Wholesaling is illegal in NC?

Insurance Agent · Clayton, NC · Member since 2015 · 41 posts · 8 votes

I just ran in to a REALTOR that told me would not work with me because assignments of contract and wholesaling is illegal in North Carolina. I have contacted an attorney that advised assignments and double closings are perfectly legal in North Carolina as long as all parties are aware of it. Any attys, Realtors in North Carolina that can elaborate more on this?

4 Reply

281 views

Most Popular Reply

Curtis WatersBusiness Member

Rental Property Investor · Charlotte, NC · Member since 2013 · 291 posts · 176 votes

Many wholesalers use the 'equitable interest' argument. I was at a training done by the NC Real Estate Commission. They advise that assigning your contract and not taking title makes you a real estate broker and you must be licensed.

From NC General Statutes Section 93 - A real estate broker within the meaning of this Chapter is any person, partnership, corporation, limited liability company, association, or other business entity who for a compensation or valuable consideration or promise thereof lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction (specifically not including a mere crier of sales), or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents or offers to rent any real estate or the improvement thereon, for others

Some real estate agents and attorneys read the definition and will steer clear of you and your deal...

You should be able to do a double closing (i.e., you buy from the Seller at 11AM, sell to new Buyer at Noon) and avoid this. Some investors use transactional funding to achieve this. Note that there are fees for this funding plus additional legal fees. Many wholesalers will do a double close to hide their profit, as it is not uncommon for Sellers or end buyers to walk at closing to avoid giving a wholesaler a significant profit.

In NC the real estate commission doesn't look for wholesalers - but someone could complain about your activities and complain. This might result in a cease and desist letter from the NCREC. If necessary they will refer your case to the Attorney General. The major issue a few wholesalers face is a lack of ethics that lead to problems.

8 Reply

See this reply in the discussion

75 Replies

Jump to latestLatest

Sort by

Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
11y
Sounds like what a REA would say. Most that say that don't understand what wholesaling is. They think it is a form of sale of a property, when in fact the property doesn't change hands until someone actually pays for the property.
Plus, anytime they think they are losing a potential commission,...?
8 Reply
Judah Hoover
Real Estate Investor · Lancaster, PA · Member since 2015 · 102 posts · 102 votes
11y
It doesn't really matter what is legal or illegal (its totally legal by the way). If it looks like a duck and quacks like a duck as far as the board or realtors is concerned.... its a duck.
So just be ready, once you are big enough to get on their radar (around 50 to 75 deals a year) they will try to come after you for "practicing real estate without a license".
Not saying that's right, or that they should... just telling you what they will do.
A buddy of mine just had to pay $50k to settle with the department of real estate in his state, because they didn't like what he was doing.
0 Reply
Iris Ortiz
OP
Insurance Agent · Clayton, NC · Member since 2015 · 41 posts · 8 votes
11y
What is your take on working with a Realtor to wholesale? Worth the time or should I not use them at all if all I intend to do is assignments or double closings?
2 Reply
Judah Hoover
Real Estate Investor · Lancaster, PA · Member since 2015 · 102 posts · 102 votes
11y
Avoid realtors when wholesaling. I love the realtors I work with, and have some great relationships, but its almost impossible to wholesale from the MLS.
Find other ways of getting leads to wholesale. Work directly with sellers.
4 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
11y
How much is an LLC in NC? In MI it's only $50, so we make all offers in an LLC, then just sell the LLC when the offer is accepted.
2 Reply
Mark Esposito
Raleigh, NC · Member since 2014 · 125 posts · 37 votes
11y
NOTE to the forum: I'm no attorney offering legal advice...but here's what our RE attorney tells us:
No one needs a license to sell their own property.
When you wholesale a deal, have an equity position in it. I close on them first. Double closings the same day using transitional 'wet' money, as opposed to using the end buyer's 'dry' money to close on the deal.
The 'assignment' is an area the realtors like to focus on but again if you put ernest money down you have positioned yourself with equity. Its just that the paperwork is somewhat cumbersome to the closing attorney. I prefer to cooperate with my attorney.,.and pay him a little more for ease of transactions.
Now if you want to get realtors really worked up talk 'Bird Dogging'. But that's not offering other people's property for sale...only referring a potential deal to a buyer for a referral fee.
Realtors are good for closings and are a great source of market trends...knowing where deals are. I have a monthly 'take a realtor to lunch' program where I buy a lunch for a new realtor I'm hoping to get in good with. It seems to warm them up quite a bit.
Always welcome responses from detractors. :o)
6 Reply
Chaz Reid
Investor · Fayetteville, NC · Member since 2014 · 916 posts · 190 votes
11y
Haters are going to hate @Iris Ortiz ! @Mark Esposito speaks truth.
3 Reply
Roland Paicely
Raleigh, NC · Member since 2011 · 721 posts · 343 votes
11y
I've done numerous wholesale deals in North Carolina. Guess what, they were all closed by an attorney.
1 Reply
Marcus Thomas
Wholesaler · Tarboro, NC · Member since 2015 · 7 posts · 7 votes
11y
I'm kinda going through the same thing. Just yesterday I had an attorney tell me it's not legal and he doesn't feel comfortable doing anything with my Contracts which are just a purchase and sale agreement and a assignment of Contact. he didn't even know what an assignment was but then in the same breath told me it was illegal and in the state of NC the Contracts are at least ten pages long and then said if I can find an attorney that will do it to give him a call because he would love to learn more about it. That let me know people are afraid of what they don't know or understand. So I'm pushing on until I do find an attorney to close my deals. So don't let anyone tell you, u can't do something because we all know wholesaling is very legal.
5 Reply
Bionca Huntley
Greensboro, NC · Member since 2016 · 9 posts · 0 votes
9y
I'm looking to get a few wholesaling contracts drawn up. Can anyone recommend an attorney?
0 Reply
Curtis WatersBusiness Member
Rental Property Investor · Charlotte, NC · Member since 2013 · 291 posts · 176 votes
9y
Many wholesalers use the 'equitable interest' argument. I was at a training done by the NC Real Estate Commission. They advise that assigning your contract and not taking title makes you a real estate broker and you must be licensed.
From NC General Statutes Section 93 - A real estate broker within the meaning of this Chapter is any person, partnership, corporation, limited liability company, association, or other business entity who for a compensation or valuable consideration or promise thereof lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction (specifically not including a mere crier of sales), or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents or offers to rent any real estate or the improvement thereon, for others
Some real estate agents and attorneys read the definition and will steer clear of you and your deal...
You should be able to do a double closing (i.e., you buy from the Seller at 11AM, sell to new Buyer at Noon) and avoid this. Some investors use transactional funding to achieve this. Note that there are fees for this funding plus additional legal fees. Many wholesalers will do a double close to hide their profit, as it is not uncommon for Sellers or end buyers to walk at closing to avoid giving a wholesaler a significant profit.
In NC the real estate commission doesn't look for wholesalers - but someone could complain about your activities and complain. This might result in a cease and desist letter from the NCREC. If necessary they will refer your case to the Attorney General. The major issue a few wholesalers face is a lack of ethics that lead to problems.
8 Reply
Kai Kopsch
Real Estate Broker · Charlotte, NC · Member since 2016 · 569 posts · 351 votes
9y
Yeah! right @Mark Esposito to make it legal you must double close the deal so and take the ownership of the property and pay for the 2 set of closing cost .
1 Reply
Samuel Barton
Killeen, TX · Member since 2016 · 30 posts · 14 votes
9y
There is always a way around it.
Educate your realtor, or find another realtor.
Educate your attorney, or find another attorney.
Educate your title company, or find another title company.
Go to your local investor meetups, network with the heavy hitters, and use there referrals for all of the above.
4 Reply
Duane Ortega
Transactional Funder · Neptune, NJ · Member since 2011 · 187 posts · 86 votes
9y
@Bionca Huntley
I know an attorney in North Carolina who can double close. PM me.
8 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Curtis Waters I know wholesalers don't want to hear this
but Oregon just made selling or trading in equitable interest a event that needs a licensed broker to handle.. if you do this your selling RE without a license and you will get a cease and desist .. they are nice the first time.. but violate it again and your in for some pretty heavy trouble
and I think many states are starting to follow suit because of the abuse that is done by beginners and others that are just slimy operators .. those ruin it for others.
simple way to solve this is to have your transactional funding in place or figure out how to come into title.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
I know this post is about 2 years old but there is nothing saying wholesaling in NC is illegal. That is a realtor that has no clue or doesn't want to lose their commission on the C side of the transaction. A lot of states are getting tighter and that's where a good transactoinal lender comes into play. Two years ago when this thread was created this whole thought of tightening up wasn't even a gleam in an eye.
0 Reply
George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
@Jay Hinrichs We are in the Oregon market in case you have any contacts needing TF. We have some great rates and you can PM me for details.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@George Taylor I am good and unless your NMLS registered and state licensed mortgage banker your not in Oregon.. its not legal.. I am a NMLS registered and state licensed mortgage banker.. just FYI I just don't put it on my BP signature because I much prefer being a developer
and one of my main markets I s Charleston SC.. love that place
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
@Jay Hinrichs Our ability to do transactional funding is in every state except AK, HI, PA, CA, and NV. I would have to check with our managing partner on the exact specifications in Oregon but as far as I know we are still able to do TF there. Charleston is great, I'm going there next week for vacation, I love the charm. I'm sort of new to the BP community so I'm feeling my way around it.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@George Taylor I guess it depends on how you set them up.. if your loaning at all then no your not able to do Oregon
but be that I am blessed I am not in need of capital ..
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
George Taylor
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
@Jay Hinrichs I welcome all the knowledge that I can get from those in other markets than my own. I'll reach out to my boss tomorrow to clarify this. I appreciate it..
0 Reply
Steven Pizarro Jr
Charlotte, NC · Member since 2017 · 13 posts · 3 votes
9y
Illegal to wholesale? ........That's silly. I'm in Charlotte, if it was illegal there would be no attorney willing to close the transactions. It's important not to let people stop you with their beliefs on how things work. P.S., Not all realtors are the same, some are aware of The multiple strategies of actual real estate investing.
1 Reply
Stanley Parsley
Investor · Chandler, AZ · Member since 2015 · 409 posts · 214 votes
9y
iris
I say it all the time
find a local paralegal and do your home work
this will save you the bar fees and you will be educated about the law in your state
realtors are mostly cream puff seller-(no offense) especially when it comes to something out side the boilerplate contract
I bought my first piece of property on a napkin at the black bear dinner
make sure you get in with the title company and make it a habit of being a friend with the county court house
enjoy
3 Reply
Curtis WatersBusiness Member
Rental Property Investor · Charlotte, NC · Member since 2013 · 291 posts · 176 votes
9y
@Steven Pizarro Jr and @George Taylor - I was an active investor before becoming a licensed broker.
This isn't silly - it is the law (see above post on NC Statutes and NC Statutes - who is a Real Estate Broker & needs a license). My attorney works with wholesalers daily. (NC requires that attorneys close RE transactions, not title companies. In NC attorneys are agents of title insurance companies). It is not an attorney's job or requirement to enforce state statutes regarding wholesaling (only the RE Commission and the Attorney General).
Wholesaling (i.e. assigning your contract) is definitely against the NC RE Commission rules. At this point they aren't actively going after wholesalers - unless someone complains. Yes, some brokers certainly want to protect their industry - as does the RE Commission. I have seen a few shady wholesalers in Charlotte who deceive the Sellers they work with. How many wholesalers actually tell the Sellers that they won't take title? Brokers must disclose everything by law, especially if they have an equitable interest (Brokers can legally wholesale) or have an ownership interest in the property. Wholesalers sometimes operate without full disclosure, which can lead to consumer complaints.
I have worked with Wholesalers myself at times. A valuable wholesaler understands property values, rehab costs, and keeping the transaction transparent and clean.
If you do a double close (Seller to investor, investor to end Buyer) - then you have taken title and there should not be an issue in any state.
1 Reply
Curtis WatersBusiness Member
Rental Property Investor · Charlotte, NC · Member since 2013 · 291 posts · 176 votes
9y
@Jay Hinrichs - does a lender doing transactional funding to an entity need NMLS registration and state licensing in Oregon (or anywhere) if they are lending only to entities (LLCs, Corporations, etc)?
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.