Ok everyone, my wife is bugging me and I know I can get a quick reply here. Im closing on my first wholesale prop right now looking at around a 30k profit after selling the contract. My wife read something online that the act of wholesaling is pretending to buy someones home and then advertise the house as if u are the owner selling it when you aren't really the owner or going to buy it. She said that certain states do not allow wholesaling because you are essentially selling the house with no license and it is technically a crime.
The post my wife read was BP's post by Brian Turner called Is Real Estate Wholesaling Illegal.
There is always a legal way to wholesale a house, I cant comment on WA state law and how you have to do it there to stay legal. In most states you can wholesale directly without any problem In pain in the *** states like my home state of PA, you need to register an option and then release the option because in my state we cant assign contracts. The way to clear this up for you is to contact a local RE lawyer who deals with investors. Then ask him/her how to legally wholesale in your state. If you dont know a lawer in your area who specializes in real estate and deals with investors then you need to check out REAPS the Real Estate Assoc or Puget Sound run by my firend Kathryn Swamberg. You can surely find the right attorney in that group, as they are one of the biggest and most active group in America.
To your success
What you described and what a wholesale deal should look like are two different things. If you lock up a property, then sell it by representing yourself as an owner (list it in MLS), then yes, that is prohibited.
If you have an assignable contract and a buyers list and sell your interest in the contract then no, that is not illegal.
I wholesale deals in Vancouver WA. Its legal however just make sure you are advertising your contract not the property as you are not a broker. Also $30k on a wholesale deal is huge. Will you be doing a double close?
Where in Washington are you from?
By the way, I'm in Georgia, you def want to check with a local atty before taking legal advice from some randoms on a forum like this...
I would agree that there is a proper way to wholesale in most states and areas but you have to make sure that you learn how from a qualified real estate attorney in your area. Yes in some states and maybe more and more there will be some cracking down on wholesalers that inadvertently do wholesaling, use paper work, market and say things that brings them under the legal radar and many are getting caught and fined in court.
Honestly getting a real estate license is not that big of a deal, the course is not hard to get through and pass your real estate agent exam. There may be some expenses involved in maintaining your license and standing and perhaps some continued educational requirements , license renewal issues you will have to deal with but find out for sure. In any case the starting point is a good local well informed and practiced real estate attorney. Won't cost you much for the time needed to learn how to wholesale legally without a real estate license just make sure you do follow the rules
forgot to mention I live in Seattle
First - congrats on almost closing your first wholesale property!
I believe the article your wife is referring to is Brandon's: https://www.biggerpockets.com/renewsblog/2015/03/2....
The legality of wholesaling is a bit grey if you aren't a licensed broker, and the definition of a broker is different in each state. If you want to make sure that what you are doing is legal, you can become a licensed broker, or do a double close (where you actually buy the property and own it for like, a minute, and then sell it out to who you would've assigned the contract to). Echoing what a few others have recommended, consulting with an attorney would help clarify all of this for you.
Best of luck :).
See you 'round BP!
or simply write the real estate commission describe your model and get a letter back telling you its OK or not.. any other advice or what have you will not suffice..
WA may not be going hard on wholesalers like CA, OH FLA.. are currently
What your doing is considered a brokerage activity in several states.
If it's not in yours it should be but it may not be. As Jay said check with your local RE commission.
What do you mean by wholesaling? Tie up property and assign in escrow? Yes. Illegal. And Criminal. Just learned it myself. In California you can do 7 without foul. CA Codes BPC 10131.1 (A)
You could put it into a Title Holding Trust, name your co. as trustee and you as bene. Then you'd be a principle. Transfer the beneficial interest etc....
But even sending letters to get business is a no no.
That's why I'm getting licensed. I really don't want a cease and desist letter just when I'm cranking.
My friend is getting creamed right now by BRE and it's not fun. And he may go to jail.
impressive list probably includes one in 10,000 that could be wrung up LOL
You can always consider getting your broker license just in case. :)
Wholesaling in WA state is not only legal, but also there is a specific North West MLS form to do it. just a couple of items though:
- in the purchase agreement you must have "and/or assigns"
- when finding a buyer, you cannot advertise that you own the property, just a contract for purchase. i see all the time, "i have a property at 123 main street for $150,000 that i am looking to assign." NO, NO, NO!!! you have a 'CONTRACT' to buy said property at that price...you do not have the property itself.
- best to make sure everyone knows what you are doing, especially any professionals involved like title/escrow, RE agent, etc.
- escrows willing to do double closes are nearly impossible to find in WA state. so long as everyone is getting a good deal your seller should not have issue with you making money. keyword = SHOULD :) if you do things correctly there is no need for double closings which quite frankly, is a real newb way of doing business
- if you're not 100% about this or that, employ the services of a real estate agent/broker/realtor. he or she can help you present the offer, negotiate on price and then assist in finding you a buyer.
I cannot speak for other states.
oh and one more thing. it could be considered equity skimming as per RCW 61.34 if you wholesale a property that is owner-occupied by someone facing foreclosure. be safe and do owner occupied only.
last but not least, it never hurts to have your RE license. in WA state, Rockwell publishing is the best, IMHO.
I think you wanted to say NON owner occ.... equity skimming laws came to the west coast in about 08 they are very strong and severe in Oregon and WA. I did my last sub too owner occ back in 07 and stopped when the new laws came into effect. Of course I doubt many are aware of them.. But they will get you wrung up if your turned into the state.
I think for practical matters on the assigning of contracts.. one just needs to keep this out of the public space.. these deals need to be done between principals and without advertising them... like you said that's were these folks get hung up.. they tie up a property have no place to go with it stick it for sale on craigs list and whammo selling RE without a license... :)
LOL - woops!
"be safe and do NON-owner occupied only." thanks @Jay Hinrichs
there are a set of great videos on the thread about getting busted I OHIO.. they actually do what should be done I each state by each STATE REIA they actually interview the regulators and run through the can I do this can I do that.. and of course most of what people do is selling RE without a license and is prohibited..
Even assigning contracts its very specific how you have to do that... and its not just as easy as what people think they can do.
I suspect virtually ever state if ASKED will take the same position as OHIO. It just wether they want to really regulated it... an or if they are getting complaints.
WE have to remember here in ORegon and WA we have no where near the amount of wholesaling activity that goes on in big mid western markets were there are thousands of low end homes changing hands each month.. We just don't have that kind of inventory or velocity.
You should probably talk to an attorney about what is legal and what is not if you want an actual answer with substance.
I recommend getting license. You can do a few deals then just get license. If you are planning on doing this as a career. Just get your license. Don't hassle with the the BS. You already have the challenge of getting a ton of deals in your pipe line. I recommend eliminating that variable by getting license. You can do a few deals make some cash then get your license..This makes the most sense and I recommend this strategy to my students.
Yeah, the amount of wholesaling that goes on in this area of the world is nothing in comparison to the Midwest, or certain other states like Florida and Arizona.
I found it tough to wholesale in the Seattle area since inventory is so low and sellers are able to get full retail pricing very easily. Through my marketing campaigns I received a number of callbacks and nearly all of them, regardless of how motivated they may or SHOULD be, want retail pricing and know that they can get it with a good listing agent.
I recall a specific incident involving a rental property owner, who had a little bit of equity in the property, was facing foreclosure with fewer than 60 days until auction. He admitted that although he was motivated to sell and would prefer to close quickly, he realized that people in his area were able to get an average of 98% of their asking price within 2 to 3 weeks of being listed on MLS.
It's sort of funny because he told me that my letter reminded him of the need to do something with the property and last time I checked he had listed it with an agent. It is already gone pending but has yet to close.
Here we go again with another opportunity for the "wholesaling is illegal" crowd to state their case. It does vary by state. It might be termed "illegal" in Ohio because of their super strict regulations, but we have people "wholesaling" in just about every state in the U.S.
I'd put 10x more weight on the responses you got above from experienced people in WA state. If anyone not in your state is telling you it's illegal, that info is worth what you paid for it.
P.S. "Wholesaling" is not even a legit legal or real estate term. It refers to getting a property under contract to purchase, and then assigning your contractual rights to another party, via a contract assignment, in exchange for some consideration (an "assignment fee"). In my opinion, the term is slang in our business. We use it, but just be aware if you talk to a attorney, broker, or state regulator about "wholesaling" they will have no idea what you are talking about. Ask about your legal right to assign a contract for the purchase of real estate to another party in exchange for compensation.
Jeff Watson has some great videos on the do and dont's of legally wholesaling in Ohio. See
(I'm not an attorney so the following are just my opinions and interpretations)
Wholesaling (assignments and back to back closings) is legal in Ohio. I am not sure if Ohio is "technically" more restrictive that any other state. The "no nos" in the video probably shouldn't be done in any state. I think Ohio has probably started to ENFORCE their laws and guidelines more than any other state when it comes to people trying circumvent being a licensed real estate agent.The main problem it seems is about how one may market their wholesale deals and their intent when entering into an agreement with a seller. The 3 biggest takeaways I got of the videos were
1) You can't have weasel clauses saying the contract is contingent on finding another buyer.
2) You can't market house you don't own and/or lead people to believe you own the property. For example put a photo of the house with the address and saying the house is for sale. Technically this would include not only wholesalers who assign contracts but also rehabbers who buy properties outright as well. According to that interpretation a rehabber can't advertise a house they have not bought yet even though they plan to invest thousands of dollars of their own money to buy and renovate the house. (I doubt a rehabber with a track record of buying and renovate houses would get in trouble)
3) What you can do is market your contract and equitable interest in the property WITHOUT the full address and photos. For example instead of "I have a house at 123 Main Street for sale" you would say "I have a wholesale deal under contract for a house in the <example> neighborhood on Main Street"
The broad generic concept of Wholesaling itself isn't illegal. It is the unscrupulous and misleading marketing and contractual tactics of some people that is what is illegal.
Ohio Is not cool with assignments.
I have been in the game here for nearly 2 decades and went to the state and had a meeting with the division of Real Estate and my attorney. they want you to close then market the house. Not prior to closing.
They are cracking down on a ton of folks here.
Just my experience.
I consulted my attorney about wholesale flipping and he told me it is uncommon in WA state because of the exorbitant excise tax paid at closing. You will be much better off assigning your contract which is perfectly legal as long as you state it clearly in the contract by writing "and or assigns" next to your name on the first page. Feel free to contact me with further questions as I am a WA state broker who has closed all manner of creative deals with the help of a seasoned attorney.