Wholesaling in Minnesota is Illegal ?

32 Replies

Originally posted by @Jacobus Rex :

@Charlie MacPherson     Charlie my only point is that alot of people seem to do it here and elsewhere; and they're involving title companies, lenders, etc.  @Jay Hinrichs seems to have a lot of reservation, or at least a strong caution about it based on his experience in NV. . .or CA?  

It's an honor to talk to all of you successful real estate investors. 

Thanks, 

Jim in St. Cloud

See below in a state I work in Oregon.. again the only one that counts in this matter is the department of real estate in the state your working.. so I get a e mail flyer JUST like realtor would do.. I am tired of the is it legal or not question.. quick call to my title company and in 60 seconds I have the last recorded deed and this wholesaler does not own it.. last recorded deed was 20 years ago.. and then a quick look at the state for license and no license .. so I just e mailed it all to the state and asked for clarification.  below is the answer I got. it cut and pasts backwards.. 

530 Center Street NE, Suite 100, Salem, OR 97301

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Best regards,

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

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

Hello Jay,

So if you really want to know just ask the state for a written opinion.. this opened an investigation I was interviewed further and well this individual is going to need to get a license if they want to continue to make any kind of middle man fee.. who ever you want to couch it I also asked about equitable interest as many in the wholesale trade quote that one.. and that did not fly.. mainly if was you cant advertise what you don't own. I have another guy I fund deals for in Oregon he got a cease and desist as well.. neighbor of a property he went into contract for turned him in.. WHY all of a sudden there was a FSBO sign in the yard with his name and number. .Neighbor knew he did not own it.. so its like get a drunk driving cost you about 10k and you now have cease and desist from the state. Further more this one that I asked the state about has a pretty robust business and its in our state 5k fine per transaction.. don't think they will fine him that much..

But anyway.. and when I was funding deal in Orlando for Turnkey operators they got their inventory from wholesalers however these were big shops and they  were full blown real estate outfits so they were licensed.. with disclosures etc..  So anyway if your at all curious you may want to call or write your state describe your business model in detail and ask for a  written ruling they have to do this for U at least I know they will in my state..   But like the financial investigator above mentioned its like catching speeders.. some are going to get caught some may never.. and closing companies and mortgage companies they don't care.. 

@Jacobus Rex There is a deluge of bad information on the web and in guru seminars.  Much of it is just plain wrong and exposes their followers to all sorts of legal problems for heeding their bad advice.

Just yesterday, another BPer asked about starting up a property management business and pointed me to a website that insists that property managers need no real estate license in MA.

I spent a few minutes of searching and came up with a link to MA state law that says there are only three exception - the property owner, a salaried employee of the property owner and a hotel reservation worker.  All others need a real estate license.

The link I dug up for you is the actual law in MN.  No matter what a guru or a wholesaling company says, wholesalers need a license to sell real estate.

Yes, people break this law every day, and they'll get away with it right up until they don't.  

I can promise you that if a relative or friend of mine got duped by an unlicensed wholesaler (which is the essence of the wholesaling business model), I and my attorney would rain down the fires of hell on them.

And in case you think that an LLC or S-corp is going to protect your personal assets from the lawsuit I'd bring, the corporate veil will not protect you against illegal activities.

I got to deal with the MN Department of Commerce on this because someone reported me for unlicensed real estate activity. It was a quick investigation that was closed within a day because I knew the law and was operating within it. They just asked me to make a few changes to my website.

Wholesaling is not illegal in Minnesota. It is not illegal to buy property at a lower price and sell it for a higher price in Minnesota. It is not illegal to assign a contract in Minnesota.

It is illegal to represent someone else in a real estate transaction or to market property that you do not have an equitable interest in. This would mean that you have an option on the property or a purchase agreement. You need a limited broker's license in either case (purchasing outright or assigning) if you conduct 10 real estate transactions within a 12 month period. It's like $120. DO NOT conduct more than 10 transactions without this license. The penalties can be quite severe.

This was all very helpful information. I have recently been looking into wholesaling and also live in MN. With most things you need a license so I found it strange  that a wholesaler would not need a real estate license.  

Looking forward to meeting a few folks and learning lots 🖒🖒

I see a lot of debate on this topic and I really want to get into the real estate  market.  However, I certainly don't want to do anything that is illegal.  If it's true that wholesaling properties is illegal  can just anyone else happen to have any advice on how to get started in dealing with real estate properties when you have little money  and bad credit ?  my family and I are barely making ends meet right now and I'm looking for any way that I can possibly get us out of this rut .

Just getting started, I am in the "education" part of my journey right now. I've heard a lot of the above is it legal or not. Your one safety net is a double close. You close on the property and then do an immediate second closing to sell the property. The catch here is that you may nee the money to purchase at the first closing. Depends on the title company some will work work with "contractual funds." (This is what I have heard- I have not done a deal like this). 

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