesale:
1. Get a property under contract and assign the contract to another buyer for a higher price. Schedule one closing between the seller and buyer. At closing the "wholesaler" gets a check for the difference between the contracted seller and buyer price. Wholesalers claim they are selling the contract not the property, but most states consider that equitable interest. This can be considered brokering because you get paid without ever owning the property. You are also marketing a property you never own.
2. Get a property under contract and write a different sales contract at a higher price. Schedule two closings for the same day. The "wholesaler" takes ownership from the seller, then has a second closing with the buyer the same day at a higher price. The "wholesaler" never owns the property for a day, but technically takes ownership in the middle. This is to get around never taking ownership, but still runs afoul of marketing a property you never own.
3. Get the property under contract and take ownership for a day or more. This is a straight buy/resale of the property. Since you own the property for more than a day, this gets around both brokering and marketing without license.
Just to clarify, marketing involves ANY sales activity including sending emails to a private buyers list. Obviously the only way to sell a property the day you buy it is by marketing it prior to owning it. Wholesalers argue they are "selling a contract", but the contract is inseparable from the property. You send someone pictures of a house and walk them through the house, so it is in fact the house that is of interest to the buyer.
Ask the if it is ok to market a property you don't own, without a license. Ask if it is ok to collect a fee on the sale of a home that you never take possession of.
Again, wholesaling is a made up term in real estate. In any other industry the term means buying in bulk and reselling. They are technically a "broker" by the real definition but they don't like using that term. Brokering without license is not legal in most states. So they made up the term wholesaler, even though most never take ownership of anything. Some do take ownership, but really that is just a fast flip (fast buy/resale).
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
5y
Because I like a thread with some gravel in it and I am in WA, gotta give my $.02
I've assigned and been assigned a few contracts over the years. WA excise tax costs too much to double close or close more than absolutely necessary.
As long as one has the intent and ability to close as WA PSAs state and one only markets their position as a vested party to a purchase, not the property, it shouldn't be considered brokering.
I'll now show myself quietly out.
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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
5y
Originally posted by @Lynn Knaak:
@Mike Hern I thought you and I were done talking?

Of course not, I'm having too much fun.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
Originally posted by @Lynn Knaak:
@Joe Splitrock I have called them and they don’t even know what wholesaling is, I’ve called a real Estate attorney as well and they said as long as I’m not representing anybody then I’m good. But I know there’s more to this so I’m going to continue to ask around.
the state may not know wholesaling as a term.. you need to lay out your bizzness plan.. If its buy a house close on it then resell it without touching it ( wholesaling) then I think your answer will be your fine. If you explain to them ( keep wholesaling out of it) You are going to market to sellers go into contract with them with minimal EM deposit with the SOLE intention of assigning the contract to another for compensation .. and you have no ability personally to actually buy the home. is this OK.. you have to be more specific.. The regulator in Oregon knew exactly what it meant.. they are all different.. Hell you can talk to many RE brokers and they dont know what wholesaling is either..

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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Jay Hinrichs okay thank you, I did explain to them what wholesaling is but I guess I’ll explain in a different way with more detail to it.
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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Joe Splitrock thanks for the helpful info
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Kevin Scott
Flipper / Buyer · Tacoma, WA · Member since 2013 · 160 posts · 80 votes
5y
Assigning a contract is allowed in Washington. Its allowed in most states possibly all. Designing a business around getting properties under contract and assigning your interest is against wac codes and against most states codes.

Washington as well as most states are concerned with intent. Most people doing this are taking a chance. That being said tons of people are doing it in Washington, I've bought from a bunch. I'm not sure they would even get fined if caught considering most of the "wholesalers" i know are now at a point where they could close if they wanted to and have closed occasionally which could help them in the event they were brought to court.

Getting a realtors license doesn't give you a pass for Assigning contracts as a business either. Although it allows you to broker deals it doesn't allow you to create a business Assigning contracts as your main business model.

if you "wholesale" a few deals you will likely be ok if you cover yourself by doing things such as have a have a hard money lender give you a quote on each deal. This would help u show intent. If you happen to talk to a buyer that wants the property before you close then Assigning the contract shouldn't generally be an issue.

I'll see if I can dig up the old wac codes. Its possible they have changed but this info was valid at least up to a few years ago. I probably should have started with this paragraph :)

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Lynn Knaak
OP
Member since 2021 · 18 posts · 1 vote
5y
@Kevin Scott thanks my plan really is getting into fix and flip I just need to start somewhere where it doesn’t take much money to start.
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Kevin Scott
Flipper / Buyer · Tacoma, WA · Member since 2013 · 160 posts · 80 votes
5y
Nothing wrong with that. Where u located?
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