Seeking clarity re: 2024 changes to Texas wholesaling laws

Fort Worth, Texas
Wholesaling
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Seeking clarity re: 2024 changes to Texas wholesaling laws

Savanna Kwieran
Member since 2023 · 2 posts · 3 votes

Hey there, friends. I am trying to fully understand what new regulations have been implemented in Texas for wholesaling, because I'm seeing discrepancies in what I'm reading and hearing. First, I was informed that wholesaling in Texas now requires a double-close, which made my eyes go wide and prompted a deeper inquiry. But in researching the legislation, all I see is a new rule about disclosure. Bill SB 1577 states that effective January 1, 2024, wholesalers in Texas are required "to disclose their interest in the property in writing to both buyers and sellers." To me, nothing about that prompts necessity for a double-close when assigning a property. 

Am I missing some other new legislation, which would indeed make a double-close necessary? Or, is assigning a contract to an end buyer the regular old way still in place, and the only change is disclosure? Because if it's only the disclosure thing, I'm golden, because I choose to be upfront about that anyway. 

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T. Alan CeshkerPro Member
Attorney · 3409 Executive Center Drive Ste 110 Austin, Texas 78731 · Member since 2020 · 99 posts · 92 votes
2y

There are 3 separate statutory codes governing wholesaling. They are substantially similar.

The bottom-line requirements for wholesalers are:

  • A buyer must disclose to a seller of their intention to wholesale the property;
  • A buyer must disclose they are selling their equitable interest/contract rights (versus selling the property) in all marketing, advertisements and communications with other parties;

    It is important that each and every communication, ad, sign, post and communication have a disclosure that the wholesaler is marketing and selling their equitable interest or their contract rights. If a wholesaler places a sign in the front yard with their number and states: For Sale - 3 bed 2 bath, this is enough to possibly get fines by TREC.

    Our suggested disclosure in a separate addendum to the TREC 1 to 4 is:

    EQUITABLE INTEREST ADDENDUM

    The Buyer and Seller agree and understand that the Buyer may sell an option or assign an interest in this Contract. The Seller agrees that the Buyer has the right to sell and assign their contract rights and equitable interest in the Property. Seller agrees there is no further approval needed from Seller to allow the assignment of this contract to a third party/end buyer.

    I have an information form for this - let me know if you wan to receive this.

    Also, if you would like to learn more about how Ceshker Group Title can assist you in your real estate efforts, reach out to schedule a time to meet with us.

    [email protected]
    4Reply
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    • Mike ReynoldsPro Member
      construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
      2y
      Quote from @Savanna Kwieran:

      Hey there, friends. I am trying to fully understand what new regulations have been implemented in Texas for wholesaling, because I'm seeing discrepancies in what I'm reading and hearing. First, I was informed that wholesaling in Texas now requires a double-close, which made my eyes go wide and prompted a deeper inquiry. But in researching the legislation, all I see is a new rule about disclosure. Bill SB 1577 states that effective January 1, 2024, wholesalers in Texas are required "to disclose their interest in the property in writing to both buyers and sellers." To me, nothing about that prompts necessity for a double-close when assigning a property. 

      Am I missing some other new legislation, which would indeed make a double-close necessary? Or, is assigning a contract to an end buyer the regular old way still in place, and the only change is disclosure? Because if it's only the disclosure thing, I'm golden, because I choose to be upfront about that anyway. 


       If you do disclose that you are more honest than any I've come across before. I've tried to work with wholesalers a few times but they left a bad taste in my mouth. 

      Not sure about the new law though. I'm just replying because I think they are only having to pass one because of the ones like I have had to deal with. It's sad that some crooked people are causing issues because they have problems being honest in their business. 

      I'll be following this thread to see what the changes are though. 

      0Reply
    • Guy Gimenez
      Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
      2y

      There is no duty to "double close." Under both the Texas Property Code 5.0205 and 5.086, as well as TRELA 1101.0045, the "seller" of a contract is required to disclose the nature of the seller's equitable interest. Especially under the TPC, the disclosure should be in writing with assignor, assignee and the seller (titled owner) acknowledging the assignee intends to assign the contract and not consummate a purchase. Failure to do so places the assignor in violation of these statutes and provides the titled owner with a potential way out of the contract. In my opinion, the disclosure should be in a separate document that is incorporated into the contract and not hidden amongst a multitude of other provisions. The use of "and or assigns" is insufficient. A separate document with separate signatures should withstand scrutiny should a dispute arise between the parties.

      1Reply
    • Savanna Kwieran
      OP
      Member since 2023 · 2 posts · 3 votes
      2y
      Quote from @Mike Reynolds:
      Quote from @Savanna Kwieran:

      Hey there, friends. I am trying to fully understand what new regulations have been implemented in Texas for wholesaling, because I'm seeing discrepancies in what I'm reading and hearing. First, I was informed that wholesaling in Texas now requires a double-close, which made my eyes go wide and prompted a deeper inquiry. But in researching the legislation, all I see is a new rule about disclosure. Bill SB 1577 states that effective January 1, 2024, wholesalers in Texas are required "to disclose their interest in the property in writing to both buyers and sellers." To me, nothing about that prompts necessity for a double-close when assigning a property. 

      Am I missing some other new legislation, which would indeed make a double-close necessary? Or, is assigning a contract to an end buyer the regular old way still in place, and the only change is disclosure? Because if it's only the disclosure thing, I'm golden, because I choose to be upfront about that anyway. 


       If you do disclose that you are more honest than any I've come across before. I've tried to work with wholesalers a few times but they left a bad taste in my mouth. 

      Not sure about the new law though. I'm just replying because I think they are only having to pass one because of the ones like I have had to deal with. It's sad that some crooked people are causing issues because they have problems being honest in their business. 

      I'll be following this thread to see what the changes are though. 


      @ Mike Reynolds, I know that I operate in a different way than most people who wholesale in this regard, but my integrity is important to me and I believe in karma. When I'm talking to a homeowner, I do let them know that I have options in dispo. Usually with a variation of, "in taking ownership of this property, there are several ways I could choose to handle this property. I may decide to keep it in my portfolio, fix it up and sell it on the market, or pass it on to another investor." Up to this point I haven't shared with the homeowner the exact amount of money I stand to make on it -- only that I have options to profit off the sale. I haven't found a homeowner yet that is surprised to hear that I stand to make money on the sale -- if they have sense at all, they understand that we don't operate for free, you know? Alternately, I feel like end buyers also understand the deal when they buy from a wholesaler, and if they also have some integrity, they aren't bothered that a wholesaler profits from an assignment. They're essentially paying the wholesaler for doing the leg work to find the deal. So I don't see any reason to be secretive about any of that. I feel like doing things completely above board buys trust and builds rapport.
      2Reply
    • Mike ReynoldsPro Member
      construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
      2y
      Quote from @Savanna Kwieran:
      Quote from @Mike Reynolds:
      Quote from @Savanna Kwieran:

      Hey there, friends. I am trying to fully understand what new regulations have been implemented in Texas for wholesaling, because I'm seeing discrepancies in what I'm reading and hearing. First, I was informed that wholesaling in Texas now requires a double-close, which made my eyes go wide and prompted a deeper inquiry. But in researching the legislation, all I see is a new rule about disclosure. Bill SB 1577 states that effective January 1, 2024, wholesalers in Texas are required "to disclose their interest in the property in writing to both buyers and sellers." To me, nothing about that prompts necessity for a double-close when assigning a property. 

      Am I missing some other new legislation, which would indeed make a double-close necessary? Or, is assigning a contract to an end buyer the regular old way still in place, and the only change is disclosure? Because if it's only the disclosure thing, I'm golden, because I choose to be upfront about that anyway. 


       If you do disclose that you are more honest than any I've come across before. I've tried to work with wholesalers a few times but they left a bad taste in my mouth. 

      Not sure about the new law though. I'm just replying because I think they are only having to pass one because of the ones like I have had to deal with. It's sad that some crooked people are causing issues because they have problems being honest in their business. 

      I'll be following this thread to see what the changes are though. 


      @ Mike Reynolds, I know that I operate in a different way than most people who wholesale in this regard, but my integrity is important to me and I believe in karma. When I'm talking to a homeowner, I do let them know that I have options in dispo. Usually with a variation of, "in taking ownership of this property, there are several ways I could choose to handle this property. I may decide to keep it in my portfolio, fix it up and sell it on the market, or pass it on to another investor." Up to this point I haven't shared with the homeowner the exact amount of money I stand to make on it -- only that I have options to profit off the sale. I haven't found a homeowner yet that is surprised to hear that I stand to make money on the sale -- if they have sense at all, they understand that we don't operate for free, you know? Alternately, I feel like end buyers also understand the deal when they buy from a wholesaler, and if they also have some integrity, they aren't bothered that a wholesaler profits from an assignment. They're essentially paying the wholesaler for doing the leg work to find the deal. So I don't see any reason to be secretive about any of that. I feel like doing things completely above board buys trust and builds rapport.

      I agree with everything you say there. As an end buyer myself, I don’t care how much a wholesaler or anyone makes off the property. The numbers are the numbers. I either can or can not. 

      One time here recently I went to look at a large commercial property near Austin. When I met the owner to see it, he asked about our “ partner”. Turns out he never told the owner he was going to assign the property but that his partner was coming to look at it. I just walked away because it’s better if I don’t get involved in something that may or may not even be legal. That was only one case of many. 

      If more wholesalers would just do the right thing, they wouldn’t get such a bad rap. 
      1Reply
    • Jose JacobPro Member
      Investor · 11040 · Member since 2019 · 188 posts · 111 votes
      2y

      Every State has its own laws and disclosures regarding Real Estate transactions.  As the time goes on, states are becoming more strict with  those regulations due to the fact that so many of the wholesalers DO NOT understand the business.  Normal W2 employees get into this business hoping to make thousands in one phone call after receiving some courses from these wholesale "GURUS".  It is sad to see that these (new)wholesalers are not understanding that they need more into and disclosures to do a legit business better than they learn in these so called "courses".  State are making it difficult for all of us due to the same reason.  I am from NY and it is nearly impossible to do a wholesale directly from the home owner.  Most of the wholesale happens here between the investors. Moreover this is an attorney state and most of  the attorneys do not advise their clients for a straight wholesale from the homeowner except some special circumstances. 

      718-200-6100
      1Reply
    • T. Alan CeshkerPro Member
      Attorney · 3409 Executive Center Drive Ste 110 Austin, Texas 78731 · Member since 2020 · 99 posts · 92 votes
      2y

      There are 3 separate statutory codes governing wholesaling. They are substantially similar.

      The bottom-line requirements for wholesalers are:

      • A buyer must disclose to a seller of their intention to wholesale the property;
      • A buyer must disclose they are selling their equitable interest/contract rights (versus selling the property) in all marketing, advertisements and communications with other parties;

        It is important that each and every communication, ad, sign, post and communication have a disclosure that the wholesaler is marketing and selling their equitable interest or their contract rights. If a wholesaler places a sign in the front yard with their number and states: For Sale - 3 bed 2 bath, this is enough to possibly get fines by TREC.

        Our suggested disclosure in a separate addendum to the TREC 1 to 4 is:

        EQUITABLE INTEREST ADDENDUM

        The Buyer and Seller agree and understand that the Buyer may sell an option or assign an interest in this Contract. The Seller agrees that the Buyer has the right to sell and assign their contract rights and equitable interest in the Property. Seller agrees there is no further approval needed from Seller to allow the assignment of this contract to a third party/end buyer.

        I have an information form for this - let me know if you wan to receive this.

        Also, if you would like to learn more about how Ceshker Group Title can assist you in your real estate efforts, reach out to schedule a time to meet with us.

        [email protected]
        4Reply
      • David Ramirez
        Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes
        2y
        Quote from @T. Alan Ceshker:

        There are 3 separate statutory codes governing wholesaling. They are substantially similar.

        The bottom-line requirements for wholesalers are:

        • A buyer must disclose to a seller of their intention to wholesale the property;
        • A buyer must disclose they are selling their equitable interest/contract rights (versus selling the property) in all marketing, advertisements and communications with other parties;

          It is important that each and every communication, ad, sign, post and communication have a disclosure that the wholesaler is marketing and selling their equitable interest or their contract rights. If a wholesaler places a sign in the front yard with their number and states: For Sale - 3 bed 2 bath, this is enough to possibly get fines by TREC.

          Our suggested disclosure in a separate addendum to the TREC 1 to 4 is:

          EQUITABLE INTEREST ADDENDUM

          The Buyer and Seller agree and understand that the Buyer may sell an option or assign an interest in this Contract. The Seller agrees that the Buyer has the right to sell and assign their contract rights and equitable interest in the Property. Seller agrees there is no further approval needed from Seller to allow the assignment of this contract to a third party/end buyer.

          I have an information form for this - let me know if you wan to receive this.

          Also, if you would like to learn more about how Ceshker Group Title can assist you in your real estate efforts, reach out to schedule a time to meet with us.

          Yes, that's basically what most states are setting regulations around: proper disclosures, especially when advertising the deal. You must disclose that you are selling your equitable interest in it or your rights to fully execute the purchase. 

          1Reply
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