Why aren’t states/city enforcing wholesaling laws?

Question

Wholesaling is illegal in Oklahoma, Illinois, and Philadelphia without a license.

Maryland is trying to make wholesaling without a license illegal.

None of these laws are being enforced. Why is this? Is it because they realize that the laws are completely unconstitutional?

Is it because wholesaling transactions go virtually undetected since the house isn’t actually being bought by the wholesaler?

Disclosure: I’m not an attorney.

Jay Hinrichs · Answer

with very few exceptions wholesaling as done or taught is illegal in most states its just some states enforce others don't.. Texas has a specific carve out for the activity Ohio will regulate it and of course read from the state of Oregon.

Below is a response to my e mail about wholesaling in Oregon.. I wanted to know at the state level is this legal or not.. To get a definitive answer I needed to file a submission in writing and then they followed up opened a case on the one that I sent them asking is this legal or not.. ITS NOT..

so at least in Most states unless someone files a written complaint to the agency most states simply dont going looking for it but will tag folks if they are brought to their attention.

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

Russell Brazil · Answer

Wholesaling is not illegal in any of the places you mentioned. All those places do require a license to wholesale.

Mark S. · Answer

@Russell Brazil I believe most of the time when people are talking about wholesaling they are referring to unlicensed individuals doing so. Virtually all posts asking about getting started in wholesaling appear to be individuals who are not licensed and are looking for an ‘easy’ way to get into real estate.

Nate Marshall · Answer

It's hard to enforce when LE agencies are constantly under fire for other things. DORA in Colorado needs to be given more authority so they can enforce it.

Jeff Copeland · Answer

I'm not aware of anything unconstitutional about state licensing laws. They exist for consumer protection.

It can be just as bad for Joe Public to get duped by an unlicensed person practicing medicine or law as it is for him to lose his hard earned equity to an unlicensed person practicing real estate. In such cases, the unlicensed activity is investigated and enforced when it is reported.

I'd argue that in real estate, it's more likely to go unreported, thus it's also more likely to go unenforced.

There are legitimate wholesale real estate operations, and there are shady unlicensed individuals with no money who prey on unsuspecting distressed homeowners (often because they are taught to do so by some real estate guru offering a weekend seminar). The latter give the former a bad name.

Why aren’t states/city enforcing wholesaling laws?

Why aren’t states/city enforcing wholesaling laws?

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